TaxTMI 
TaxTMI 
TaxTMI 
Foreign Investment in India - Sector Specific conditions.
X X X X Extracts X X X X
X X X X Extracts X X X X
.... April 10, 2012 and the same is available at Government website www.dipp.gov.in. In order to bring uniformity in the sectoral classification position for FDI as notified under the Consolidated FDI Policy Circular with the FEMA Regulation, the revised position on Annex A and Annex B of Schedule 1 to Notification No. FEMA 20/2000-RB dated 3rd May 2000, has been suitably revised and is enclosed. 3. Necessary amendments to the Foreign Exchange Management (Transfer or Issue of Security by a Person Resident Outside India) Regulations, 2000 notified vide Notification No.FEMA 20/2000-RB dated May 3, 2000 will be issued separately. 4. AD Category - 1 banks may bring the contents of this circular to the notice of their constituents and customers concerned. 5. The directions contained in this circular have been issued under sections 10(4) and 11(1) of the Foreign Exchange Management Act, 1999 (42 of 1999) and are without prejudice to permissions/approvals, if any, required under any other law. Yours faithfully, (Rudra Narayan Kar) Chief General Manager ============= Document 1 Annex. A [Annex to A. P. (DIR Series) Circular No. dated June 28, 2012] Sectors Prohibited for F....
X X X X Extracts X X X X
X X X X Extracts X X X X
....For companies dealing with development of transgenic seeds/vegetables, the following conditions apply: (i) When dealing with genetically modified seeds or planting material the company shall comply with safety requirements in accordance with laws enacted under the Environment (Protection) Act on the genetically modified organisms. (ii) Any import of genetically modified materials if required shall be subject to the conditions laid down vide Notifications issued under Foreign Trade (Development and Regulation) Act, 1992. (iii) The company shall comply with any other Law, Regulation or Policy governing genetically modified material in force from time to time. (iv) Undertaking of business activities involving the use of genetically engineered cells and material shall be subject to the receipt of approvals from Genetic Engineering Approval Committee (GEAC) and Review Committee on Genetic Manipulation (RCGM). (v) Policy. II. Import of materials shall be in accordance with National Seeds The term 'under controlled conditions' covers the following: â– Cultivation under controlled conditions' for the categories of Floriculture, Horticulture, Cultivation of vegeta....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... Automatic 3.3 consumption by power projects, iron & steel and cement units and other eligible activities permitted under and subject to the provisions of Coal Mines (Nationalization) Act, 1973 (2) Setting up coal processing plants 100% Automatic like washeries subject to the condition that the company shall not do coal mining and shall not sell washed coal or sized coal from its coal processing plants in the open market and shall supply the washed or sized coal to those parties who are supplying raw coal to coal processing plants for washing or sizing. Mining and mineral separation of titanium bearing minerals and ores, its value addition and integrated activities 7 Sl.No. 3.3.1 3.3.2 Sector/Activity Mining and mineral separation of titanium bearing minerals & ores, its value addition and integrated activities subject to sectoral regulations and the Mines and Minerals (Development and Regulation Act 1957) Other conditions: % of FDI Entry Route Government Cap/Equity 100% India has large reserves of beach sand minerals in the coastal stretches around the country. Titanium bearing minerals viz. Ilmenite, rutile and leucoxene, and Zirconium bea....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ilable for setting up such industries within the country. Thus, if with the technology transfer, the objective of the FDI Policycan be achieved, the conditions prescribed at (i) (A) above shall be deemed to be fulfilled. Exploration activities of oil and 100% 4 Petroleum & Natural Gas 4.1 natural gas fields, infrastructure related to marketing of petroleum Automatic products and natural gas, marketing of natural gas and petroleum products, petroleum product pipelines, natural gas/pipelines, LNG 9 Sl.No. 4.2 5 5.1 Sector/Activity Regasification infrastructure, market study and formulation and Petroleum refining in the private sector, subject to the existing sectoral policy and regulatory framework in the oil marketing sector and the policy of the Government on private participation in exploration of oil and the discovered fields of national oil companies % of Cap/Equity FDI Entry Route Petroleum refining by the Public 49% Sector Undertakings (PSU), without any disinvestment or dilution of domestic equity in the existing PSUs. MANUFACTURING Government Manufacture of items reserved for production in Micro and Small Enterprises (MSES) FDI in M....
X X X X Extracts X X X X
X X X X Extracts X X X X
....d be no minimum capitalization for the FDI. A proper assessment, however, needs to be done by the management of the applicant company depending upon the product and the technology. The licensing authority would satisfy itself about the adequacy of the net worth of the non-resident investor taking into account the category of weapons and equipment that are proposed to be manufactured. (vii) There would be a three-year lock-in period for transfer of equity from one non-resident investor to another non-resident investor (including NRIS & erstwhile OCBs with 60% or more NRI stake) and such transfer would be subject to prior approval of the Government. (viii) The Ministry of Defence is not in a position to give purchase guarantee for products to be manufactured. However, the planned acquisition programme for such equipment and overall requirements would be made available to the extent possible. (ix) The capacity norms for production will be provided in the licence based on the application as well as the recommendations of the Ministry of Defence, which will look into existing capacities of similar and allied products. (x) Import of equipment for pre-production activity....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... 7.2 7.3 7.4 7.4.1 Broadcasting Terrestrial Broadcasting FM (FM Radio) subject to such terms and conditions as specified from time to time by Ministry of Information and Broadcasting for grant of permission for setting up of FM Radio Stations Cable Network, subject to Cable Television Network Rules, 1994 and other conditions as specified from time to time by Ministry of Information and Broadcasting Direct-to-Home subject to such guidelines/terms and conditions as specified from time to time by Ministry of Information and Broadcasting 26% (FDI, NRI & PIO investments and portfolio investment) 49% (FDI, NRI & PIO investments and portfolio investment) 49% (FDI, NRI & PIO investments and portfolio investment) Within this limit, FDI component not to exceed 20% Government Government Government Headend-In-The-Sky (HITS) Broadcasting Service refers to the multichannel downlinking and distribution of television programme in C- Band or Ku Band wherein all the pay channels are downlinked at a central facility (Hub/teleport) and again uplinked to a satellite after encryption of channel. At the cable headend these encrypted pay channels are downlinked....
X X X X Extracts X X X X
X X X X Extracts X X X X
....f Scientific and Technical Magazines/specialty journals/ periodicals, subject to compliance with the legal framework as applicable and guidelines issued in this regard from time to time by Ministry of Information and Broadcasting. 100% Government 8.4 Publication of facsimile edition of 100% foreign newspapers 8.4.1 Other Conditions: 9 9.1 Government (i) FDI should be made by the owner of the original foreign newspapers whose facsimile edition is proposed to be brought out in India. (ii) Publication of facsimile edition of foreign newspapers can be undertaken only by an entity incorporated or registered in India under the provisions of the Companies Act, 1956. (iii) Publication of facsimile edition of foreign newspaper would also be subject to the Guidelines for publication of newspapers and periodicals dealing with news and current affairs and publication of facsimile edition of foreign newspapers issued by Ministry of Information & Broadcasting on 31.3.2006, as amended from time to time. Civil Aviation The Civil Aviation sector includes Airports, Scheduled and Non-Scheduled domestic passenger airlines, Helicopter services / Seaplane services, Ground ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ing both of which shall include the activities as specified by the Ministry of Civil Aviation through the Aeronautical Information Circulars from time to time, and (iii) any other activity specified by the Central Government to be a part of either ramp handling or traffic handling. 9.2 Airports (a) Greenfield projects 100% Automatic (b) Existing projects 100% Automatic up to 74% 9.3 Air Transport Services Government route beyond 74% (a) Air Transport Services would include Domestic Scheduled Passenger Airlines; Non-Scheduled Air Transport Services, helicopter and seaplane services. (b) No foreign airlines would be allowed to participate directly or indirectly in the equity of an Air Transport Undertaking engaged in operating Scheduled and Non-Scheduled Air Transport Services except Cargo airlines. (c) Foreign airlines are allowed to participate in the equity of companies operating Cargo airlines, helicopter and seaplane services. (1) Scheduled Air Transport Service/ Domestic Scheduled Passenger Airline Automatic 49% FDI (100% for NRIs) (100% for NRIs) to 49% (2) Non-Scheduled Air Transport 74% FDI Service Automatic up Government route beyond....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ed within a period of five years from the date of obtaining all statutory clearances. The investor/investee company would not be permitted to sell undeveloped plots. For the purpose of these guidelines, 'undeveloped plots' will mean where roads, water supply, street lighting, drainage, sewerage, and other conveniences, as applicable under prescribed regulations, have not been made available. It will be necessary that the investor provides this infrastructure and obtains the completion certificate from the concerned local body/service agency before he would be allowed to dispose of serviced housing plots. (5) The project shall conform to the norms and standards, including land use requirements and provision of community amenities and common facilities, as laid down in the applicable building control regulations, bye-laws, rules, and other regulations of the State Government/Municipal/Local Body concerned. (6) The investor/investee company shall be responsible for obtaining all necessary approvals, including those of the building/layout plans, developing 20 Sl.No. 12 12.1 Sector/Activity % of Cap/Equity FDI Entry Route internal and peripheral areas and other i....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ts excluding the site area and built up space utilized for providing common facilities. (v) "Industrial Activity" means manufacturing; electricity; gas and water supply; post and telecommunications; software publishing, consultancy and supply; data processing, database activities and distribution of electronic content; other computer related activities; basic and applied R&D on bio-technology, pharmaceutical sciences/life sciences, natural sciences and engineering; business and management consultancy activities; and architectural, engineering and other technical activities. FDI in Industrial Parks would not be subject to the conditionalities applicable for construction development projects etc. spelt out in para 11 above, provided the Industrial Parks meet with the under-mentioned conditions: (i) it would comprise of a minimum of 10 units and no single unit shall occupy more than 50% of the allocable area; 12.2 22 22 Sl.No. Sector/Activity % of FDI Entry Route Cap/Equity (ii) the minimum percentage of the area to be allocated for industrial activity shall not be less than 66% of the total allocable area. Satellites - Establishment and operation 13 13.1 ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....nt of Telecommunications) would be required if such information is to be provided to anybody else. company. (iii)For security reasons, domestic traffic of such entities as may be identified /specified by the licensor shall not be hauled/routed to any place outside India. (iv) The licensee company shall take adequate and timely measures to ensure that the information transacted through a network by the subscribers is secure and protected. 24 24 Sl.No. Sector/Activity % of FDI Entry Route Cap/Equity (v) The officers/officials of the licensee companies dealing with the lawful interception of messages will be resident Indian citizens. (vi) The majority Directors on the Board of the company shall be Indian citizens. (vii) The positions of the Chairman, Managing Director, Chief Executive Officer (CEO) and/or Chief Financial Officer (CFO), if held by foreign nationals, would require to be security vetted by Ministry of Home Affairs (MHA). Security vetting shall be required periodically on yearly basis. In case something adverse is found during the security vetting, the direction of MHA shall be binding on the licensee. (viii) The Company shall not transfer the ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....rs/officials in respect of relevant operations/features of their systems. (xviii) It shall be open to the licensor to restrict the Licensee Company 26 Sl.No. Sector/Activity % of FDI Entry Route Cap/Equity from operating in any sensitive area from the National Security angle. (xix) In order to maintain the privacy of voice and data, monitoring shall only be upon authorisation by the Union Home Secretary or Home Secretaries of the States/Union Territories. (xx) For monitoring traffic, the licensee company shall provide access of their network and other facilities as well as to books of accounts to the security agencies. (xxi) The aforesaid Security Conditions shall be applicable to all the licensee companies operating telecom services covered under this circular irrespective of the level of FDI. (xxii) Other Service Providers (OSPs), providing services like Call Centres, Business Process Outsourcing (BPO), tele-marketing, tele- education, etc, and are registered with DoT as OSP. Such OSPS operate the service using the telecom infrastructure provided by licensed telecom service providers and 100% FDI is permitted for OSPs. As the security conditions are applica....
X X X X Extracts X X X X
X X X X Extracts X X X X
..../ permits, as specified under the relevant Acts/Regulations/Rules/Orders of the State Government/Government Body/Government Authority/Local Self-Government Body under that State Government should be obtained. (b) Except in case of sales to Government, sales made by the wholesaler would be considered as 'cash & carry wholesale trading/wholesale trading' with valid business customers, only when WT are made to the following entities: (I) Entities holding sales tax/ VAT registration/service tax/excise duty registration; or (II) Entities holding trade licenses i.e. a license/registration certificate/membership certificate/registration under Shops and Establishment Act, issued by a Government Authority/ Government Body/ Local Self-Government Authority, reflecting that the entity/person holding the license/ registration certificate/ membership certificate, as the case may be, is itself/ himself/herself engaged in a business involving commercial activity; or (III) Entities holding permits/license etc. for undertaking retail trade (like tehbazari and similar license for hawkers) from Government Authorities/Local Self Government Bodies; or (IV) Institutions having cert....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... trading would cover only products which are branded during manufacturing. (d) The foreign investor should be the owner of the brand. (e) In respect of proposals involving FDI beyond 51%, mandatory sourcing of at least 30% of the value of products sold would have to be done from Indian ‘small industries/ village and cottage industries, artisans and craftsmen'. 'Small industries' would be defined as industries which have a total investment in plant & machinery not exceeding US $ 1.00 million. This valuation refers to the value at the time of installation, without providing for depreciation. Further, if at any point in time, this valuation is exceeded, the industry shall not qualify as a 'small industry' for this purpose. The compliance of this condition will be ensured through self-certification by the company, to be subsequently checked, by statutory auditors, from the duly certified accounts, which the company will be required to maintain. (3) Application seeking permission of the Government for FDI in retail trade of ‘Single Brand products would be made to the Secretariat for Industrial Assistance (SIA) in the Department of Industrial Policy & Promot....
X X X X Extracts X X X X
X X X X Extracts X X X X
....e to include IPOs, Private placements, GDR/ADRs and acquisition of shares from existing shareholders. (2) The aggregate foreign investment in a private bank from all sources will be allowed up to a maximum of 74 per cent of the paid up capital of the Bank. At all times, at least 26 per cent of the paid up capital will have to be held by residents, except in regard to a wholly-owned subsidiary of a foreign bank. (3) The stipulations as above will be applicable to all investments in existing private sector banks also. (4) The permissible limits under portfolio investment schemes through stock exchanges for FIIs and NRIs will be as follows: (i) In the case of FIIs, as hitherto, individual FII holding is restricted to 10 per cent of the total paid-up capital, aggregate limit for all FIIs cannot exceed 24 per cent of the total paid-up capital, which can be raised to 49 per cent of the total paid-up capital by the bank concerned through a resolution by its Board of Directors followed by a special resolution to that effect by its General Body. 33 Sl.No. Sector/Activity % of FDI Entry Route Cap/Equity (a) Thus, the FII investment limit will continue to be within 49 pe....
X X X X Extracts X X X X
X X X X Extracts X X X X
....s into a subsidiary or through a fresh banking license. A foreign bank will be permitted to establish a subsidiary through acquisition of shares of an existing private sector bank provided at least 26 per cent of the paid capital of the private sector bank is held by residents at all times consistent with para (i) (b) above. (e) A subsidiary of a foreign bank will be subject to the licensing requirements and conditions broadly consistent with those for new private sector banks. (f) Guidelines for setting up a wholly-owned subsidiary of a foreign bank will be issued separately by RBI (g) All applications by a foreign bank for setting up a subsidiary or for conversion of their existing branches to subsidiary in India will have to be made to the RBI. (iii) At present there is a limit of ten per cent on voting rights in respect of banking companies, and this should be noted by potential investor. Any change in the ceiling can be brought about only after final policy decisions and appropriate Parliamentary approvals. Banking- Public Sector Banking- Public Sector subject to 20% (FDI and Government 35 Sl.No. Sector/Activity % of FDI Entry Route Cap/Equity Bankin....
X X X X Extracts X X X X
X X X X Extracts X X X X
....(CIC) 21 21.1 Credit Information Companies 21.2 Other Conditions: 49% (FDI & FII) Government (1) Foreign investment in Credit Information Companies is subject to the Credit Information Companies (Regulation) Act, 2005. (2) Foreign investment is permitted under the Government route, subject to regulatory clearance from RBI. (3) Investment by a registered FII under the Portfolio Investment Scheme would be permitted up to 24% only in the CICs listed at the Stock Exchanges, within the overall limit of 49% for foreign investment. (4) Such FII investment would be permitted subject to the conditions that: (a) No single entity should directly or indirectly hold more than 10% equity. 37 Sl.No. Sector/Activity 22 22.1 22.2 22.2.1 23 23.1 23.2 24 24.1 % of FDI Entry Route Cap/Equity (b) Any acquisition in excess of 1% will have to be reported to RBI as a mandatory requirement; and (c) FIIs investing in CICs shall not seek a representation on the Board of Directors based upon their shareholding. Infrastructure Company in the Securities Market Infrastructure companies in 49% (FDI & FII) Securities Markets, namely, stock exchanges, depositories and clearin....