India: Comparative Note Of Press Note 12 Dated Nov 24, 2015 Issued By DIPP Regarding Change In FDI Policy

We have done a comparative analysis of Press Note 12 issued by DIPP regarding the change in FDI policy.

Heading Existing FDI Policy Alterations carried out by Press Note 12 Impact/ Remarks
Definition of "Manufacture" Definition of the phrase 'Manufacture' was not there in the existing FDI policy. New definition has been introduced as under ; "Manufacture" with its grammatical variations, means a change in a non- living physical object or article or thing- (a) resulting in transformation of the object or article or thing into a new and distinct object or article or thing having a different name, character and use; or (b) bringing into existence of a new and distinct object or article or thing with a different chemical composition or integral structure. Definition of 'Manufacture' has been included and it is now clarified that a manufacturing entity is permitted to sell its products manufactured in India through wholesale and/or retail, including through e-commerce without any government approval.
FDI in LLP As per existing policy:
  • FDI in LLP was allowed only through the Government approval route i.e. prior approval of Government was necessary to make FDI in any LLP.
  • LLP's were not allowed to make downstream investment.
  • Conversion of Company with FDI into LLP required Government approval.
As per altered position:
  • FDI in LLPs is now permitted in those sectors in which 100% FDI is allowed under the automatic route.
  • LLP is also allowed to make downstream investment in another company or LLP in automatic sectors.
  • FDI in LLP is subject to the compliance of the conditions of the LLP Act, 2008.
FDI in LLPs is now permitted under automatic route which will encourage Foreign Co(s) to consider LLP as preferred entity for setting up business in India.

LLP having foreign Investment will be permitted to make downstream investments.
FDI in Dormant Companies FDI in Indian companies not having any operations. (Dormant Companies)

Required to take Government approval for accepting any FDI.
Now such Dormant Co(s) are not required to take Government approval to initiate FDI for operating in automatic sector. Now, Dormant Co(s) can be considered for making investments in India to save time.
FDI by Swap of Share As per existing Policy FDI by way of swap of shares both in automatic and approval route requires Government approval. Now, it has been decided that no Government approval will be required for making investment in automatic route sectors by way of swap of shares. Foreign and Indian parties can now consider swap of shares as a tool of making investment in Indian Companies.
FDI by Co./Trust/ Partnership owned and controlled by NRI Clarification was not there in the existing policy requiring the FDI by Co/Trust/Partnership by NRI. Now it has been clarified that a company, trust and partnership firm incorporated outside India and owned and controlled by non-resident Indians can invest in India with the special dispensation as available to Non-Residents under the FDI policy. This clarification allows NRI's to structure their investment in India through the entities owned and controlled by them.
Monitory limit for approval by Foreign Investment Promotion Board (FIPB) As per existing Policy FIPB can consider proposals having total foreign equity inflow up to Rs. 3000 Crores and proposals above Rs. 3000 Crores were placed before the Cabinet Committee on Economic Affairs (CCEA) for consideration. It has been specified that FIPB can now approve proposal up to Rs. 5000 crore, more that which CCEA will consider the FDI proposals. This will reduce the time gap to get approvals on FDI proposals.
FDI in Coffee / Rubber / Cardamom / Palm Oil Tree & Olive Oil Tree Plantations As per existing Policy only tea plantation was open for Foreign Investment. Now it has been decided that the Coffee/Rubber/Cardamom/Palm Oil & Olive Oil tree Plantations are now open for 100% foreign Investment under automatic route Earlier only FDI in tea sector was allowed and that too under Government route. Now Coffee/Rubber/Cardamom/Palm Oil & Olive Oil Plantations are also included under 100% automatic route.
FDI in Defence Sector As per existing policy:
  • FDI in Defence Sector was allowed up to 49 % under Govt. approval route.
  • Investment above 49% to be considered by Cabinet Committee on Security (CCS).
Pursuant to PN 12, FDI in defence Sector has been raised to 49% under automatic route (i.e. no Government approval required to invite such investments) and FDI above 49% (on a case to case basis, wherever it is likely to result in access to modern and state of the art technology in the country) shall entail Government approval.

Earlier there were 20 conditions interalia dealing with appointment of key officers, ownership and control etc., However, there are only 4 conditions which are as under-
  • "Infusion of fresh foreign investment within the permitted automatic route level, in a company not seeking Industrial License, resulting in change in the ownership pattern or transfer of stake by existing investor to new foreign investor, will require Government approval;
  • License applications will be considered and licenses given by DIPP, Ministry of commerce & Industry, in consultation with Ministry of Defence and Ministry of external affairs;
  • Foreign investment in the sector is subject to security clearance and guidelines of MOD; and
  • Investee Company should be structured to be self sufficient in areas of product design and development. The investee/ joint venture company along with manufacturing facility should also have maintenance and life cycle support facility of the product being manufactured in India."
Even though DIPP has imbibed the proposed changes in the FDI policy, they still are required to provide further clarifications.

There is no lucidity with regards the applicability of these conditions.

Usage of phrases like "in a company not seeking Industrial License" and "change in the ownership pattern" requires explanation. The need for clarification emanates from the fact that FDI in defence sector in any case is subject to grant of IL because any company intending to operate in defence manufacturing requires an IL. Thus, there may not be a situation where a company does not intend seeking an IL to operate in this sector. Therefore, clarity is awaited from the DIPP for use of the aforementioned phrases.

Even if the expression "in a company not seeking Industrial License" is ignored, then the first condition appears to mean that FDI up to 49% in defence sector that result in change in ownership of a company, will need prior FIPB approval even though the government has put such investments under automatic route. Accordingly, that also does not appear to be the intent of the amendment.

Accordingly, it is expected that DIPP will be issuing further clarification in this regard.
FDI in DTH/Cable Networks The present existing FDI was allowed under maximum cap was of 74%.
Automatic route up to 49 % and beyond 49 % up to 74% Govt. route.
Now, up to 49% - Automatic Route and beyond 49 % under Govt. route. Thus the proposals seeking up to 100% FDI can be carried by FIPB, which was earlier allowed only to the extent of 74%.
FDI in FM radio Max 26% was allowed under Govt. Route. Now upto 49 % Government route can be considered under Government Route. FDI limits have been increased.
Up-Linking of 'News & Current Affairs' TV Channels Max 26% was allowed under Govt. Route. Now upto 49 % Government route can be considered under Government Route. FDI limits have been increased.
Up-Linking of 'Non-News & Current Affairs' TV Channels/ Down-linking of TV Channels FDI up to 100 % was allowed under Govt. approval route. 100 % FDI is allowed under Automatic Route. No approval is required for making FDI in this section.
Air Transport Service FDI in regional Air Transport Service was not allowed earlier. Now, FDI in regional Air transport Service is up to 49% and 100% for NRI under automatic route is allowed. FDI in Regional Air transport Service is now also allowed.
FDI in Ground Handling Services Earlier 74% (100% for NRIs) was allowed under which Automatic up to 49% Govt. route beyond 49% and up to 74 % Now, 100 % FDI is allowed under Automatic Route. Foreign parties can now consider making FDI in this sector without any Govt. approval.
Establishment and operation Space Satellites FDI was allowed up to 74% under Government Route. Now FDI upto 100 % is allowed under Automatic Route. Increase in the limit of FDI
Credit Information Companies As per existing policy FDI in Credit Information Companies was allowed up to 74 % under automatic route. Now FDI upto 100 % is allowed under Automatic Route. Now no approval is required for 100% in FDI in CIC's
FDI in duty free shops FDI in duty free shops was not permitted as per existing policy. FDI in duty free shops in now permitted up to 100 % under Automatic Route. Foreign parties can now consider making investments in duty free shops.
Whole Sale Trading conditions As per existing policy a Wholesale/Cash & carry trader cannot open retail shops to sell to the consumer directly. Now a wholesale/ cash & carry trader can undertake Single Brand Retail Trading (SBRT) subject to the conditions related to FDI in SBRT sectors. A wholesale cash and carry trader can undertake FDI in SBRT section.
Conditions for SBRT As per existing policy for SBRT mandates that in case of FDI beyond 51%, sourcing of 30% of the value of goods purchased has to be done from India. Now this outsourcing requirement has to be reckoned from the opening of first store.

SBRT entities operating through brick and mortar services is now allowed to take retail through e-commerce.
As against average of first five years now this condition has to be fulfilled for the opening of first store which appears to be more stringent.
Condition for FDI in Construction Development As per the existing policy the foreign investor was allowed to exit the company and repatriate the money only after completion of the project. A foreign investor will be permitted to exit and repatriate the foreign investment before the completion of the project provided that the lock-in-period of 3years with reference to each phase of project is now classified as project. Each phase of project is to be calculated separately which was not provided before the amendment. This will give flexibility to the foreign investor to exit the project.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Authors
Similar Articles
Relevancy Powered by MondaqAI
SKP Business Consulting LLP
 
In association with
Related Topics
 
Similar Articles
Relevancy Powered by MondaqAI
SKP Business Consulting LLP
Related Articles
 
Related Video
Up-coming Events Search
Tools
Print
Font Size:
Translation
Channels
Mondaq on Twitter
 
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
 
Email Address
Company Name
Password
Confirm Password
Position
Mondaq Topics -- Select your Interests
 Accounting
 Anti-trust
 Commercial
 Compliance
 Consumer
 Criminal
 Employment
 Energy
 Environment
 Family
 Finance
 Government
 Healthcare
 Immigration
 Insolvency
 Insurance
 International
 IP
 Law Performance
 Law Practice
 Litigation
 Media & IT
 Privacy
 Real Estate
 Strategy
 Tax
 Technology
 Transport
 Wealth Mgt
Regions
Africa
Asia
Asia Pacific
Australasia
Canada
Caribbean
Europe
European Union
Latin America
Middle East
U.K.
United States
Worldwide Updates
Registration (you must scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions

Mondaq.com (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of www.mondaq.com

To Use Mondaq.com you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.

Disclaimer

The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.

General

Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions