DOING BUSINESS WITH INDIA
GENERAL
Q. Is the use of foreign brand names permissible under collaboration? Ans. Yes. The use of foreign brand names under collaboration is per- missible for new as well as existing companies. Q. What facilities are planned to enable small and medium size enterprises to function as ancillaries to new units by foreign investors? Ans. Under the new policy announced by Government recently for development of small and tiny industries, industrial undertakings can subscribe upto 24% in the equity of small scale units. This includes foreign investment also. Q. The system of administered prices in some of the core sectors has considerably eroded profit prospects by escalating costs. What will be the future policy and approach on administered prices? Ans. Government's policy is to do away with administered prices as far as possible. The system of administered prices is constantly under review and wherever the administered prices have outlived their utility, these are discontinued. Q. Now that the liberalised trade and industrial policies have been announced, what is the likelihood of their being effectively implemented? Ans. The Government attaches high priority to reforms in the trade and industrial policies as an essential element in restructuring our economy to increase productivity and competitiveness and to achieve a strong export performance in the years ahead. The simplified procedures with regard to industrial licensing, foreign investment and technical collaborations have already been notified. The Rupee has already made partially convertible. Import duties have been cut and foreign equity is now permitted in all export oriented units and export processing zones and in the Power sector. India's message to the world is clear. It is open for business. Q. Can a foreign company apply directly for industrial approval? Ans. Yes. A foreign company can apply directly for industrial license/ foreign collaboration or other approvals in their own name without tying up with an Indian party or forming a company prior to making the application. Q. Who can invest in India? Ans. Investment opportunities in India are open to the following categories of foreign investors:- 1. Companies and other bodies. 2. Government, Semi-Government and Government affiliated autonomous agencies. 3. Banks, financial institutions, non-banking financial companies,agencies, institutions, trust etc. 4. Individuals Q. Can a foreign company appoint an expatriate Managing Director? Ans. Yes. A company in which foreign equity holding is 26% or more, the foreign investor can appoint an expatriate managing director/whole time Director. Where foreign equity is between 15% to 26% foreign investors can appoint an expatriate managing director/whole time director initially for ten years. Q. Can foreign companies open liaison offices in India? Ans. Foreign companies are permitted to open offices in India with the prior approval of Reserve Bank of India (RBI) purely for liaison work. Such offices are also permitted to carry on activity relating to export of Indian products to their home countries. Actual export has to be done by Indian agents. They can sign documents on behalf of the principals.
TECHNICAL COLLABORATION Q. Is collaboration/investment allowed only for new units? Ans. No. Foreign collaboration agreements, financial or technical, can be entered into both for new industries and for existing ones. Existing companies are allowed to upgrade their technologies in their present area of activity and also for diversifying into other areas of activity. Q. Is Foreign collaboration in consumer products allowed? Ans. Yes. Foreign collaborations for the production of consumer products are allowed. However, since most consumer durables fall in Annex.II, they are governed by the licensing requirements that are applicable to such products.
PRIVATISATION Q. What is the Government's view on privatisation? Ans. The Government has announced a number of steps aimed at progressively increasing the participation of the private sector in the economy. The number of industries reserved exclusively for the public sector has been reduced from 17 to 8. The Government has also initiated the process of selling a part of its shareholding in public sector units to mutual funds, financial institutions. It has also decided to undertake a review of the existing portfolio of public investment particular in respect of industries based on low-technology, small-scale and non-strategic areas with low or no social consideration or public purpose and areas where the private sector has developed sufficient expertise and resources. The policy changes have also thrown open areas such as power generation and distribution and air transport for the private sector.
RUPEE CONVERTABILITY Q. What is the Liberalised Exchange Rate Management System (LERMS) ? Ans. LERMS is another name for partial convertibility announced by the Finance Minister in his budget speech on 29th February 1992. Under this system, the recipients of foreign currency remittances in respect of current account transactions will have to surrender to the Reserve Bank through banks authorised to deal in foreign exchange, 40 % of the for- eign currency at the Reserve Bank's official rate and the balance will be purchased by banks at market rates. The portion acquired by the Reserve Bank will be made available for import of essential items ap- proved by the Government. Q. How is the new system different from the old one? Ans. Under the old system, Reserve Bank was the sole custodian of for- eign exchange reserves except for working balances allowed to be held by authorised dealers in their overseas accounts. Under the new system, authorised dealers are allowed to retain 60% of the receipts in respect of the current account transactions with themselves for being sold in compliance with the trade and exchange control regulations. While under the old system, Reserve Bank was under an obligation to buy from and sell to authorised dealers Pound Sterling without any limit, under the new system Reserve Bank is under an obligation to sell, at its option, Pound Sterling or US Dollar at its official rate only for purposes approved by the Central Government. Reserve Bank has decided to use U.S. dollars as its international currency since the major part of its overseas trade is invoiced in U S Dollar. Q. How will the exchange rate of the rupee de determined under the new system? Ans. Reserve Bank will continue to determine under the new system the official exchange rate of the rupee on the basis of its value in terms of a basket of currencies. This rate will be used for specified trans- actions. For the remaining transactions, rates will be determined by market forces of demand and supply. Thus, there would be dual exchange rates for the rupee - (i) the official exchange rate of the Reserve Bank to be used by authorised dealers for transactions in foreign exchange with members of public being based on the official rate and (ii) the free market determined on the basis of the factors of demand and supply. Q. What is the objective of the introduction of the new system? Ans. The Government has declared its commitment to make the rupee con- vertible in the trade account within a period of 2 to 3 years. This would have to be followed by convertibility of the rupee in regard to all current account transactions. The objective of the new system accordingly is a gradual movement towards convertibility of the rupee for all external transactions in the Current Account. Q. Does the introduction of the new system mean that there would be no exchange control regulations in relation to current account transac- tions? Ans. Transactions of the official and free market rates will have to be done within the frame work of the existing Exchange Control Regulations. To give an example, as person wishing to travel abroad would be required to purchase foreign exchange at the free market rate buy only to the extent permitted under the Exchange Control Regulation. Similarly, trade control regulations, to the extent in the force, will have to be complied with. These may relate to import/export of banned/restricted goods or other items requiring specific licences. Q. Is there any proposal to liberalised the Exchange Control Regula- tions in regard to current account transactions? Ans. Yes. Reserve Bank would be progressively liberalising its Ex- change Control Regulations relating to current account transactions. Q. Is there any advantage to recipients in India of foreign currency remittance under the new scheme? Ans. Yes. While under the old system, the entire amounts of inward remittances were purchased by authorised dealers at their exchange rates based on the Reserve Bank official rates, under the new system, all export proceeds and invisible receipts would be purchased to the extent of 40% receipt at official rates and the balance 60% would be purchased by banks at free market rates. All capital receipts would be purchased at market rates. The new system is thus expected to be more favourable to the recipients. Q. Is the recipient in India of a foreign currency remittance, repre- senting a current account transaction, required to convert the entire amount of remittance into rupees? Ans. No. Under the new system, the recipient would be permitted to retain in a foreign currency account with a bank in India upto 15% of the receipt. Q. Will exporters be allowed to retain a certain percentage of their export receipts in a foreign currency account with a bank in India? Ans. Yes. Exporters would also be allowed to retain upto 15% of the receipts in a foreign currency account with an authorised dealer in India and use the funds in such accounts for all purposes for which exchange could be drawn by them under blanket exchange permits and also for certain additional purposes subject to guidelines issued by the Reserve Bank. Q. What is the exchange rate for payments for import of goods? Ans. Authorised dealers will sell exchange towards payments for imports at the free market rate. However, Reserve Bank would provide foreign exchange to authorised dealers at the official rate for specified essen- tial imports. Q. What about essential imports required by private parties? Ans. Foreign exchange for import of life-saving drugs and equipment under import licences issued for the purpose would be made available by authorised dealers at the official rate. Q. What about payments for imports which are primarily made for export production of items which have to significant import content? Ans. Import under advance licenses and imprest licences and import of replenishment of raw materials for gem and jewellery exports could be paid for at the official exchange rate to the extent of 40% of the value of imports. The balance will have to be procured at market rates. Q. Will the Reserve Bank continue to announce its official buying and selling rates on every business day? Ans. Yes. Q. What are the currencies in which Reserve Bank would be dealing? Ans. Reserve Bank would continue to buy, both spot and forward Pound Sterling, US Dollar, Deutsche Mark and Japanese Yen. It would, however, sell only U S Dollar spot. Q. If exporters desire to enter into a forward contract in relation to their exports, would it be necessary for them to book two contracts? Ans. If the entire export receipts are to be covered, it would then be necessary for exporters to enter into two contracts one for 40% of the receipts at the rate based on the official rate and for the balance 60% at the rate based on free market rate. Exporters would, however, be free to leave both or one component of the transaction uncovered. Q. How does a customer with a foreign exchange liability at a future date (for whom foreign exchange will be sold by the Reserve Bank at the official rate) cover his exchange risk? Ans. As the Reserve Bank does not sell forward, forward cover will not be available to customer entitled to foreign exchange at the official rate. Q. What rates are to be quoted to banks who maintain Vostro Accounts with banks in India? Ans. For funding Vostro accounts, banks would quote official rate for 40% of the foreign currency amount and market rate for the balance 60% for the time being. Q. Exporters and recipients of inward remittances are allowed to maintain 15% of their receipts in a foreign currency account with a bank in India.Is 15% calculated on the total receipt or on that portion of the receipt which is surrendered at the free market rate?
Ans. 15% relates to the total receipt e.g. If US$ 100 is received, US$ 40 has to be surrendered to authorised dealers at the official rate, US$ 15 may be retained in a foreign currency account with a bank in India and the remaining 45% would be converted in to rupees at the free market rate. Q. What rate would apply to inflow of foreign equity and repatriation of dividends? Ans. All transactions pertaining to foreign investment involving either inflow of foreign equity or repatriation of dividends would be done at the market rate.
INFRASTRUCTURE Q. There are reports of constant power shortage and inconsistent quality of power that is available to the industry. What measures is India going to take to ensure quality supply of power? Ans. Although power shortages do prevail in some parts of the country, major metropolitan areas as well as industrial centres are generally not affected by these shortages. Moreover, the Government has been giving the highest priority to the development and modernisation of the power sector. In the Seventh Five Year Plan (1985-90) as much as Rs.626 billion amounting to over 28% of the total plan expenditure were spent on the energy sector. The recent policy changes have opened up power generation as well as power distribution to the private sector and have permitted 100% foreign equity in power generation projects. At the same time improvement is also being made in the quality of power supplied through the use of HVDC transmission system, as a result the power sector should see major improvement in the near future. Q. How does the Government resolve to overcome infrastructural inadequacies such as in the fields of telecom and transport? Ans. Along with the power sector, the telecom and transport sectors are the two other areas where major modernisation projects are underway. Extensive use of digital technology over the last few years has resulted in connecting Indian cities with major cities throughout the world via international subscriber dialing(ISD). Satellite circuits are being extensively used for telephone telex and fax connections. Major cities also offer facilities for video-conferencing and data- transmission via satellite. The transport sector is seeing several improvements through modernisation of the railways as well as major ports and upgradation of national highways. The Seventh Plan spent almost Rs.300 billion on the transport sector and Rs.86 billion on the communications sector. In order to give a further inputs to the modernisation of these sectors, they have been placed in the automatic approvals category to attract significant foreign investment. Q. Is there a plan to bring office automation and communications facilities to the level required for multinational operations? Ans. A major effort to bring the telecommunication system at par with international standards through extensive use of satellite and satellite circuits and digital technology is already underway. The office automation facilities already in existence are comparable with the best in the world. A wide range of computers, word processors, electronic typewriters, fax machines, photocopying machines, etc. are already being manufactured in India in collaboration with leading international companies and are therefore readily available.
DISINVESTMENT Q. If an 'exit' decision is taken,can the overseas promoter repatriate his share? Ans. Yes. In case of an exit decision the overseas promoter can repatriate his share after discharging tax and other obligations. He can also disinvest his share either to his Indian partner, to another company, or to the public.
FOREIGN EXCHANGE AND REGISTRATION ACT Q. Do existing FERA companies get automatic exemption from some of the provisions of the Act under the new policies? Ans. Yes. RBI has granted general exemption to FERA companies from the relevant sections of FERA. thus, FERA companies have the same opera- tional freedom as any other Indian companies. Q. What is the likelihood of major and lasting structural changes in the nature of FERA? Ans. Major amendments in FERA have already been carried out and there is no longer any discrimination between Indian and foreign held (FERA) companies. More changes are in the pipeline. A clear indica- tion of this was given by the Finance Minister in his Budget proposals on 29th Feb. 1992, when he said that the Act would be amended to bring it in line with the requirements of the new policy. Q. Would existing FERA companies be allowed to start any new industry in which 51% foreign equity is now permissible? Ans. Yes, FERA Companies are treated at par with other Indian compa- nies and are free to make investment in all areas open to Indian Companies.
INVESTMENT PROCEDURES Q. What are the licensing requirement for setting up industries in India ? Ans. Licensing requirement has been abolished for all except for a short list of 18 industries. The restricted list is based on safety and environmental concerns, social considerations, health hazards, strategic and defence related production. Q. Are there any other procedural formalities which have to be observed for setting up industries which require no licensing? Ans. Entrepreneurs are now required to file only a memorandum for statistical purposes, with the Secretariat for Industrial Approvals in the Ministry of Industry. There is a prescribed form for this and a small fee of Rs. 1,000/- is payable. Q. What is the procedure for industries still needing licensing ? Ans. Entrepreneurs have to file an application in II Form with the Prescribed fee of Rs. 2,500/- with the Secretariat for Industrial Approvals in the Ministry of Industry. Licences are issued within 45-60 days. Q. What is the procedure for foreign investment proposals ? Ans. Foreign investment proposals up to 51% are processed without any bottlenecks in respect of high priority (Annex. III) industries. Applications in Form FC(RBI) without any fee have to be filed with the RBI. RBI issues approvals within two weeks. The approval also provides automatic exemptions from restrictive conditions of FERA. Further, if there is a capital goods requirement and it is covered by the foreign equity, clearance for import is also simultaneously given. For proposals not covering Annex III items or involving higher than 51% equity application in the form FC-(SIA) has to be made to the secretariat for Industrial approvals in the Ministry of Industry and major investment proposals of proposals that are not covered by existing policy parameters, a concept proposal (no special application form needed) can be made to the Foreign Investment Promotion Board in the Prime Minister's office. Q. What is the procedure for existing companies to raise foreign equity upto 51% ? Ans. Such approvals are granted without any bottlenecks to companies engaged in the manufacture of high priority items or intending to take up the same. Applications in Form FC (RBI) are to be filed with RBI which issues approvals within two weeks. No fee is payable. Q. What is the procedure for companies seeking investment in low priority (non-Annex III) items or where CG import is more than foreign equity ? Ans. Applications are to be filed in Form (SIA) with the Secretariat for Industrial Approvals in the Ministry of Industry. Approvals are issued within 45-60 days. No fee is payable. Q. What is the procedure for technology transfer arrangements ? Ans. Technology agreements within a specified financial parameters are given approvals without any bottlenecks by RBI within two weeks. Applications in Form FC (RBI) are to be filed with the RBI. No fee is payable. Q. What kind of procedures are necessary under the New Industrial Policy for import of capital goods? Ans. No import license is required for the import of CG where the capital goods requirement is covered under foreign equity; from April 1992 automatic clearance envisaged if the c.i.f. value of CG is less than 25% of the total value of the plant and machinery (not of taxes) upto a maximum value of Rs.20 million. For other cases, Industrial Approvals in the Ministry of Industry. Fee payable on the basis of value of imports proposed. Approval within 60 days. Q. What is the procedure for 100% export oriented units ? Ans. A system of automaticity has been brought in the approvals for setting up 100 export units subject to the conditions:- i) That the units adhere to the value addition norms prescribed for the industry or a minimum of 35%; ii) The cost of import of capital goods is met out of foreign equity or if the capital goods do not ex- ceed 50% of the value of plant and machinery sub- ject to a ceiling of Rs. 30 millions. Q. What is the procedure for approvals for other export-oriented units ? Ans. The applications for 100% export oriented units are to be submitted to the Secretariat for Industrial Approvals, Ministry of Industry, Udyog Bhavan, New Delhi in the prescribed form alongwith an application fee of Rs. 2,500/-. The applications for Export Processing Zones are to be submitted to concerned Development Commissioner of the Export Processing Zone. Composite approval are accorded within 30 days. Q. Is there any procedure for obtaining a single window approval for setting up industries ? Ans. Yes. Entrepreneurs can file a composite application containing requests for foreign collaboration, import of capital goods and industrial licence (where necessary) with the Secretariat for Industrial Approvals in the Department of Industrial Development. Approvals are accord within 45-60 days. Q. What is the procedure in regard to engagement of experts/technicians of the foreign collaborators by the Indian companies ? Ans. No approval of the Government is required for engaging foreign experts/technicians by the Indian companies. They have only to approach the Reserve Bank of India or authorised dealers of foreign exchange for remitting the remunerations etc. in foreign exchange. Q. Is there any procedure for obtaining industrial approvals which are not normally admissible under the New Industrial Policy or Rules/Regulations of the Government of India? Ans. Yes. Such proposals can be submitted for consideration of the Foreign Investment Promotion Board. This is a High Powered Body located in the Prime Minister's Office and has been given the required flexibility to examine and approve proposals on the basis of commercial viability and mutually acceptable profitability. No formal application form is prescribed for proposals made to the FIPB. No fee is payable.
TRADE POLICY Q. Will any export commitments be imposed on units set up by overseas investors in the automatic approval category? If yes, what will be the nature and extent as a percentage of turnover and time-frame? Ans. Export commitment is applicable to the extent that repatriation of dividends for a period of seven years be balanced against net foreign exchange earnings. Q. Can one import old machineries against 51% foreign equity approval scheme? Ans. No. Under this scheme, machineries must be new. Q. What is the procedure for import of old machineries? Ans. In accordance with the import-export policy, Government accords clearances for import of second-hand machinery. For machineries less than 7 years old, the approval is given by SIA where the CG cost is more than Rs.15 million. In cases where the machinery is more than 7 years old, approval from committee of secretaries is taken and the entrepreneurs are required to submit chartered engineer's certificate giving details regarding year of manufacture, residual life of the machinery, etc. Such clearances are given on case to case basis on merits. Q. Why are foreign investors bracketed with domestic industry with regard to restrictions on import of raw materials and intermediate goods? Ans. Once foreign investment is approved, no discrimination is made between the foreign investor and the Indian company and the same provisions apply to both. The only case of discrimination -in favour of the foreign investor - is that he is allowed unlimited import of capital goods in the case of Annex.III industries so long as they are covered by foreign equity.
TIME FRAME Q. What does automatic approval for a list of industries mean? What is the time frame for giving such approval? Ans. Automatic approvals are available for foreign technology agreements in all industries. With regard to the foreign investment, such facility is available in respect of Annex-III industries and trading companies primarily engaged in export activities. The Reserve Bank of India with whom applications for automatic permission are to be filed, has prescribed a time limit of 15 days for disposal of such applications. In actual practice, it is seen that the Reserve Bank of India have been disposing of such applications within a week. The procedurefor grant of automatic permission has been brought into effect by Reserve Bank of India on 16.9.91. For cases not falling in the automatic approvals category the application is filed with the Secretariat for Industrial Approvals, which provides a response within 6 weeks. Q. What steps are being taken to streamline the procedures laid down by state Government with regard to new units? Ans. Most States have set up a nodal agencies which provide single- window clearance and assist the investor. They are also taking effective steps to streamline procedures at the state level.
INVESTMENT Q. Is collaboration/investment allowed only for new units? Ans. No. Foreign collaboration agreements, financial or technical, can be entered into both for new industries and for existing ones. Existing companies are allowed to upgrade their technologies in their present area of activity and also for diversifying into other areas of activity. Q. Would the Government consider raising the import limit for requirement of Capital Goods Committee approval from Rs.20 million to a more reasonable level? Ans. The Rs.20 million limit is applicable essentially to Indian companies seeking automatic approval for the import of capital goods. As far as foreign direct investment is concerned, there is no monetary limit on the import of capital goods so long as the import is covered by foreign equity. Q. Will any export commitments be imposed on units set up by overseas investors? If yes, what will be the nature, the extent as a percentage of turnover and the time-frame? Ans. Foreign investment upto 51% will be permitted without any bottlenecks in Annex-III industries. One of the conditions laid down for grant of such approvals is that the units should ensure balancing of dividend payments by way of export earnings. Export earnings can be by way of export of the company's own products or of products made by other companies provided these are Annex-III items. Moreover, the dividend balancing is required to be complied with only for a period of 7 years. In respect of cases which do not fall within the procedure for automatic permission, Government will take a view with regard to the conditions to be stipulated for approval of such proposals, keeping in view the item of manufacture, domestic demand, export possibilities, foreign exchange outgo involved etc. Q. Considering that India's foreign investment policy has been substantially liberalised why are there restrictions on certain areas of foreign investment? Ans. Foreign investment is permitted in all industries except those of strategic importance to the country. In fact, the earlier procedure of not allowing foreign investment in certain industries has been done away with under the new policy.
EOU's AND EPZ's Q. What are Export Processing Zones? Ans. Export processing zones are areas which provide centralised export facilities including custom bonding in order to facilitate the activities of exporting units located in these areas. The Government has set up six export processing zones at KANDLA (GUJARAT), COCHIN (KERALA), MADRAS (TAMILNADU), SANTA CRUZ (BOMBAY), FALTA (WEST BENGAL) and NOIDA (UTTAR PRADESH). The seventh EPZ at Visakhapatnam is under implementation. All export processing zones, except the one at Santa Cruz, are multi-product zones. The EPZ at SANTA CRUZ is meant exclusively for electronic and gems/jewellery units. Q. Does the Government encourage investment in export-oriented units? Ans. Yes. Automatic approval for even 100% foreign equity is available to these units and to units located in export processing zones. There are two special schemes exclusively for export promotion - one is for 100% export oriented units which can be set up anywhere in the domestic tariff area (DTA) and there is another scheme for free trade zone/export processing zones. As per the policy, units seeking approval under the above schemes are required to show a minimum value addition of 20% in order to qualify for the facilities and incentives available as a EOU/EPZ. The value addition norms vary from industry to industry keeping in view the export potential of the items of manufacture. The norms for setting up of EOUs/EPZs have been simplified and a system of automaticity has been brought in the approvals for setting up of such units subject to conditions:- i) That the units adhere to the value addition norms prescribed for the industry or a minimum of 35%; ii) The cost of import of capital goods is met out of foreign equity or if the capital goods do not exceed 50% of the value of plant and machinery subject to a ceiling of Rs.30 Million. All such proposals within the automatic approval category will be cleared within two weeks. All other proposals not falling in this category including issue of licenses will be cleared by board of approvals within a period of 45 days. Besides this, in order to revamp the functioning of export processing zones and EOUs, the development commissioners of various export processing zones have been delegated powers to effect minor modifications in the approvals relating to increase in the cost of capital goods, attestation of list of CG, capacity enhancement, broad- banding etc. Q. What are the facilities and incentives for the 100% export oriented industries and EPZ units? Ans. The following facilities and incentives are provided to EOUs and EPZs: i) There is a tax holiday for a period of 5 years. This can be avai- led for a block of 5 years during the first 8 years from the commencement of production. After which the normal tax exemption for export increase is allowable. ii) Single-window facility for matters pertaining to the import-export policy. iii) The unit can sell its product to the domestic area subject to value addition being achieved, to the extent of 25% of the export sales provided that the unit uses indigenous raw material to the extent of 30% or more of the production. If the use of indigenous raw material is less than 30%, domestic sales are correspondingly limited to 15% of export sales. iv) The import of capital equipment and raw material is free from customs duty and entry of imported raw material on provisional assessment basis, to expedite customs clearance. v) Flexibility in calculation of value addition and entitlement for domestic sale has been introduced and customs duty reduced to generally, half the applicable rate. vi) EOU and EPZ units can supply/transfer finished goods among themselves. vii) The IPRS (INTERNATIONAL PRICE REIMBURSEMENT SCHEME) is being introduced for EOU and EPZ units using iron and steel. viii) Replacement of multiple bonds by a single bond for obtaining import clearance. ix) Simple procedure for determining exemption of excise duties for supplies procured from the domestic market. x) Exemption from reinspection of containers stuffed in EOUs or EPZs, so long as the seals are intact. Q. What procedure is to be adopted for getting approvals for export oriented scheme? Ans. The applications for grant of industrial licence for 100% export oriented units are to be submitted to Secretariat for Industrial Approvals, Ministry of Industry, Udyog Bhavan, New Delhi, on prescribed forms along with application fee of Rs. 2,500/-. The applications for export processing zones are to be submitted to concerned development commissioner of the export processing zone. Q. Is an effort being made to improve the programme of export promotion zone (EPZ) 100% export oriented unit (EOU) schemes? Ans. Yes. Following are the reforms in the trade and industrial policies, the Government has revamped the EPZ and 100% EOU schemes. An important feature of the new changes is the delegation of powers to the development commissioners of the export processing zones, who are also made in-charge of the 100% export oriented units functioning in specified area under their jurisdiction. The powers delegated to the development commissioners include the following:- i) To allow one time additional import of capital goods to the extent of 15% over and above the value of capital goods. ii) To allow increase in the value of capital goods imports in terms of Rupee, owing to the exchange rate fluctuations. iii) To permit increase in the value of imported capital goods upto 15%, if there has been any increase in the invoice value. iv) To permit attestation of C.G. list for imports within the approved value. v) To permit capacity enhancement through additional imports of raw materials/inputs and consumables within specified limits. vi) To permit additional balancing equipment upto 15% of the value of installed machinery for the items covered under broad banding. vii) To authorise the change in the name of the company or the implementing agency. viii) To permit change of location of 100% EOU within specified territorial jurisdiction. ix) To extend the authority of letter of approval or letter of indent upto 2 years, in case of EPZ units.
PROJECT FINANCE Q. Are there institutions for project finance? Ans. Yes. Projects costing upto Rs.30 million are assisted by State level Financing Institutions. Projects involving investment between Rs.30 million and Rs.50 million are assisted by The All India Institutions such as Industrial Finance Corporation of India (IFCI) Industrial Credit and Investment Corporation of India (ICICI) and Industrial Reconstruction Bank of India (IRBI) and the Exim Bank. Those projects above Rs.50 million are provided direct assistance by Industrial Development Bank of India (IDBI), in consortium with other All India Institutions. Q. Are joint venture projects eligible for project finance from financial institutions? Is there any limit? Ans. Yes, joint-venture projects are eligible for institutional finance. The cost of the project is financed partly by equity and partly by long term institutional loan representing debt. A flexible approach is adopted in regard to debt-equity ratio of an industrial concern depending on various relevant factors viz. size of the project, debt servicing capacity, risk element etc. The general norm is 2:1.In the case of projects promoted by large houses, a combination of somewhat lower debt-equity ratio and higher promoter's contribution is expected.
EQUITY & REMITTANCE Q. In view of FERA restrictions will foreign partners be allowed to transfer their Indian stock either in the Indian stock market or abroad? Ans. The foreign partners are permitted to transfer their shareholding to other companies in Indian as well as abroad. They are also permitted to disinvest their holding when they wish to discontinue their participation. Q. Is portfolio investment permissible by foreign investors? Ans. Yes. The Budget proposals made on 29th Feb. 1992 include a decision to permit pension funds and other reputed financial institu- tions to make portfolio investment in India. The guidelines for this are being formulated. Q. Is the foreign equity to be brought in freshly as cash or can it be subscribed through any capital goods? Ans. The foreign equity can be subscribed in terms of new capital goods only in case of Annex-III items to the extent of 51% of total equity of a project. For other cases foreign investment should be in terms of cash. Q. Is there any restriction on large dividend remittances? Ans. No. Dividends earned by foreign companies are freely repatriable. Q. Are there any 'invisible' barriers to repatriation of earnings? Ans. No. There are no 'invisible' barriers.
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