In Union Budget 2019-20, Finance Minister proposed to further consolidate gains under FDI in order to make India a more attractive FDI destination. Continuing with its reform policy, on 28 August 2019, the Union Cabinet has approved proposal for review of FDI Policy on various sectors. Key highlights of FDI Policy reform are listed below:
1 Single Brand Retail Trading (SBRT): In order to provide greater flexibility and ease of operations in SBRT sector, following norms are eased:
- in case of SBRT entities with more than 51% FDI, all procurements from India by such SBRT entity for that single brand shall be counted towards local sourcing of 30%, irrespective of whether goods procured are sold in India or exported. Further, to give an impetus to exports, current cap of considering exports for 5 years only has been removed;
- 'sourcing of goods from India for global operations' can be done directly by the entity undertaking SBRT or its group companies (resident or non-resident), or indirectly by them through a third party under a legally tenable agreement;
- further, entire sourcing from India for global operations shall be considered towards local sourcing requirement (and no incremental value);
- retail trading through online trade can be undertaken prior to opening of brick and mortar stores, subject to the condition that the entity opens brick and mortar stores within 2 years from date of start of online retail.
2 Contract Manufacturing: At present, 100% FDI under automatic route is allowed in manufacturing sector. There is no specific provision for contract manufacturing in FDI Policy. In order to provide clarity on contract manufacturing, it has been decided to permit 100% FDI under automatic route in contract manufacturing. Manufacturing activities may be conducted either by the investee entity or through contract manufacturing in India under a legally tenable contract, whether on Principal to Principal or Principal to Agent basis.
3 Digital Media: Extant FDI policy provides for 49% FDI under approval route in Up-linking of 'News &Current Affairs' TV Channels. Now upto 26% FDI under government route is permitted for uploading/ streaming of News & Current Affairs through Digital Media, on the lines of print media.
4 Coal Mining: At present, 100% FDI under automatic route is allowed for coal mining for captive consumption by power projects, iron and steel and cement units and also for coal processing plants subject to condition that processing units will not do coal mining or sell in open markets. Now it has been decided to permit 100% FDI under automatic route for sale of coal, coal mining activities including associated processing infrastructure. "Associated Processing Infrastructure" would include coal washery, crushing, coal handling, and separation (magnetic and non-magnetic).
Press Release can be accessed at: https://pib.gov.in/PressReleseDetail.aspx?PRID=1583294
Originally published 30 August 2019
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