FINANCE MINISTRY RE-LAUNCHES WEBSITE FOR FDI PROPOSALS

FINANCE MINISTRY RE-LAUNCHES WEBSITE FOR FDI PROPOSALS

• For a push to ‘Make in India’ initiative, the Finance Ministry, re-launched its website for filing and processing of applications for foreign direct investment (FDI) proposals requiring the Centre’s approval.
• Applicants will have to submit just a single copyof proposal applications on the new website instead of 15-18 copies earlier.
• The initiative is part of the government’s ongoing efforts for good governance by enhancing transparency and accountability in its proceduresand is a step towards minimum government and maximum governance.
• The new features, include elimination of physical delivery and loss of time due to postal delays by shifting all correspondence, including updates and decisions, to SMS and emails.
• The Ministry expects that this would reduce paperwork too.
• The website offers an Any-doubts modulefor users to raise queries online. The relevant ministries will be responding online itself to the queries raised.
• The plan also is to record all transactions and correspondences online for greater transparency and security.

FDI IN INDIA:

• India has already marked its presence as one of the fastest growing economies of the world.
• It has been ranked among the top 3 attractive destinations for inbound investments.
• Since 1991, the regulatory environment in terms of foreign investment has been consistently eased to make it investor-friendly.

STEPS INVOLVED IN INVESTMENT

• Identification of structure
• Central Government approval if required
• Setting up or incorporating the structure
• Inflow of funds via eligible instruments and following pricing guidelines
• Meeting reporting requirements of RBI and respective Act
• Registrations/obtaining key documents like PAN etc.
• Project approval at state level
• Finding ideal space for business activity based on various parameters like incentives, cost, availability of man power etc.
• Manufacturing projects are required to file Industrial Entrepreneur’s Memorandum (IEM), some of the industries may also require industrial license.
• Construction/renovation of unit
• Hiring of manpower
• Obtaining licenses if any
• Other state & central level registrations
• Meeting annual requirements of a structure, paying taxes etc.

AUTOMATIC ROUTE :

• Under this route no Central Government permission is required.

GOVERNMENT ROUTE :

• Under this route applications are considered by the Foreign Investment Promotion Board (FIPB).
• Approval from Cabinet Committee on Security is required for more than 49% FDI in defence.
• The proposals involving investments of more than INR 12 billion are considered by Cabinet committee on economic affairs.
• The Indian company receiving FDI either under the automatic route or the government route is required to comply with provisions of the FDI policy including reporting the FDI and issue of shares to the Reserve Bank of India.

TYPES OF INVESTORS

INDIVIDUAL:

• FVCI
• Pension/Provident Fund
• Financial Institutions

COMPANY:

• Foreign Trust
• Sovereign Wealth Funds
• NRIs / PIOs

FOREIGN INSTITUTIONAL INVESTORS:

• Private Equity Funds
• Partnership / Proprietorship Firm
• Others

SECTORS WHERE FDI IS PROHIBITED :

• Lottery Business including Government /private lottery, online lotteries, etc.
• Gambling and Betting including casinos etc.
• Chit funds
• Nidhi company-(borrowing from members and lending to members only).
• Trading in Transferable Development Rights (TDRs)
• Real Estate Business (other than construction development) or Construction of Farm Houses
• Manufacturing of Cigars, cheroots, cigarillos and cigarettes, of tobacco or of tobacco substitutes
• Activities / sectors not open to private sector investment e.g. Atomic Energy and Railway Transport (also Mass Rapid Transport Systems).
• Services like legal, book keeping, accounting & auditing.

SECTORS WITH CAPS

• Petroleum Refining by PSU (49%).
• Teleports (setting up of up-linking HUBs/Teleports),Direct to Home (DTH), Cable Networks (Multi-system operators (MSOs) operating at national, state or district level and undertaking upgradation of networks towards digitalization and addressability), Mobile TV and Headend-in-the-Sky Broadcasting Service (HITS) – (74%).
• Cable Networks (49%).
• Broadcasting content services- FM Radio (26%), uplinking of news and current affairs TV channels (26%).
• Print Media dealing with news and current affairs (26%).
• Air transport services- scheduled air transport (49%), non-scheduled air transport (74%).
• Ground handling services – Civil Aviation (74%).
• Satellites- establishment and operation (74%).
• Private security agencies (49%).
• Private Sector Banking- Except branches or wholly owned subsidiaries (74%).
• Public Sector Banking (20%).
• Commodity exchanges (49%).
• Credit information companies (74%).
• Infrastructure companies in securities market (49%).
• Insurance and sub-activities (26%).
• Power exchanges (49%).
• Defence (49% above 49% to CCS).

RECENT POLICY MEASURES

• 100% FDI allowed in the telecom sector.
• 100% FDI in single-brand retail.
• FDI in commodity exchanges, stock exchanges & depositories, power exchanges, petroleum refining by PSUs, courier services under the government route has now been brought under the automatic route.
• Removal of restriction in tea plantation sector.
• FDI limit raised to 74% in credit information & 100% in asset reconstruction companies.
• FDI limit of 26% in defence sector raised to 49% under Government approval route. Foreign Portfolio Investment up to 24% permitted under automatic route. FDI beyond 49% is also allowed on a case to case basis with the approval of Cabinet Committee on Security.
• Construction, operation and maintenance of specified activities of Railway sector opened to 100% foreign direct investment under automatic route.