2. Foreign Investment: Procedures

The new procedures governing foreign investment reflect the positive attitude with which the Government welcomes FDI. The procedures outlined in this section apply both to the automatic approval category and to other investment proposals. The automatic approval category covers foreign investment up to 51% equity in the promoted products list (Annex.III) as well as in trading companies and in the hotels and tourism related industry as spelt out in the industrial policy statement [Para 39B(i), (ii) and (iv)]. Other foreign equity proposals which do not fall within the parameters of these provisions [Para 39(iii) of industrial policy statement] would continue to require prior permission.

General Procedures.

The procedures outlined in this section apply both to the automatic approval category and to other investment proposals. The automatic approval category covers foreign investment up to 51% equity in the promoted products list  as well as in trading companies & in the hotels and tourism related industry.

Increasing equity to 51% in existing Co's Procedures for increase in Foreign Equity to 51% in existing companies. According to this procedure approvals will be given to investments up to 51% foreign equity in high priority industries. These approvals will be available if the foreign equity covers the foreign exchange requirements.

Hotels & Tourism.

Hotels and Tourism related industries are eligible for automatic approval for foreign direct investment upto 51% foreign equity.

Trading companies.

Majority foreign equity holding upto 51% equity will be allowed for trading companies primarily engaged in export activities; such trading houses shall be at par with domestic trading and export houses in accordance with the Import Export Policy.

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Foreign Technology Agreements: Procedures

The new policies facilitate and encourage technical collaboration agreements between Indian firms and their foreign counterparts in a wide range of industries. Under the liberalised procedures,automatic approval is available for foreign technology agreements in the promoted products category. It is also available for other industries provided that no free foreign exchange is involved in making the payments. All other proposals require specific approval from the Government.

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Foreign Investment Promotion Board.

This specially empowered board has been set up in the office of Prime Minister with the objective of negotiating with large international firms and approving direct foreign investment in select areas. Proposals involving major investment or access to high technology and world markets can be made directly to the Board which would consider these proposals in their totality, free from pre- determined parameters or procedures.

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5. Export-Oriented Units and Export Promotion Zones

The Government attaches a high priority to increasing export earnings. For this purpose, it provides special facilities and incentives for 100% export-oriented units and for manufacturing units located at Export Processing Zones/Free Trade Zones. The requirement is that there should be a minimum value addition of 20% for EOUs and 30% for units in EPZs in order to qualify for the incentives. The incentives include a five year tax holiday, single-window clearance and expeditious clearance of imported raw-materials and capital goods.

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6. Industrial Licensing: Procedures

Industrial Licensing in all bit 18 sectors of industrial activity has been abolished. If the foreign investor participates in a venture involving one of the 18 industries which are subject to compulsory licensing, then the procedures outlined in this section would also apply to him.

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Form FC

This form is the basic application form for foreign investors. The Form has two versions.

7.2) Form FC(SIA) is for proposals not falling in the automatic approvals category and is to be filed with the Secretariat for Industrial Approvals, Department of Industrial Development.

Trade Policy Reform

Reform of the trade policy is one of the principal features of the comprehensive programme of economic restructuring initiated by the Government. The new trade policy is aimed at substantially bringing down the level of Govt. intervention in the external sector of the economy and reducing bureaucratic controls over imports as well as exports. The policy has a distinct bias in favour of export-promotion and it provides a number of incentives to exporters in general and to export-oriented units and export processing zones in particular. The policy's ultimate objective is to facilitate India's integration into the global economy.

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