Sep 23, 2019

Amendments in FDI Policy

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Amid the headwinds faced by India in the FDI inflows due to the global economic slump, the Government of India announced certain changes in FDI Policy on 28th August, 2019 in order to ease the provisions and attract more foreign investment with an investor friendly policy. In continuation of the same, DIPP vide its Press Note No. 4 (2019 Series) incorporated the suggested changes in the Policy, which are capsulized hereinbelow-

Sector

Extant Provision

Amendment

Coal Mining

100% FDI under automatic route is allowed for-

  • Coal & lignite mining for captive consumption by power projects, iron & steel and cement units and other eligible activities subject to the compliance with sector regulations
  • setting up coal processing plants subject to compliance with the conditions specified

To attract international players to create an efficient and competitive coal market, 100% FDI under automatic route has been further permitted for sale of coal, for coal mining activities (for other than captive consumption) including associated processing infrastructure subject to compliance with the sector specific regulations.

Contract Manufacturing

100% FDI is permitted under automatic route for manufacturing sector, however the current provisions is silent on contract manufacturing.

It has been clarified that 100% FDI under automatic route is also available for contract manufacturing in order to widen the scope of foreign investment under manufacturing sector.

Single Brand Product Retail Trading (SBRT)

Local Sourcing Requirement
SBRT Entities with FDI of over 51%, are required to source 30% of the value of goods purchased by them from India preferably from MSMEs, village and cottage industries, artisans and craftsmen.

With a view to provide greater flexibility and ease of operations to SBRT entities, it has been decided to allow all local procurements made from India by the SBRT entity towards meeting the local sourcing, irrespective of whether the goods procured are sold in India or exported i.e. for global operations.

Further, for reckoning sourcing for global operations, the value of goods sourced from India for global operations for that single brand (in INR terms) in a particular financial year directly by the entity undertaking SRBT or its groupĀ  companies (resident or no-resident) or indirectly by them through a third party under a legally tenable agreement, will also be considered

E-commerce and Brick & Mortar Stores
Extant FDI provisions permitted SBRT entity to undertake retail trading through e-commerce after setting-up the brick and mortar stores.

In order to boost the retail trade market, government permitted commencement of retail trading through e-commerce prior to setting-up brick and mortar stores, subject to opening of the latter within 2 years from the opening of online stores.

Digital Media

Evidencing the extent usage of digital media, 26% FDI under approval route has been allowed for uploading/streaming of news & current affairs through digital media.

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