Hi,
Please find the links below. If you go through, it will answer all
your questions in particular.
http://siadipp.nic.in/publicat/most_frq.htm
http://dipp.nic.in/invindia/invind.htm
Best Regards
epedia.
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FREQUENTLY ASKED QUESTIONS
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1. What are the forms in which business can be conducted by a
foreign company in India?
Ans. "Entry Strategies for foreign investors" is available under
the "Policy & Procedures" menu of the website by clicking "Secretariat
for Industrial Assistance" of DIPP Website (http://dipp.nic.in ).
Foreign companies can make investments or operate their
business in a number of ways as given below: -
·Liaison/representative office1
· Project Office1
· Branch Office1
· 100% Wholly owned subsidiary2
· Joint venture company2
Financial/Technical/Techno-financial approval is given by
1. Under Automatic route through RBI
2. Government/FIPB/RBI automatic approval is governed by Press Note
No. 2 of 2000 subject to sectoral caps as given in Annex IV.
Any company set up with FDI has to be incorporated under the Indian
Companies Act with the Registrar of Companies and all Indian
operations would be conducted through this company.
2. Is foreign company treated as domestic company?
Ans. Yes, a foreign company incorporated under the Companies Act
is treated at par with any domestic Indian company within the scope of
approval and subject to all Indian laws.
3. How does a foreign company invest in India?
Ans. Either through:-
a. Automatic Approval - by the country's Central Bank, the Reserve
Bank of India (RBI), Mumbai, or
b. Through the Foreign Investment Promotion Board (FIPB)
i. Automatic Approval through Reserve Bank of India is available for
all items/activities except a few as given in the Press Note No.2(2000
series) dated 11.2.2000. The sector specific guidelines in this regard
are given in Annexure IV of the Manual on Industrial Policy &
Procedures in India.
No prior approval required. The company is only required to report to
RBI within 30 days of receipt of foreign equity/allotment of shares.
ii) FIPB approval is required for all other proposals not eligible
for Automatic Approval.
Applications to be submitted in Form IL-FC or on plain paper with full
details to the Secretariat for Industrial Assistance (SIA) for the
cases involving NRI/OCB investment and 100% EOU. For remaining cases,
the applications may be submitted to Department of Economic Affairs,
Ministry of Finance. The proposals are considered by the reconstituted
FIPB in the Department of Economic Affairs. IL-FC Form is available at
Website in a downloadable format on the DIPP Website
(http://dipp.nic.in).
4. From where one can get NIC Codes 1987 for products/services, to
be filled in IL-FC Form?
Ans. Investors are required to give the description of activities
as per the National Industrial Classification of all Economic
Activities (NIC), 1987, while submitting applications to the RBI/SIA.
Copies of the NIC, 1987 published by the Ministry of Statistics &
Programme Implementation , Central Statistical Organization, can be
obtained on payment from the Controller of Publications, 1 Civil
Lines, Delhi 110054 or from any authorised agent.
However, NIC Codes (1987) are also available on the website (http://dipp.nic.in ) .
5. What is the FIPB?
Ans. FIPB is a competent body to consider and recommend Foreign
Direct Investment (FDI), which do not come under the automatic route.
The FIPB has been reconstituted as under :
1) Secretary, Department of Economic Affairs
Chairman
2) Secretary, Department of Industrial Policy & Promotion
Member
3) Secretary, Department of Commerce
Member
4) Secretary (Economic Relations), Ministry of External
Affairs Member
The Board would be able to co-opt Secretaries to the
Government of India and other top officials of financial institutions
, banks and professional experts of industry and commerce, as and
when necessary.
6. What are the factors considered by the FIPB while examining proposals?
Ans. To impart greater transparency to the approval process,
guidelines have been issued which govern the consideration of FDI
proposals by the FIPB. These are given at Annexure III of the Manual
on Foreign Direct Investment in India - Policy & Procedures.
7. Who is the Officer concerned in your Department for FIPB related matters?
Ans. Director (Foreign Collaboration/Foreign Direct Investment
Policy) Mr. R.S. Julania (Tel:91-11-23013196, Fax 91-11-23015245
e-mail: julaniya@ub.nic.in) may be contacted for FDI policy matters.
At Joint Secretary level, work is being looked after by Shri Umesh
Kumar (Tel : 91-11-23011983, Fax: 91-11-23011034, Email :
umeshgupta@ub.nic.in ).
8. Please let us know the status of the application made to FIPB?
Ans. The status of the FIPB application can be seen on the website
of Department of Economic Affairs (http://finmin.nic.in). However,
status for the applications involving NRI/OCB investment and 100% EOU
is available at "SIA Application status" link on the opening page of
the DIPP website (http://dipp.nic.in) wherein following three
categories are given.
a) Daily Status of Applications for NRI / OCB investment and 100% EOU for the week.
b) Weekly Status of Applications for NRI/OCB Investmebt and 100% EOU
for the week ending
c) Date of posting of approval letters of applications for NRI/OCB
investment and 100% EOU
The cases that are listed but do not figure in the approved / rejected
categories, fall under the deferred category viz. cases which are
still under consideration. It may be possible that applications in
such cases, need additional clarification from other Ministries or
attracts on policy angle because of which it may take some more time.
The link for the status of FIPB applications has also been provided at
the front page of DIPP website (http://dipp.nic.in).
9. Which are the sectors, which attracts limit on foreign ownership?
Ans: The following activities attract equity cap for FDI:
S. No.
Sector
FDI cap (in %)
Activities
1.
Telecom
49
74
basic, cellular, value-added services, global mobile personal
communications by satellite
internet service providers with gateways, radio paging and end-to-end bandwidth
2.
Coal & Lignite
49
50
74
public sector undertakings
other than public sector undertakings
for exploration & mining of coal or lignite for captive consumption
3.
Mining
74
exploration and mining of diamonds and precious stones
4.
Private Sector Banking
49
private banking sector
5.
Insurance
26
insurance sector (subject to obtaining license from IRDA)
6.
Domestic Airlines
40
no direct or indirect equity participation by foreign airlines
7.
Petroleum
(Other than refining)
Refining
60
51
51
74
26
in unincorporated joint venture
in incorporated joint venture
petroleum products and pipelines sector
in infrastructure related marketing and marketing of petroleum products
for public sector undertakings
8.
Investing companies in Infrastructure/Service sectors
49
investment through such vehicle is treated as resident equity
9.
Atomic minerals
74
mining and mineral separation;
value addition;
integrated activities.
10.
Defence industry sector
26
for arms and ammunition and allied items of defence equipment,
defence aircraft and warships
11.
Broadcasting
Setting up hardware facilities, such as uplinking, HUB, etc.
Cable network
Direct-to-Home
Terrestrial Broadcasting FM
49
49
20
20 (portfolio investment)
Private companies incorporated in India with permissible
FII/NRI/OCB/PIO equity within the limits (as in the case of telecom
sector FDI limit up to 49% inclusive of both FDI and portfolio
investment) to set up up linking hub (teleports) for leasing or hiring
out their facilities to broadcasters
Footnote: As regards satellite broadcasting, all T.V. Channels
irrespective of the ownership or management control to uplink from
India provided they undertake to comply with the broadcast (programme
and advertising) code
Foreign investment allowed up to 49% (inclusive of both FDI and
portfolio investment) of paid up share capital. Companies with minimum
51% of paid up share capital held by Indian citizens are eligible
under the Cable Television Network Rules (1994) to provide cable TV
services.
Companies with a maximum of foreign equity including FDI/NRI/OCB/FII
of 49% would be eligible to obtain DTH License. Within the foreign
equity, the FDI component not to exceed 20%.
The licensee shall be a company registered in India under the
Companies Act. All share holding should be held by Indians except for
the limited portfolio investment by FII/NRI/PIO/OCB subject to such
ceiling as may be decided from time to time. Company shall have no
direct investment by foreign entities, NRIs and OCBs. As of now, the
foreign investment is permissible to the extent of 20% portfolio
investment. No private operator is allowed in terrestrial TV
transmission
12
Small Scale Industries (SSI) sector
24
if FDI in an SSI unit exceeds 24% of the paid up capital, the company
loses its SSI status. Further, if the item/s of manufacture is/are
reserved for SSI sector, the company has to obtain an industrial
license and undertake a minimum export obligation of 50% of annual
production on such products
13.
Satellites
74%
Establishment and operation of Satellites
14.
Tea Sector
100%*
FDI permitted in Tea sector, including tea plantations requiring
prior Government approval
* subject to compulsory divestment of 26% equity of the company in
favour of an Indian partner/Indian public within a period of five
years.
15. Print Media 74%**
26%**
In Indian entities publishing scientific/technical and speciality
magazines/periodical/journals
In Indian entities publishing newspapers and periodicals
** subject to guidelines notified by Ministry of Information &
Broadcasting from time to time
10. What is the Government Policy for Telecom Sector?
Ans. For major sector specific guidelines including Telecom
Sector, please refer to Annexure IV at the Manual on FDI in India -
Policy & Procedures in India of the website.
11. What is the investment policy for trading companies?
Ans. Trading is permitted under automatic route with FDI up to 51%
provided it is primarily export activities, and the undertaking is an
export house/trading house/super trading house/star trading house.
However, under the FIPB route :
i. 100% FDI is permitted in case of trading companies for the
following activities:
· exports,
· bulk imports with ex-port/ex-bonded warehouse sales,
· cash and carry wholesale trading,
· other import of goods or services provided at least 75% is for
procurement and sale of goods and services among the companies of the
same group and not for third party use or onward
transfer/distribution/sales.
ii. The following kinds of trading are also permitted, subject to
provisions of EXIM Policy:
a. Companies for providing after sales services ( that is not trading per se)
b. Domestic trading of products of JVs is permitted at the wholesale
level for such trading companies who wish to market manufactured
products on behalf of their joint ventures in which they have equity
participation in India.
c. Trading of hi-tech items/items requiring specialised after sales service
d. Trading of items for social sector
e. Trading of high-tech, medical and diagnostic items.
f. Trading of items sourced from the small scale sector under which,
based on technology provided and laid down quality specifications, a
company can market that item under its brand name.
g. Domestic sourcing of products for exports.
h. Test marketing of such items for which a company has approval for
manufacture provided such test marketing facility will be for a period
of two years , and investment in setting up manufacturing facilities
commences simultaneously with test marketing.
i. FDI upto 100% permitted for e-commerce activities subject to the
condition that such companies would divest 26% of their equity in
favour of the Indian public in 5 years, if these companies are listed
in other parts of the world. Such companies would engage only in
business to business (B2B) e-commerce and not in retail trading.
12. Whether wholesale trading activity is covered on the automatic route?
Ans: No, prior approval of FIPB is required.
13. Whether FIPB approval is required for 100% EOUs involving FDI
from foreign companies?
Ans. Only where the activity proposed does not fall on the automatic route.
14. How are investments in 100% Export Oriented Units (EOUs) allowed?
Ans. There are four schemes for such units. They are the 100%
EOUs, Electronics Hardware Technology Parks (EHTPs) , Software
Technology Parks (STPs) and Special Economic Zones (SEZ) .
FDI/NRI/OCB investment up to 100% in these units is eligible for
automatic route subject to fulfilling parameters prescribed in Press
Note No.2 (2000 series) dated 11.2.2000. This Press Note is available
on the website http://dipp.nic.in
15. Is a 100% foreign owned subsidiary allowed? Whether FIPB approval is required?
Ans. Yes, except in sectors that attract equity cap. The criteria
for allowing such investments have been detailed in the guidelines
given at Annexure IV of the Manual on Industrial Policy & Procedures
in India.
FIPB approval is required if the activity does not fall on the automatic route.
16. Is investment by Non-Resident Indians(NRIs) permitted?
Ans. The Government attaches importance to investments by NRIs and
Overseas Corporate Bodies(OCBs) i.e. corporate bodies in which NRIs
hold at least 60% of equity. Government has provided a liberalised
policy framework for approval of NRI investments through both the
Automatic and the Government route. NRI/OCBs are permitted to invest
upto 100% equity in the Real Estate and Civil Aviation Sectors.
Automatic Approval is given by the RBI to all NRI/OCB proposals with
their investment upto 100% for all items/activities except a few
exceptions mentioned in Press Note 2 (2000 series) read with sector
specific guidelines. Government approval is given for all proposals
not qualifying for Automatic Approval.
17. How is FDI permitted in the Small Scale Sector?
Ans. Equity participation in the Small Scale Sector up to 24% by
any other Industrial undertaking is allowed. For equity participation
in excess of this or if a non-SSI unit whishes to manufacture a
reserved item, it would be required to obtain industrial licence and
undertake a minimum export obligation of 50% of production.
18. Can profits, dividends, royalty, knowhow payments be repatriated from India?
Ans. All profits, dividends, royalty, knowhow payments that have
been approved by the Government/RBI can be repatriated. Some sectors
like NRI Investment in real estates may attract a lock-in period.
19. Whether FDI is permitted in "Online Lottery Business"?
Ans: The lottery business, including "Online Lottery Business" is
not opened to foreign direct investment.
20. What is the procedure of issuing shares to foreign collaborator?
Ans: The issue of shares to the foreign collaborator is governed
by the guidelines issued by RBI / SEBI and Companies Act.
21. While calculating ceiling on foreign holdings, are preference shares included?
Ans: Yes, if it is convertible into equity shares. Non-convertible
redeemable preference shares are not included for calculating FDI
limit.
22. Is FIPB approval required for the swap of shares?
Ans: Yes, FIPB approval is required.
23. Whether issue of preference shares can be made on the automatic route?
Ans: Yes, subject to the activity concerned falling under the automatic route.
24. What are the formalities a joint venture company has to do to
increase the foreign equity holding?
Ans: The following formalities are required for the joint venture
that want to increase in their foreign equity holding by acquisition
of shares or by any other means.
a) If only the quantum of foreign equity increased without change in
percentage then Press Note no. 7 (1999 series) may be followed.
b) For increase in percentage of foreign equity by way of expansion of
capital base, automatic route or FIPB / Government route would apply
depending upon the nature of proposal in terms of Press Note No. 2
(2000 series)
c) Cases involving increase in percentage in foreign equity by way of
acquiring existing shares in an Indian company would necessarily
require prior approval of FIPB/Government.
d) In cases involving inclusion of an additional foreign collaborator,
guidelines laid down in Press Note No. 18 (1998 series) would have to
be satisfied.
25. What is the policy of conversion of non-repatriable shares into
repatriable shares?
Ans. FIPB approval is required. Where original investment was made
in foreign exchange, the change is allowed without any conditions; if
not, the sale proceed will have to be repatriated to India by opening
an NRO account.
26. Is there any time limit within which Indian company have to make
their Euro issues or ADRs/GDRs after having received the approval from
FIPB?
Ans There is no time limit as per extant guidelines.
27. In a public limited company having less than 100% foreign equity
participation under the automatic route, whether it can be increased
to 100% equity participation under the automatic route?
Ans. As long as the activity is covered on the automatic route and
there is no sectoral cap and no acquisition of existing shares is
involved.
28. Is it possible that a foreign company provide a non interest
bearing or interest bearing loan to an Indian company?
Ans: Yes, subject to conformity with the ECB Guidelines of
Ministry of Finance .
29. Whether FIPB approval is required for consultancy services,
research and development, software development etc.?
Ans: The above activities fall under automatic route and,
therefore, do not require FIPB approval.
30. How are foreign technology agreements approved?
Ans. Approval is granted by two routes
a. Automatic approval by RBI;
i) Available for any proposal with lumpsum payment not exceeding US$ 2
million, and royalty of upto 5% on domestic sales and 8% on
exports.This is applicable to technical collaborations with technology
transfer. There is no limit on duration of royalty payment by a WOS to
its offshore parents.
ii) Payment of royalty up to 2% of exports and 1% for domestic sales
on use of trade marks and brand name of the foreign collaborator
without technology transfer
b. Government approval in all other cases.
31. Whether royalties for technology transfer and other royalty can
be paid for same product on use of trademarks and brand name?
Ans. No, both royalties cannot be paid together on the same product.
i) Cases involving transfer of technology will be eligible for royalty
payment at the prescribed rate on the automatic route.
ii) Cases not involving any transfer of technology and only involving
the use of brand names and trademarks will be eligible to payment of
trademarks or brand name royalty at the prescribed rate on the
automatic route.
32. Is it possible to use foreign brand names/trade marks in India
and is lump sum fee permissible under royalty payment for use of brand
name and trademarks?
Ans. Yes, it is possible to use foreign brand names/trade marks in
India. However, lump sum fee is not permissible, only running royalty
payment is permissible as per prescribed rate.
33. What is the mechanism for publicizing the changes in the FDI Policies?
Ans. Changes in FDI policies are brought out in the form of Press
Notes by Department of Industrial Policy & Promotion (DIPP) . Soon
after releasing the Press Notes to the media, it is also loaded on the
Departmental website (http://dipp.nic.in).
34. What proposals require an Industrial Licence(IL) and how is it obtained?
Ans. In the New Industrial Policy, all industrial undertakings are
exempt from licencing except for those products given in Annexure I
and II and those reserved for the Small Scale Sector. The project
should not be located within 25 kilometres of a city with a population
of more than one million (Annexure v).
The Government has substantially liberalised the procedures for
obtaining an Industrial Licence. An IL is approved by the Government.
The application in form IL-FC should be filed with the SIA. Approvals
normally granted within 6-8 weeks.
35. What is the procedure for a delicensed sector?
Ans. An Industrial undertaking exempted from licencing needs only
to file information in the Industrial Entrepreneurs Memorandum (IEM)
with the SIA , which will issue an acknowledgement. No further
approvals are required.
36. Where can one get the information on Indian Standards for any product?
Ans. Please refer to the website of Bureau of Indian Standards
(http://delhi.vsnl.net.in/bis.org)
37. How to contact the Nodal Officers of the Department of Industrial
Policy & Promotion who are responsible for monitoring the approved
Projects of a particular state?
Ans: Please visit the website of the Department of Industrial Policy &
Promotion at http://dipp.nic.in by clicking FIIA. |
