CHAPTER - I EXHIBIT NO.6(Contd.) POLICY MEASURES FOR PROMOTING & STRENGTHENING SMALL, TINY AND VILLAGE ENTERPRISES, AUGUST 6, 1991

the financial liability of the new and non-active partners/entrepreneurs to the capital invested. 3.4 A beginning has been made towards solving the problem of delayed payments of ‘factoring’ services through Small Industries Development Bank of India (SIDBI). Network of such services would be set up throughout the country and operated through commercial banks. A suitable legislation will be introduced to ensure prompt payment of Small Industries’ bills. 4. INFRASTRUCTURAL FACILITIES 4.1 To facilitate location of industries in rural/ backward areas and to promote stronger linkages between agriculture and industry, a new Scheme of Integrated Infrastructural Development (including Technological Back-up Services) for Small Scale Industries would be implemented with the active participation of State Governments and financial institutions. A beginning in this direction will be made this year itself. 4.2 A Technology Development Cell (TDC) would be set up in the Small Industries Development Organisation (SIDO) which would provide technology inputs to improve productivity and competitiveness of the products of the small scale sector. The TDC would coordinate the activities of the Tool Rooms, Process-cum-Product Development Centres (PPDCs), existing as well as to be established under SIDO, and would also interact with the other industrial research and development organisations to achieve its objectives. 4.3 Adequacy and equitable distribution of indigenous and imported raw materials would be ensured to the small scale sector, particularly the tiny sub-sector. Policies would be so designed that they do not militate against entry of new units. Based on the capacity needs, Tiny/Small Scale units would be given priority in allocation of indigenous raw materials. 4.4 A proper and adequate arrangement for delivery of total package of incentives and services at the District level will be evolved and implemented.

5. MARKETING AND EXPORTS 5.1 In spite of the vast domestic market, marketing remains a problem area for small and tiny enterprises. Mass consumption labour intensive products are predominantly being marketed by the organised sector. The tiny/ small scale sector will be enabled to have a significant share of such markets. In addition to the existing support mechanism, market promotion would be undertaken through co-operative/public sector institutions, other specialised/professional marketing agencies and consortia approach, backed up by such incentives, as considered necessary. 5.2 National Small Industries Corporation (NSIC) would concentrate on marketing of mass consumption items under common brand name and organic links between NSIC and SSIDCs would be established. 5.3 Government recognises the need to widen and deepen complementarity in production programmes of large/medium and small industrial sectors. Parts, components, sub-assemblies, etc. required by large public/ private sector undertakings would be encouraged for production in a technoeconomically viable manner through small scale ancillary units. Industry associations would be encouraged to establish sub-contracting exchanges, in addition to strengthening the existing ones under the SIDO. Emphasis would also be laid on promotion of a viable and competitive ‘component’ market. 5.4 Though the Small Scale Sector is making significant contribution to total exports, both direct and indirect, a large potential remains untapped. The SIDO has been recognised as the nodal agency to support the small scale industries in export promotion. An Export Development Centre would be set up in SIDO to serve the small scale industries through its network of field offices to further augment export activities of this sector. 6.

MODERNISATION, TECHNOLOGI-CAL AND QUALITY UPGRADATION

6.1 A greater degree of awareness to produce goods and services conforming to national and international standards would be created among the small scale sector.

19

Industrial Policy Highlights

20

EXHIBIT NO.6(Contd.) POLICY MEASURES FOR PROMOTING & STRENGTHENING SMALL, TINY AND VILLAGE ENTERPRISES, AUGUST 6, 1991

6.2 Industry Associations would be encouraged and supported to establish quality counselling and common testing facilities. Technology Information Centres to provide updated knowledge on technology and markets would be established. 6.3 Where non-conformity with quality and standards involves risk to human life and public health, compulsory quality control would be enforced. 6.4 A reoriented programme of modernisation and technological upgradation aimed at improving productivity, efficiency and cost effectiveness in the small scale sector would be pursued. Specific industries in large concentrations/clusters would be identified for studies in conjunction with SIDBI and other banks. Such studies will establish commercial viability of modernisation prescriptions, and financial support would be provided for mo-dernisation of these industries on a priority basis.

7.4 Additional employment opportunities would be generated through training of multidisciplinary ‘barefoot’ managers to suit the special requirements of the small scale sector. 8. SIMPLIFICATION OF RULES AND PROCEDURES 8.1 The persistent complaint of small scale units of being subjected to a large number of Acts and Laws, being required to maintain a number of registers and submit returns, and face an army of inspectors, would be attended to within a specified time frame of three months. 8.2 Procedures would be simplified, bureaucratic controls effectively reduced, unnecessary interference eliminated and paper work cut down to the minimum to enable the entrepreneurs to concentrate on production and marketing functions. B.

6.5 Indian Institutes of Technology (IITs) and selected Regional/ other Engineering Colleges will serve as Technological Information, Design and Development Centres in their respective command areas. 7.

PROMOTION OF ENTREPRENEURSHIP

7.1 Government will continue to support first generation entrepreneurs through training and will support their efforts. Large number of EDP trainers and motivators will be trained to significantly expand the Entrepreneurship Development Programmes (EDP). Industry Associations would also be encouraged to participate in this venture effectively. 7.2 EDP would be build into the curricula of vocational and other degree level courses. 7.3 Women entrepreneurs will receive support through special training programmes. Definition of “Women Enterprises” would be simplified. The present stipulation regarding employment of majority of women workers would be dispensed with and the units in which women entrepreneurs have a majority shareholding and management control, would be defined as “Women Enterprises”.

VILLAGE INDUSTRIES

9. HANDLOOM SECTOR 9.1 Handloom sector contributes about 30 per cent of the total textile production in the country. It is the policy of Government to promote handlooms to sustain employment in rural areas and to improve the quality of life for handloom weavers. 9.2 Schemes for the handloom sector will be redesigned keeping in mind the local and regional needs. Constraints of coverage will be removed so as to include bulk of the weavers who are outside the corporate/ cooperative fold. 9.3 Existing schemes will be redrawn and suitably revised under three major heads : (a) Project Package Scheme : Under this scheme, area-based projects for product development, upgradation of technology, improvement of marketing facilities will be drawn up. (b) Welfare Package Scheme : Number of welfare schemes and quantum of funds earmarked for them will be substantially augmented.

21

CHAPTER - I EXHIBIT NO.6(Contd.) POLICY MEASURES FOR PROMOTING & STRENGTHENING SMALL, TINY AND VILLAGE ENTERPRISES, AUGUST 6, 1991

(c) Organisation Development Package : Schemes for participation in the share capital will be redrawn under organisational development scheme for imparting a better management system in the existing state agencies. 9.4 Janta cloth scheme which sustains weavers often on a minimum level of livelihood will be phased out by the terminal year of the VIII Plan and replaced by the omnibus project package scheme under which substantial funds will be provided for modernisation of looms, training, provision of better designs, provision of better dyes and chemicals and marketing assistance. 9.5 A vastly expanded role for the National Handloom Development Corporation (NHDC) is envisaged. NHDC would be the nodal agency for increasing the supply of hank yarn and of dyes and chemicals. Spinning capacity in the cooperative sector will be increased. National Co-operative Development Corporation will provide more assistance for this in the form of Seed Money, both for cotton growers, spinning mills and weavers, spinning mills. 9.6 For improving marketing of handloom products, a more intensive implementation of schemes for design and product improvement by national level publicity, exhibitions, and design exercise will be undertaken. A special scheme will be drawn up to graduate the handloom production, which is often of low value items, to high value products suitable for export markets. This will be done by better design inputs, upgradation of technology, diversion of weavers from cotton to silk and tassar weaving. Special projects for modernisation of looms for products suitable for export markets will be drawn up. 10. HANDICRAFTS SECTOR 10.1 The key areas in handicrafts that could contribute towards a faster pace of rural industrialisation are production and marketing. Schemes for training and design development and for production and marketing assistance will be given encouragement.

10.2 Considering the importance of this sector from the point of view of employment and exports, it is proposed to provide an integrated development thrust to this sector with a view to enlarging the production base, thus enhancing the opportunities for employment and income through crafts as an economic activity and to giving it necessary inputs for quality improvement and effective marketing support both internal and overseas. Efforts will be made not only to preserve the traditional richness of the crafts but to engage the hereditary skills of the craftspersons to suit modern requirements. 10.3 Emphasis will be given to the following :-

Extension of services like supply of raw materials, design and technical guidance, market support, training and procuring of related materials/ inputs in an integrated and area-based manner through the setting up of craft development centres in identified clusters of villages.

-

Market development support in the form of a package of assistance through expansion of marketing infrastructure, exhibitions, publicity, etc., through Central and State Handicrafts Corporations, voluntary organisations and support to direct marketing activity by craftspersons.

-

Expansion of training activities by greater involvement of State Handicrafts Development Corporations, Co-operatives and voluntary organisations.

-

Measures to sustain an increased exports of handicrafts through new marketing channels like trading companies, departmental stores, etc.

11. OTHER VILLAGE INDUSTRIES 11.1 Government recognise the need to enhance the spread of rural and cottage industries towards stepping up non-farm employment opportunities. 11.2 The activities of the Khadi and Village Industries Commission and the State Khadi and Village Industries Boards will be expanded and organisations strengthened to discharge their responsibilities more effectively.

Industrial Policy Highlights

22

EXHIBIT NO.6(Contd.) POLICY MEASURES FOR PROMOTING & STRENGTHENING SMALL, TINY AND VILLAGE ENTERPRISES, AUGUST 6, 1991

11.3 There will be greater emphasis on improving the quality and marketability of the products pari passu with consumer preferences instead of merely depending on rebates and subsidies. 11.4 While the plan allocation for rural industries will be augmented, effective steps will also be taken to ensure better flow of credit from the financial institutions and a more coordinated and optimal utilisation of different development schemes and agencies operating in the rural sector. Bankability of projects undertaken in this sector would be stressed. 11.5 The programmes of intensive development of KVI through area approach with tie-up with DRDA, TRYSEM and ongoing developmental programmes relating to weaker sections like Scheduled Castes, Scheduled Tribes and Women would be extended throughout the country. 11.6 The traditional village industries would be given greater thrust. Involvement of traditional

and reputed voluntary organisations will be encouraged. 11.7 Agro processing and food processing industries in KVI sector using appropriate technologies would be promoted with a view to utilise locally available agricultural produce and promote employment/ resource generation in the countryside. 11.8 Functional industrial estates would be established in areas with concentration of agricultural/ horticultural produce. 11.9 R & D in KVI sector would be strengthened through greater linkages with CSIR and other research institutions in the areas of production, finishing/packaging, processes and devel-opment of new tools and implements. 11.10 The training programmes would be upgraded and augmented to cover the expanded list of industries under the purview of the KVIC.

Source : Government of India, Ministry of Industry, Department of Small Scale Industry, Agro and Rural Industry.

23

CHAPTER - I EXHIBIT NO.7 PRESS NOTE NO. 9(1991 Series) CHANGESINPROCEDURESFORINDUSTRIALLICENSING

1. Government tabled a Statement on Industrial Policy in both Houses of Parliament on July 24, 1991. The Statement has substantially reduced the requirement for various types of industrial approvals. To implement this Policy Statement in respect of industrial licensing, Notification No. 477(E) dated 25.7.1991 has been issued under the Industries (Development and Regulation) Act, 1951.

A.

(i) The proposed article(s) of manufacture is not included in Annex I, II or is not reserved for small scale/ancillary sector.

2. Under this notification, industrial undertakings have been exempted from the operation of Sections 10, 11, 11(a) and 13 of the I(D&R) Act, 1951 subject to fulfilment of certain conditions. Section 10 refers to the requirement of registration of existing industrial units. Section 11 refers to the requirement of licensing of new industrial undertakings. Section 11(a) deals with licences for the production of new articles. Section 13 refers, inter alia to the requirement of licensing for effecting substantial expansion. 3.

(ii) The proposed project is not located within 25 kms. from the periphery of the standard urban area limits of a city having a population of more than 10 lakhs according to the 1991 Census. (List enclosed). This condition, however, will not apply to electronics, computer software, printing industry and other non-polluting industries that may be notified from time to time. This condition will also not apply to other industries provided these are located within the areas designated as ‘industrial areas’ by the State Government(s) before July 25, 1991. All other units wishing to locate within restricted locations will require an industrial licence.

The notification has three Schedules:

Schedule I

lists the industries reserved for public sector. (Annex I to this Press Note).

Schedule II

is the list of industries which are subject to compulsory licensing. This list is in the Indian Trade Classification (Harmonised System). (Annex II to this Press Note).

Schedule III

Notwithstanding the above, the location of industrial projects will be subject to Central or State environmental laws or regulations including local zoning and land use laws and regulations.

is the list of articles reserved for the small scale/ancillary sector and remains the same as before. (Not annexed).

This Press Note sets out the changes in the existing system and procedures for industrial approvals arising out of the aforesaid Notification. EXEMPTION FROM INDUSTRIAL LICENSING 4. Licensing is abolished for all industrial undertakings including MRTP/FERA com-panies, and small scale and ancillary industries (i.e. undertakings with investment less than Rs. 60 lakh and Rs. 75 lakh respectively as defined in this Ministry’s Notification No. SO 232 (E) dated 2.4.1991). The following conditions will govern this exemption from licensing.

Licensing is exempted for industrial undertakings (including MRTP/FERA companies) other than those in the small scale/ ancillary sector, if

B.

Small scale and ancillary undertakings are exempted from licensing for all articles of manufacture which are not covered by Annex I and Annex II. In addition they are also exempted from industrial licensing for the articles of manufacture exclusively reserved for small scale/ancillary sector even if they happen to be included in Annex II. Small scale/ancillary units are, as before, exempt from locational conditions subject to the provisions of any Central or State environmental law or regulations including zoning and land use laws and regulations.

Industrial Policy Highlights

24 EXHIBIT NO.7(Contd.) PRESS NOTE NO. 9(1991 Series) CHANGES IN PROCEDURES FOR INDUSTRIAL LICENSING

C. Substantial Expansion Substantial expansion of existing units will also be exempt from licensing provided the item of manufacture is not covered by Annex I, Annex II or is reserved for the small scale/ ancillary sector. However substantial expansions will be subject to the locational conditions set out in para 4(A) above. D. Broad Banding/Manufacture of New Article Existing units will be permitted to manufacture any new article without additional investment if the article is not otherwise subjected to compulsory licensing. This facility would be available notwithstanding any locational conditions. It is clarified that this is an additional facility to existing units. Under the provisions of exemption from licensing for substantial expansion described above in para 4(C), existing units can in any case manufacture any new article not covered by compulsory licensing or locational conditions. 5.

ABOLITION OF REGISTRATION SCHEMES

EXISTING

In consequence of the new Industrial Policy, existing schemes of registration namely, the Delicenced Industries Registration Scheme (DLR), Exempted Industries Registration Scheme (EIR), and registration with DGTD and other technical authorities, namely, the Textile Commissioner and the Development Commissioner for Iron and Steel, have been abolished. 6.

FILING OF MEMORANDA

In respect of new projects for manufacture of articles not covered by compulsory licensing or their substantial expansions the only requirement would be that the industrial undertaking shall file a memorandum in prescribed form to the Secretariat for Industrial Approvals (SIA) in the Ministry of Industry. Such a memorandum will also have to be filed by those industrial undertakings to be engaged in non-scheduled industries i.e. those not covered under the I(D&R) Act. The memorandum will be accompanied by a crossed demand draft for Rs. 1000/- in favour of the Pay and Accounts Officer, Department of Industrial Development, Ministry of

Industry, payable at State Bank of India, Nirman Bhawan, New Delhi - 110 011. The receipt of the memorandum will be acknowledged by the SIA and a reference number will be given. Industrial undertakings should quote this reference number in all future correspondence, if any, with the SIA. The industrial undertakings shall also file another memorandum in prescribed form with the SIA at the time of commencement of commercial production. No payment will accompany this memorandum. Small scale and ancillary units are not required to file the above memoranda with the SIA. Such units may continue to get themselves registered with the Director of Industries of the concerned State Government. 7.

NEW CLASSIFICATION SYSTEM

Industries under compulsory licensing have been notified in the Indian Trade Classification System. Entrepreneurs may note that the description of article(s) to be manufactured should be stated according to this classification in the application for industrial licences. Similarly, in the memoranda to be filed with the SIA in respect of articles not covered by industrial licensing, the description of the articles should be given according to the Indian Trade Classification (Based on Harmonised Commodity Description and Coding System), published by the Ministry of Commerce, Directorate General of Commercial Intelligence and Statistics, Calcutta. Copies of the Indian Trade Classification can be obtained on payment from the Controller of Publications, 1, Civil Lines, Delhi 110 054 or from any of the agents authorised to sell Government of India publications. 8. PHASED MANUFACTURING GRAMME (PMP)L

PRO-

The system of Phased Manufacturing Programme (PMP) will not be applicable to new projects. However, existing projects with such programmes will continue to be governed by them. 9.

CARRY ON BUSINESS (COB) LICENCES

Certain industries which were previously exempted from the licensing provisions of I(D&R) Act, 1951 have now been brought under compulsory

25

CHAPTER - I EXHIBIT NO.7(Contd.) PRESS NOTE NO. 9(1991 Series) CHANGES IN PROCEDURES FOR INDUSTRIAL LICENSING

licensing.It is clarified that such industrial undertakings which are already holding a valid registration granted to them prior to 25th July, 1991, by SIA or DGTD or any other technical authority need not apply for a COB licence. The registration will be regarded as valid authority for carrying on the business in respect of the article, quantity and location mentioned in the registration. However, for effecting substantial expansion of capacity or for manufacturing a new article covered by Annex II, at the same location, the industrial undertaking should apply for a licence under the I(D&R) Act. Small scale/ancillary industrial under-takings engaged in the manufacture of any item(s) covered under Annex II or item(s) reserved for small scale/ ancillary sector, on crossing the investment limits prescribed for them will be required to obtain a COB licence from the Government.LL

No.10/43/91-LP

10. PENDING APPLICATIONS Consequent on issue of Notification No. 477 (E) dated 25.7.1991, all pending applications for issue of Letters of Intent will be scrutinised by the SIA in the light of the notification. Those qualifying for exemption from licensing will not be processed further and the applicants would be advised to file memoranda as in para 6 above. A similar procedure would be followed in respect of applications for DLR, EIR and registrations with DGTD or other authority. 11. PENDING APPLICATIONS FOR CONVERSION OF LETTERS OF INTENT INTO INDUSTRIAL LICENCE In cases where the article of manufacture is not covered by compulsory licensing, pending applications for conversion of LOIs into ILs will not be processed further and SIA will advise the applicants to file a memorandum as in para 6 above before commencement of commercial production.

New Delhi, the 2nd August, 1991.

Sd/(L. Mansingh) Joint Secretary to the Government of India Forwarded to Press Information Bureau for wide publicity to the contents of the above Press Note. Principal Information Officer Press Information Bureau Shastri Bhawan, New Delhi.

Note: L

This has since been amended vide Press Note No.1(1994 Series)

LL This requirement has subsequently been withdrawn vide Press Note No.15 (1992

Series)

Industrial Policy Highlights

26 EXHIBIT NO.7(Contd.) PRESS NOTE NO. 9(1991 Series) CHANGES IN PROCEDURES FOR INDUSTRIAL LICENSING

ANNEX I PROPOSED LIST OF INDUSTRIES TO BE RESERVED FOR THE PUBLIC SECTORv 1.

Arms and ammunition and allied items of defence equipment, defence aircraft and warships.

2.

Atomic energy.

3.

Coal and lignite.

4.

Mineral oils.

5.

Mining of iron ore, manganese ore, chrome ore, gypsum, sulphur, gold and diamond.

6.

Mining of copper, lead, zinc, tin, molybdenum and wolfram.

7.

Minerals specified in the Schedule to the Atomic Energy (Control of Production and Use) Order, 1953.

8.

Railway transport.

Note:

L Items No. 5 and 6 have subsequently been deleted from this list, vide Press Note No.3 (1993 Series)

27

CHAPTER - I EXHIBIT NO.7(Contd.) PRESS NOTE NO. 9(1991 Series) CHANGES IN PROCEDURES FOR INDUSTRIAL LICENSING

ANNEX II LIST OF INDUSTRIES IN RESPECT OF WHICH INDUSTRIAL LICENSING IS COMPULSORY ( In ITC (HS) Classification ) Note 1. This list is based on the Indian Trade Classification, which follows the Harmonized Commodity Description and Coding System, Government of India, Ministry of Commerce, Directorate General of Commercial Intelligence and Statistics, Calcutta. The code specified for the item description relates to this classification. Note 2. Other items in respect of which industrial licensing is not exempted are : A.

For large and medium industries, The items reserved for the Small Scale Sector listed in Schedule III.

B.

For all industries, i)

All items of electronic aerospace and defence equipment, whether specifically mentioned or not, in this list.

ii)

All items related to the production or use of atomic energy including the carrying out of any process, preparatory or ancillary to such production or use, under the Atomic Energy Act, 1962.

Note 3. The authentic description will be treated as specified in the item description given below. 1.

2.

3.

Coal and Lignite. 27.01

Coal.

27.02

Lignite.

Petroleum (other than crude) and its distillation products. 27.10

Petroleum oils, other than crude.

27.11

Petroleum gases and other gaseous hydrocarbons.

27.12

Petroleum waxes and other similar products obtained through distillation of petroleum.

27.13

Petroleum coke and other residues of petroleum oils.

Distillation and brewing of alcoholic drinks. 22.03

Beer made from malt.

22.04

Wine of fresh grapes, including fortified wines.

22.05

Vermouth and other wine of fresh grapes flavoured with plants or aromatic substances.

22.06

Other fermented beverages (for example, cider, perry, mead).

22.08

Undenatured ethyl alcohol of an alcoholic strength by volume of less than 80% vol; spirits, liqueurs and other spirituous beverages; compound alcoholic preparations of a kind used for the manufacture of beverages.

Industrial Policy Highlights

28 EXHIBIT NO.7(Contd.) PRESS NOTE NO. 9(1991 Series) CHANGES IN PROCEDURES FOR INDUSTRIAL LICENSING

4.

Sugar. 170199.02 Cane sugar, refined. 170199.09 Other sugar, including centrifugal sugar.

5.

Animal fats and oils. 151610.00 Animal fats and oils, partly or wholly hydrogenated. 15.17 Edible mixtures or preparations of animal fats and oils. 151800.11 Inedible mixtures or preparations of animal fats and oils.

6.

Cigars and cigarettes of tobacco and manufactured tobacco substitutes. 24.02

7.

Cigars, cheroots, cigarillos and cigarettes, of tobacco or of tobacco substitutes.

Asbestos and asbestos-based products. 68.11

Articles of asbestos-cement, of cellulose fibre-cement or the like.

68.12

Fabricated asbestos fibres; mixtures with a basis of asbestos or with a basis of asbestos and magnesium carbonate; articles thereof.

681390.01

Asbestos friction materials.

8L. Plywood, decorative veneers, and other wood-based products such as particle board, medium density fibre board, and block board. 44.08

Veneer sheets, plywood and other wood sawn lengthwise of a thickness not exceeding 6 mm.

44.10

Particle board and other similar board of wood or other ligneous materials.

44.11

Fibre board of wood or other ligneous materials.

44.12

Plywood, veneered panels and similar laminated wood.

44.13

Densified wood, in blocks, plates, strips and other profile shapes.

9L. Raw hides and skins, leather, chamois leather and patent leather. 41.04

Leather of bovine or equine animals, without hair on, other than leather of heading No. 41.08 or 41.09.

41.05

Sheep or lamb skin leather, without wool on, other than leather of heading No. 41.08 or 41.09.

41.06

Goat or kid skin leather, without hair on, other than leather of heading No. 41.08 or 41.09.

41.07

Leather of other animals, without hair on, other than leather of heading No. 41.08 or 41.09.

41.08

Chamois (including combination chamois) leather.

41.09

Patent leather and patent laminated leather; and metallised leather.

10. Tanned or dressed furskins. 43.02

Tanned or dressed furskins.

11L Motor cars. 87.03

Motor cars.

Note: L This has subsequently been modified vide Press Note No.3 (1992 Series)

CHAPTER - I EXHIBIT NO.7(Contd.) PRESS NOTE NO. 9(1991 Series) CHANGES IN PROCEDURES FOR INDUSTRIAL LICENSING

12. Paper and Newsprint except bagasse-based units(i.e. except units based on minimum 75% pulp from agricultural residues, bagasse and other non-conventional raw materials). 47.01

Mechanical wood pulp.

47.02

Chemical wood pulp, dissolving grades.

47.03

Chemical wood pulp, soda or sulphate, other than dissolving grades.

47.04

Chemical wood pulp, sulphite, other than dissolving grades.

47.05

Semi-chemical wood pulp.

48.01

Newsprint, in rolls or sheets.

48.02

Uncoated paper of a kind used for writing, printing or other graphic purposes, in rolls or sheets.

48.03

Paper of a kind used for household or sanitary purposes, in rolls or sheets.

48.04

Uncoated kraft paper, in rolls or sheets.

48.05

Other uncoated paper, in rolls or sheets.

48.06

Vegetable parchment, greaseproof papers, tracing papers and the like, in rolls or sheets.

48.07

Composite paper, in rolls or sheets.

48.08

Paper, corrugated, creped, crinkled, embossed or perforated, in rolls or sheets.

48.09

Carbon paper, self-copy paper and other copying or transfer papers, in rolls or sheets.

48.10

Paper, coated with Kaolin or other inorganic substances, in rolls or sheets.

48.11

Other coated or impregnated paper, in rolls or sheets.

48.12

Filter blocks, slabs and plates, of paper pulp.

48.13

Cigarette paper.

13. Electronic aerospace and defence equipment: all types. 87.10

Tanks and other armoured fighting vehicles.

88.01 to 88.05

Defence aircraft, spacecraft, and parts thereof.

8906.01 Warships - all kinds. 93.01 to 93.07

Arms and ammunition; parts and accessories thereof.

14. Industrial explosives, including detonating fuses, safety fuses, gun powder, nitrocellulose and matches. 36.01 to 36.06

Explosives; pyrotechnic products; matches; pyrophoric alloys; certain combustible preparations.

29

Industrial Policy Highlights

30 EXHIBIT NO.7(Contd.) PRESS NOTE NO. 9(1991 Series) CHANGES IN PROCEDURES FOR INDUSTRIAL LICENSING

15. Hazardous chemicals. 22.07L Undenatured ethyl alcohol of an alcoholic strength by volume of 80% vol or higher, ethyl alcohol and other spirits, denatured, of any strength (Industrial alcohol). 280110.00 Chlorine. 281119.01 Hydrocyanic acid and its derivatives. 281210.01 Phosgene and its derivatives. 2815.11

Sodium Hydroxide (Caustic soda): Solid.

2815.12

Sodium Hydroxide (Caustic soda): In aqueous solution.

290121.00 Ethylene. 290122.00 Propene (propylene). 290124.01 Butadienes. 290220.00 Benzene. 290230.00 Toluene. 290241.00 O-xylene. 290242.00 M-xylene. 290243.00 P-xylene. 290244.00 Mixed xylene isomers. 290531.00 Ethylene glycol (ethanediol)/ethylene oxide. 29.05v Industrial alcohol. 292229.02 Meta amino phenol. 292910.09 Isocyanates and diisocyanates of hydrocarbon, not elsewhere specified (example, Methyl isocyanate). 380810.02 Aluminium Phosphide. 380810.16 Dimethoate. 380810.21 Quinalphos. 380810.29 Carbaryl, Phorate and Fenitrophion. 390110.00 Polyethylene having a specific gravity of less than 0.94. 16. Drugs and Pharmaceuticals. (According to Drug Policy).

Note:

29.36

Provitamins and vitamins, natural or reproduced by synthesis (including natural concentrates), derivatives thereof used primarily as vitamins, and inter-mixtures of the foregoing. (Subject to the Drug Policy).

29.37

Hormones, natural or reproduced by synthesis; derivatives thereof, used primarily as hormones; other steroids used primarily as hormones. (Subject to the Drug Policy).

29.38

Glycosides, natural or reproduced by synthesis, and their salts, ethers, esters and other derivatives. (Subject to the Drug Policy).

29.39

Vegetable alkaloids, natural or reproduced by synthesis, and their salts, ethers, esters and other derivatives. (Subject to the Drug Policy).

L These items have been subsequently deleted vide Press Note No.2 (1992 Series).

CHAPTER - I EXHIBIT NO.7(Contd.) PRESS NOTE NO. 9(1991 Series) CHANGES IN PROCEDURES FOR INDUSTRIAL LICENSING

29.41

Antibiotics. (Subject to the Drug Policy).

29.42

Other synthetic drugs, not elsewhere specified or included. (Subject to the Drug Policy).

30.01 to 30.06

Pharmaceutical products. (Subject to the Drug Policy).

17. Entertainment electronics (VCRs, colour TVs, CD players, tape recorders). 85.19 852031.00 8520.39 85.21

Compact disc players. Tape recorders, cassette-type. Tape recorders, other than cassette-type. Video recording or reproducing apparatus.

8528.10L Colour television receivers. 18LL White goods (domestic refrigerators, domestic dishwashing machines, programmable domestic washing machines, microwave ovens, airconditioners). 84.15

Air conditioning machines.

84.18

Refrigerators and other freezing equipment, of the household type.

842211.00 84.50 851650.00

Dishwashing machines, of the household type. Household washing machines, of the programmable type. Microwave ovens.

Note: LL Subsequent changes in these items are notified vide press Note No.4 (1993 Series) L Subsequently denoted by 8 digit ITC Code, namely 852810.10 vide Press Note No.11

(1992 Series)

31

Industrial Policy Highlights

32 EXHIBIT NO.7(Contd.) PRESS NOTE NO. 9(1991 Series) CHANGES IN PROCEDURES FOR INDUSTRIAL LICENSING

List of cities with the population of 10 lakhs and above according to the provisional results of the 1991 Census Sl. No.

Name of the cities

Provisional population according to the 1991 Census

1.

Greater Bombay U.A.

12,571,720

2.

Calcutta U.A.

10,916,272

3.

Delhi U.A.

8,375,188

4.

Madras U.A.

5,361,468

5.

Hyderabad U.A.

4,280,261

6.

Bangalore U.A.

4,086,548

7.

Ahmedabad U.A.

3,297,655

8.

Pune U.A.

2,485,014

9.

Kanpur U.A.

2,111,284

10. Nagpur U.A.

1,661,409

11. Lucknow U.A.

1,642,134

12. Surat U.A.

1,517,076

13. Jaipur U.A.

1,514,425

14. Kochi U.A.

1,139,543

15. Coimbatore U.A.

1,135,549

16. Vadodara U.A.

1,115,265

17. Indore U.A.

1,104,065

18. Patna U.A.

1,098,572

19. Madurai U.A.

1,093,702

20. Bhopal M.C.

1,063,662

21. Vishakapatnam U.A.

1,051,918

22. Varanasi U.A.

1,026,467

23. Ludhiana M. Corpn.

1,012,062

CHAPTER - I EXHIBIT NO.8 PRESS NOTE NO. 10(1991 Series) PROCEDURES IN RESPECT OF FOREIGN TECHNOLOGY AGREEMENTSL

1. Government tabled a Statement on Industrial Policy in both the Houses of Parliament on July 24, 1991. The Statement has substantially liberalised the provisions and simplified the procedures governing Foreign Technology Agreements. 2. The relevant portion of the Statement dealing with Foreign Technology Agreements is as follows “39 C. FOREIGN TECHNOLOGY v AGREEMENTS i)

Automatic permission will be given for foreign technology agreements in high priority industries (Annex III)* upto a lumpsum payment of Rs. 1 crore, 5% royalty for domestic sales and 8% for exports, subject to total payments of 8% of sales over a 10 year period from date of agreement or 7 years from commencement of production. The prescribed royalty rates are net of taxes and will be calculated according to standard procedures.

ii)

In respect of industries other than those in Annex.IIIvv, automatic permi-ssion will be given subject to the same guidelines as above if no free foreign exchange is required for any payments.

iii)

All other proposals will need specific approval under the general procedures in force.

iv)

No permission will be necessary for hiring of foreign technicians, foreign testing of indigenously developed technologies. Payment may be made from blanket permits or free foreign exchange according to RBI guidelines.”

This Press Note sets out the procedures for approval of foreign technology agreements, hiring of foreign technicians and foreign testing of indigenously developed technologies.

3. FOREIGN TECHNOLOGY AGREEMENTS (a) Automatic Approvals: Applications for automatic approvals under para 39-C(i) will be filed in the prescribed form (10 copies) with the Entrepreneurial Assistance Unit of the Secretariat for Industrial Approvals (SIA) in the Department of Industrial Development, Ministry of Industry, Udyog Bhawan, New Delhi-110 011. The application shall state clearly the description of the article to be manufactured in the Indian Trade Classification System. The payment terms must comply with the conditions laid down in the said para. On receipt of the application, SIA will communicate approval after confirming that the item is covered by Annex III. No other scrutiny of the application will be done. A copy of the approval will be sent to the Reserve Bank of India (RBI). After the SIA approval, the entrepreneurs may approach the authorised dealers for foreign exchange release along with a copy of the agreement with the foreign collaborator. Intimation will be given by the entrepreneurs to RBI in a proforma to be prescribed by RBI. The entrepreneur shall furnish such other information as may be prescribed by RBI from time to time. RBI will issue necessary instructions to all concerned and delegate powers to authorised dealers to release the foreign exchange required. With regard to the provision contained in para 39-C(ii), for foreign technology agreements in industries other than those in Annex III the same procedure as indicated above would apply. However, in respect of these proposals (covered by para 39C(ii)), no free foreign exchange will be released towards lumpsum payment or royalty. The payments involved may be met through EXIM SCRIPSvvv. The Ministry of Commerce is issuing a Public Notice authorising the use of EXIM SCRIPS for this purpose. For purposes of calculating the payments prescribed under paras 39-C(i) and (ii), the lumpsum and royalty payments will be net of taxes.

Note: L Subsequently amended vide Press Notes No. 10(1991 Series), 4 (1992 Series) & 12(1992 Series) LL Attached to Press Note No.10(1992 Series) LLL Since amended vide Press Note No.12 (1992 Series)

33

Industrial Policy Highlights

34

EXHIBIT NO.8(Contd.) PRESS NOTE NO. 10(1991 Series) PROCEDURES IN RESPECT OF FOREIGN TECHNOLOGY AGREEMENTS❖

(b) Other Approvals: Proposals which are not covered by paras 39-C(i) and (ii) of the Statement on Industrial Policy will be dealt with according to the general procedure in force. Applications may be filed in the prescribed form (10 copies) with the Entrepreneurial Assistance Unit of the Secretariat for Industrial Approvals (SIA) in the Department of Industrial Development, Ministry of Industry, Udyog Bhawan, New Delhi - 110011.

(b) Where the payment to the foreign technician does not exceed US $ 500 per day, regardless or whether the local costs on board and lodging and other items are met by the Indian Company or not.

(c) Pending Applications: Pending applications for foreign technology agreements will be dealt with by the SIA in accordance with the new guidelines/ procedures contained in this Press Note.

5. FOREIGN TESTING OF INDIGENOUS RAW MATERIALS AND PRODUCTS AND INDIGEN-OUSLY DEVELOPED TECHNOLOGY

4. HIRING OF FOREIGN TECHNICIANS

Full powers are being delegated by Government to RBI to authorise payments in such cases either against blanket permits or in free foreign exchange. RBI will issue necessary instructions in this regard, including delegation to the authorised dealers.

Henceforth no permission is necessary for hiring of foreign technicians and no applications need be made to Government for this purpose irrespective of whether the hiring of foreign technicians is under an approved collaboration agreement or not. As regards release of foreign exchange, full powers are being delegated by the Government to RBI to authorise payments either against blanket permits or in free foreign exchange. RBI will in turn delegate its existing powers to the authorised dealers to release payments in free foreign exchange and against blanket permits. Release of foreign exchange by authorised dealers under the blanket permit would not be subject to any restrictions on per diem rates and duration of engagement, etc. For release of foreign exchange other than under blanket permits, the existing guidelines followed by the RBI, as shown below, would continue and would be delegated to authorised dealers: (a) Where the duration of the engagement of foreign technicians does not exceed 12 months by a company in a year, with no single technician exceeding 3 months.

No.10/43/91-LP

(c) Where in the case of company to company payment, the payment by the Indian company to the foreign company does not exceed US $ 50,000 in a year.

6. NEW CLASSIFICATION SYSTEM Entrepreneurs may note that the description of article(s) to be manufactured should be stated according to the Indian Trade Classification system. This applies both to the applications to be filed under the provision of para 3 and para 6. The description of industries covered by Annex III of the Statement on Industrial Policy in the Indian Trade Classification (Harmonised System) is attached to this Press Note. Copies of the Indian Trade Classification (Based on Harmonised Commodity Description and Coding System), published by the Ministry of Commerce, Directorate General of Commercial Intelligence and Statistics, Calcutta, can be obtained on payment from the Controller of Publications, 1, Civil Lines, Delhi - 110 054 or from any of the agents authorised to sell Government of India publications.

New Delhi, the 14th August, 1991.

The Press Information Bureau is requested to give wide publicity to this Press Note. Sd/(L. Mansingh) Joint Secretary to the Government of India Principal Information Officer, Press Information Bureau, Shastri Bhawan, New Delhi.

35

CHAPTER - I EXHIBIT NO. 9 PRESS NOTE NO. 11 (1991 Series) CHANGES IN PROCEDURES FOR FOREIGN INVESTMENT APPROVALS

1. Government tabled a Statement on Industrial Policy in both the Houses of Parliament on July 24, 1991. The Statement has substantially liberalised the provisions and simplified the procedures governing foreign investment proposals. 2. The relevant portion of the Statement dealing with foreign investment is contained in para 39 B. According to the Statement approvals will be given for investment upto 51% foreign equity in high priority industries [Annex III of the Policy Statement]L. These approvals will be available if the foreign equity covers the foreign exchange requirement for import of capital goods. The import of components, raw materials and intermediate goods and payment of know-how fees and royalties will be governed by the general policy applicable to other domestic units. Payment of dividends will be monitored through the Reserve Bank of India so as to ensure that outflows on account of dividend payments are balanced by export earnings over a period of time. Other foreign equity proposals including proposals involving 51% equity but which do not meet any or all of the criteria mentioned above, will continue to require clearance.

proposed foreign equity must cover the import of capital goods required for the project. The Reserve Bank of India will issue the necessary permission for the foreign equity investment under the Foreign Exchange Regulation Act, 1973 (FERA). This permission will include exemption from the operation of sections 26(7), 28, 29, and 31 of FERA. Simultaneously the Reserve Bank of India will confirm that the import of capital goods is covered by the foreign equity. Based on this confirmation the Chief Controller of Imports & Exports shall issue the relevant import licence for capital goods imports. Under the procedure outlined above the plant and machinery proposed to be imported must be new and not second hand. There will be no indigenous clearance of these capital goods. B.

Dividend BalancingLL

Para 39 B(ii) of the Policy Statement provides for the monitoring of outflow of foreign exchange on account of dividend payments which are to be balanced by export earnings over a period of time. This monitoring will be done by the Reserve Bank of India. The balancing will be done on the following basis: (i)

The condition of dividend balancing is required for all companies receiving approval for foreign equity upto 51% under the provisions of para 39 B(i) of the Policy Statement.

(ii)

The balancing of dividends would be over a period of 7 years from commencement of production. Balancing will not be required beyond this period.

Majority foreign equity holding upto 51% will also be allowed for trading companies primarily engaged in export activities. 3. APPROVALS FOR FOREIGN INVESTMENT UPTO 51% FOREIGN EQUITY IN HIGH PRIO-RITY INDUSTRIES(ANNEX III). A. Procedures for Approvals Applications for approval under the provisions in paras 39 B(i) and 39 B(ii) of the Statement on Industrial Policy will be filed with the Reserve Bank of India. The application shall state clearly the description of the article to be manufactured in ITC (HS classification). The proposal shall be a composite one including detailed information on the capital goods to be imported for the project. Under the provisions of the policy the

(iii) Remittance of dividends should be covered by earnings of the company from export of items in Annex III. The amount of dividend payment may be covered by export earnings of such items recorded in years prior to the payment of dividend or in the year of payment of dividend. The Reserve Bank of India will issue appropriate instructions to give effect to these provisions.

Note: L Annex.III list is attached to Press Note No.10 (1992 Series). LL Subsequently amended vide Press Note No. 12 (1992 Series).

Industrial Policy Highlights

36

EXHIBIT NO. 9 (Contd.) PRESS NOTE NO. 11 (1991 Series) CHANGES IN PROCEDURES FOR FOREIGN INVESTMENT APPROVALS

4. FOREIGN INVESTMENT IN TRADING COMPANIES Under the provisions of para 39 B(iv) foreign equity holdings upto 51% equity will be allowed in trading companies primarily engaged in export activities. Applications for foreign investment under this clause will be filed with the Reserve Bank of India in the form to be prescribed by the RBI. Such trading houses shall be at par with the domestic trading and export houses and shall operate in accordance with the Import Export Policy. 5. FOREIGN INVESTMENT IN HOTELS AND TOURISM RELATED INDUSTRY Foreign equity holdings upto 51% will also be permitted in hotels and tourism related industry. Applications will be filed with the Reserve Bank of India in the form to be prescribed by the RBI. 6. OTHER FOREIGN PROPOSALS

INVESTMENT

All other foreign investment proposals will be subject to the existing procedures. Applications will be made to the Secretariat of Industrial Approvals in the Department of Industrial Development in the prescribed form. These proposals will be considered according to usual procedures. This will include proposals involving 51% foreign equity which do not meet any or all of the criteria under paras 39 B(i) and (ii) of the Policy. Proposals of foreign investment, foreign technology agreements not

No.11/43/91-LP

covered by the automatic facility, and import of capital goods may, if desired, continue to be made on a composite basis. 7. FOREIGN TECHNOLOGY AGREEMENTS Under the provisions of the new policy foreign equity proposals need not necessarily be accompanied by foreign technology agreements. The procedure for foreign technology approvals have been outlined in Press Note No.10 (1991 Series). 8. NEW CLASSIFICATION SYSTEM Entrepreneurs may note that the description of article(s) to be manufactured should be stated according to the Indian Trade Classification (Harmonised System). This applies both to the applications to be filed under the provisions of para 3 and para 6 of this Press Note.L The description of industries covered by Annex III of the Statement on Industrial Policy in the Indian Trade Classification (Harmonised System) is attached to this Press Note.L Copies of the Indian Trade Classification (Based on Harmonised Commodity Description and Coding System), published by the Ministry of Commerce, Directorate General of Commercial Intelligence and Statistics, Calcutta, can be obtained on payment from the Controller of Publications, 1, Civil Lines, Delhi 110 054 or from any of the agents authorised to sell Government of India publications.

New Delhi, the 20th August, 1991.

The Press Information Bureau is requested to give wide publicity to this Press Note.

Sd/(L. Mansingh) Joint Secretary to the Government of India Principal Information Officer, Press Information Bureau, Shastri Bhawan, New Delhi. Note: L A list of Annex.III industries is appended to Press Note No.10 (1992 Series).

CHAPTER - I EXHIBIT NO.10 PRESS NOTE NO. 12 (1991 Series) PROCEDURES IN RESPECT OF FOREIGN TECHNOLOGY AGREEMENT

Amendment to Press Note No.10 (1991 Series) dated 14th August, 1991. 1. Government tabled a Statement on Industrial Policy in both the Houses of Parliament on July 24, 1991. The Statement has substantially liberalised the provisions and simplified the procedures governing Foreign Technology Agreements. 2. The relevant portion of the Statement dealing with Foreign Technology Agreements is as follows: “39C. FOREIGN TECHNOLOGY AGREEMENTS i)

Automatic permission will be given for foreign technology agreements in high priority industries (Annex III) upto a lumpsum payment of Rs. 1 crore, 5% royalty for domestic sales and 8% for exports, subject to total payments of 8% of sales over a 10 year period from date of agreement or 7 years from commencement of production. The prescribed royalty rates are net of taxes and will be calculated according to standard procedures. ii)

In respect of industries other than those in Annex III, automatic permission will be given subject to the same guidelines as above if no free foreign exchange is required for any payments.

iii)

All other proposals will need specific approval under the general procedures in force.

(iv) No permission will be necessary for hiring of foreign technicians, foreign testing of indigenously developed technologies. Payment may be made from blanket permits or free foreign exchange according to RBI guidelines." 3. Press Note No.10 (1991 Series) issued on 14th August, 1991 set out the procedures for approval of foreign technology agreements, hiring of foreign technicians and foreign testing of indigenous raw materials and products and indigenously developed technologies. In that Press Note, it has been stated

that applications for automatic approvals under paras 39 C(i) and C (ii) referred to above would be made to the Secretariat for Industrial Approvals in the Department of Industrial Development. In the interests of entrepreneurs, this procedure has now been modified as below. Procedures relating to other matters, however, remain the same as in Press Note No.10. 4. FOREIGN TECHNOLOGY AGREE-MENTS (a) Automatic Approvals under Para 39C (i) Applications for automatic approvals under para 39C(i) will be filed in the prescribed form (10 copies) with the Reserve Bank of India (RBI). The application shall state clearly the description of the article to be manufactured in the Indian Trade Classification System. The payment terms must comply with the conditions laid down in para 39 C(i). After RBI’s approval, the entrepreneur may approach the authorised dealer for foreign exchange release along with a copy of the agreement entered into with the foreign collaborator. The entrepreneur shall furnish such other information as may be prescribed by the RBI from time to time. RBI will issue necessary instructions to all concerned and delegate powers to authorised dealers to release the required foreign exchange. (b) Automatic Approvals under Para 39 C(ii) With regard to the provision contained in para 39C(ii) regarding foreign technology agreements in industries other than those in Annex III the same procedure as laid down above for approval under para 39C(i) would apply. However, in respect of these proposals, no free foreign exchange will be released towards lumpsum payment or royalty. The payments involved may be met through EXIM scrips. Ministry of Commerce is issuing a Public Notice authorising the use of EXIM scrips for this purpose. For purposes of calculating the payments prescribed under paras 39C(i) and (ii), the lumpsum and royalty payments will be net of taxes.

37

38

Industrial Policy Highlights EXHIBIT NO.10 (Contd.) PRESS NOTE NO. 12 (1991 Series) PROCEDURES IN RESPECT OF FOREIGN TECHNOLOGY AGREEMENT

5. OTHER CLARIFICATIONS (a) Extension of foreign technical colla-boration agreements. Extensions of foreign technical collaboration agreements will need the approval of the Government. For this purpose, the entrepreneurs will have to file an application in the prescribed form (10 copies) with the Entrepreneurial Assistance Unit of the SIA in the Department of Industrial Development.

No.10/43/91-LP

(b) Deputation of Indian technicians for training abroad. For deputing Indian personnel for training and other purposes abroad, the entrepreneurs may approach only the RBI. (c) Hiring of foreign technicians for more than three months. For hiring foreign technicians beyond a period of three months, clearance of the Ministry of Home Affairs will be required as before.

New Delhi, the 31st August, 1991.

The Press Information Bureau is requested to give wide publicity to this Press Note. Sd/(L. Mansingh) Joint Secretary to the Government of India Principal Information Officer, Press Information Bureau, Shastri Bhawan, New Delhi.

39

CHAPTER - I EXHIBIT NO.11 PRESS NOTE NO. 15L(1991 Series) THE JURISDICTION OF THE DEVELOPMENT COMMISSIONER, MADRAS EXPORT PROCESSING ZONE

100% Export Oriented Units set up in the Union Territory of Pondicherry will also fall within the jurisdiction of Development Commissioner, Madras Export Processing Zone in addition to the units set up in Tamilnadu, Andhra Pradesh, Andaman &

No.10(53)/91-LP

Nicobar Islands, as already mentioned in the Annex attached to the Press Note No. 14 (1991 series) dated 26th September, 1991 for the purpose of exercising delegated powers by DCs concerned, as specified in the above mentioned Press Note.

New Delhi, the 25th October, 1991

Forwarded to Press Information Bureau for wide publicity to the contents of the above Press Note.

Sd/(S.Bhavani) Deputy Secretary to the Government of India

Principal Information Officer, Press Information Bureau, Shastri Bhawan New Delhi Note: L Press Note No.13(1991 Series) has been superseded by Press Note No.3(1995 Series) Press Note No.14(1991 Series) has been superseded by Press Note No.4(1995 Series)

40

Industrial Policy Highlights EXHIBIT NO. 12 PRESS NOTE NO.16 (1991 Series) GUIDELINES FOR LICENSING OF SUGAR FACTORIES

A. The Government of India have reviewed the guidelines for licensing of new and expansion of existing sugar factories issued vide this Ministry’s Press Note No. 4 (1990 Series) dated 23.7.1990. In supersession of the aforesaid Press Note, Government have formulated the following revised guidelines: 1. New sugar factories will continue to be licensed for a minimum economic capacity of 2500 tonnes cane crush per day (TCD). There will not be any maximum limit on such capacity. However, in areas specified as industrially backward areas by the Government of India and certified by the Indian Council of Agricultural Research to be agro-climatically suited for development of sugarcane, licensing of new sugar factories in the co-operative and public sectors would be allowed for an initial capacity of 1750 TCD subject to the condition that the units would expand their capacity to 2500 TCD within a period of 5 years of going into production. 2. Licences for new sugar factories will be issued subject to the condition that the distance between the proposed new sugar factory and an existing/already licensed sugar factory should be 25 Kms. This distance criterion of 25 Kms. could, however, be relaxed to 15 Kms in special cases, where cane availability so justifies. 3.

The basic criterion for grant of licences for new sugar units would be their viability, mainly from the point of view of cane availability and potential for development of sugarcane.

4.

All new licences will be issued with the stipulation that cane price will be payable on the basis of sucrose content of sugarcane.

5.

Other things being equal, preference in licensing will be given to proposals from the co-operative sector and the public sector, in that order, as compared to the private sector. In case more

than one application is received from any zone of operation, priority will be given to the application received earlier. However, in such cases also, preference will be given to the co-operative sector, followed by the public sector and the private sector, in that order, even though the applications of the first two sectors may be of a later date. 6. Priority will continue to be given to sugar factories with capacity less than 2500 TCD to expand to the aforesaid minimum economic capacity. 7. While granting licences for new units and expansion projects, the additional capacity to be created upto the end of the Eighth Plan, i.e. 1996-97, will be kept in view. 8. While granting licences for new sugar factories, industrial licences in respect of down-stream units for the use of molasses i.e. industrial alcohol, etc. will be given readily. B. Applications for licences will be initially screened by the Screening Committee of the Ministry of Food. While considering such applications, the comments of the State Government/Union Territory Administration concerned would also be obtained. The State Government/Union Territory Administration would be required to furnish their comments within 3 months of the receipt of communication from the Ministry of Food. C. Applications for grant of industrial licences for the establishment of new sugar factories as well as expansion of existing units should be submitted directly to the Secretariat for Industrial Approvals in the Department of Industrial Development in Form IL alongwith the prescribed fee of Rs.2500. A copy of the application may also be sent to the Ministry of Food. D. The procedure and guidelines, as given above, are brought to the notice of the entrepre-neurs for their information and guidance.

No.10(74)/91-LP New Delhi, the 8th November 1991. Forwarded to Press Information Bureau for wide publicity to the contents of the above Press Note. Sd/(S.Bhavani) Deputy Secretary to the Government of India Principal Information Officer, Press Information Bureau, Shastri Bhawan, New Delhi.

41

CHAPTER - I EXHIBIT NO.13 PRESS NOTE NO.17 (1991 Series) PROCEDURES FOR INCREASE IN FOREIGN EQUITY TO 51% IN EXISTING COMPANIESL

1. Government tabled a Statement on Industrial Policy in both the Houses of Parliament on July 24, 1991. The statement has substantially liberalised the provisions and simplified the procedures governing foreign investment proposals. 2. The relevant portion of the Statement dealing with foreign investment is contained in para 39 B. According to the Statement approvals will be given for investment upto 51 per cent foreign equity in high priority industries [Annex III of the Policy Statement]. These approvals will be available if the foreign equity covers the foreign exchange requirement for import of capital goods. The import of components, raw materials and intermediate goods and payment of know-how fees and royalties will be governed by the general policy applicable to other domestic units. Payment of dividends will be monitored through the Reserve Bank of India so as to ensure that outflows on account of dividend payments are balanced by export earnings over a period of time. 3. Other foreign equity proposals including proposals involving 51 per cent equity but which do not meet any or all of the criteria mentioned above, will continue to require clearance. 4. The procedures for foreign equity investment in new companies have been announced in Press Note No.11 (1991 Series). 5. This Press Note states out the procedures to be followed for increase in foreign equity in existing companies which already have some foreign equity holdings. A. ELIGIBILITY CRITERIA FOR INCREASE IN FOREIGN EQUITY 6. The following categories of companies will receive automatic approval from the Reserve Bank of India for raising their foreign equity levels from existing levels upto 51 percent : (i)

Companies wishing to raise foreign equity as part of an expansion programme.

A company wishing to raise its foreign equity from existing levels to 51 per cent may do so as part Note:

of an expansion programme. The expansion programme must be in high priority industries shown in Annex III to the Statement on Industrial Policy. The additional equity should be part of the financing of the expansion programme and the money to be remitted should be in foreign exchange. The company itself need not be exclusively engaged in activities listed in Annex III; only the proposed expansion must be exclusively in the high priority industries shown in Annex III. (ii)

Companies wishing to raise level of foreign equity upto 51 per cent without an expansion programme.

A company exclusively engaged in high priority industries listed in Annex III can also raise its equity from existing levels to 51 per cent without an expansion programme. The increase in equity level must result from expansion of the equity base of the existing company. The additional foreign equity must be from remittance of foreign exchange. B. REQUIREMENT FOR PREFEREN-TIAL SHARE ALLOCATION 7. On receipt of RBI approval the company must pass a special resolution under Section 81 (1A) of the Companies Act proposing preferential allocation of the required volume of fresh equity to the foreign investor. In respect of the equity holdings of financial institutions in such companies, the Finance Ministry will separately advise the financial institutions that they may support such propo-sals provided, in their commercial judgement, they are in the interest of the company. C. ISSUE OF SHARES VALUATION

AND

SHARE

8. The CCI will allow preferential allocation of equity in favour of the foreign investor on the basis of the RBI approval for expansion of foreign equity and the adoption of the special resolution by the company. For such cases, the price of new equity will be fixed by the CCI on the basis of market prices, computed on the basis of the average price for the six months period preceding the date on

L These procedures have been subsequently revised vide Press Note No.13(1992 Series)

42

Industrial Policy Highlights EXHIBIT NO.13(Contd.) PRESS NOTE NO.17 (1991 Series) PROCEDURES FOR INCREASE IN FOREIGN EQUITY TO 51% IN EXISTING COMPANIES

which the application is received in the CCI, with a discount of upto 10 per cent if requested by the shareholders resolution. The market price will take into account any bonus issue which may have been declared in this period and adjust for the same. For companies undertaking such equity expansion disinvestment, if it occurs in future, will also be at market price computed on the same basis. D. PROCEDURES FOR APPROVALS 9. Applications for approval under the provisions in para 6 above will be filed with the Reserve Bank of India. In the case of expansion programme the application shall state clearly the description of the article to be manufactured in ITC (HS classification). The proposal shall be a composite one including detailed information on the capital goods to be imported for the project expansion programme. Under the provisions of the policy the proposed foreign equity must cover the import of capital goods required for the expansion programme. Similarly, in the case of companies not undertaking expansion programmes, the application shall describe the existing products of the company in ITC (HS classification). 10. The Reserve Bank of India will issue the necessary permission for the foreign equity investment under the Foreign Exchange Regulation Act, 1973 (FERA). This permission will include exemption from the operation of sections 26(7), 28, 29, and 31 of FERA. Simultaneously the Reserve Bank of India will confirm that the import of capital goods is covered by the foreign equity. Based on this confirmation the Chief Controller of Imports & Exports shall issue the relevant import licence for capital goods imports. 11. Under the procedure outlined above the plant and machinery proposed to be imported must be new and not second hand. There will be no indigenous clearance of these capital goods. E. DIVIDEND BALANCING 12. Para 39 B(ii) of the Policy Statement provides for the monitoring of outflow of foreign exchange on account of dividend payments which are to be balanced by export earnings over a period of time. This monitoring will be done by the Reserve Bank of India. The balancing will be done on the following basis:

(i)

The condition of dividend balancing is required for all companies receiving approval for foreign equity upto 51 per cent under the provisions outlined above in para 6.

(ii)

The balancing of dividend would be over a period of 7 years reckoned from the date of commencement of production for companies raising their level of foreign equity for an expansion programme. For companies which are raising their foreign equity levels without an expansion programme, this period will start from the date of allotment of the shares raising the level of foreign equity to the newly approved level.

(iii) Remittance of dividends should be covered by earnings of the company from export of items in Annex III. The amount of dividend payment may be covered by export earnings of such items recorded in years prior to the payment of dividend or in the year of payment of dividend. The Reserve Bank of India will issue appropriate instructions to give effect to these provisions. F. OTHER PROPOSALS FOR RAISING LEVEL OF FOREIGN EQUITY IN EXISTING COMPANIES 13. All other foreign proposals, for raising of foreign equity levels in existing companies will be subject to usual procedures. Applications will be made to the Secretariat of Industrial Approvals in the Department for Industrial Development in the prescribed form. This will include proposals involving increase in foreign equity upto 51 per cent which do not meet any or all of the criteria outlined above. G. CLASSIFICATION SYSTEM 14. Entrepreneurs may note that the description of article(s) to be manufactured should be stated according to the Indian Trade Classification (Harmonised System)

43

CHAPTER - I EXHIBIT NO.13(Contd.) PRESS NOTE NO.17 (1991 Series) PROCEDURES FOR INCREASE IN FOREIGN EQUITY TO 51% IN EXISTING COMPANIES

15. The description of industries covered by Annex III of the Statement on Industrial Policy in the Indian Trade Classification (Harmonised System) is available in Press Note No.11 (1991 Series)L. (Copies of the Indian Trade Classification (Based on Harmonised Commodity Description and Coding

No.11/43/91-LP

System), published by the Ministry of Commerce, Directorate General of Commercial Intelligence and Statistics, Calcutta, can be obtained on payment from the Controller of Publications, 1, Civil Lines, Delhi 110 054 or from any of the agents authorised to sell Government of India publications).

New Delhi, the 19th November, 1991.

The Press Information Bureau is requested to give wide publicity to this Press Note.

Sd/(L.Mansingh) Joint Secretary to the Government of India Principal Information Officer, Press Information Bureau, Shastri Bhawan, New Delhi.

Note:

L

List of Annex III industries is appended to Press Note No.10 (1992 Series)

44

Industrial Policy Highlights EXHIBIT NO.14 PRESS NOTE NO.18(1991 Series) CLARIFICATIONS REGARDING HOTEL AND TOURISM RELATED INDUSTRY

1. Government tabled a Statement on Industrial Policy in both Houses of Parliament on July 24, 1991. Subsequently Government have issued Press Note No.10 (1991 Series) on 14th August, 1991, Press Note No.11 (1991 Series) on 20th August, 1991, Press Note No.12 (1991 Series) on 31st August, 1991 and Press Note No.17 (1991 Series) on 19th November, 1991 laying down the procedures for approval of foreign technology agreements, foreign investments, etc. Annex III attached to the Statement on Industrial Policy and the Press Notes referred to above, list out the industries eligible for automatic approval of foreign technology agreements and for 51 per cent foreign equity approvals. Serial No.34 of this Annex contains the following entry: “34.Hotels and Tourism related Industry”. For the information of entrepreneurs, it is hereby clarified that the term ‘Hotels’ would include restaurants, beach resorts and other tourism complexes providing accommodation and/or catering and food facilities to tourists. The term ‘Tourismrelated Industry’ would include among other the following:i)

Travel agencies, tour operating agencies and tourist transport operating agencies;

ii)

Units providing facilities for cultural, adventure and wildlife experience to tourists;

iii)

Surface, air and water transport facilities for tourists;

iv)

Leisure, entertainment, amusement, sports and health units for tourists; Convention/seminar units and organisations.

v)

No.11/43/91-LP

2. Hotel and Tourism related Industry as clarified above will also be eligible for approval for direct foreign investment upto 51 per cent foreign equity in accordance with para 39B of the Statement on Industrial Policy dated 24.7.1991. Procedures for Approvals as given in Press Note No.17 (1991 series) dated 19.11.1991 will be applicable for this purpose. 3L. As regards foreign technology agreements in Hotel Industry only, automatic permission will be available in terms of para 39C(i) of the Statement on Industrial Policy subject to fulfilment of the following parameters: (a) Technical and Consultancy Serivces: Lumpsum fee not exceeding US $ 200,000. (b) Franchising and Marketing/Publicity support Upto 3% of the gross room sales. (c) Management Fees Upto 10% of the foreign exchange earnings provided the foreign party puts in 25 per cent of the equity. This will also cover payments for marketing and publicity support. It may be mentioned that the above parameters are different from those applicable to other industries as specified in para 39 C(i) of the Statement. The procedure for grant of approval in such cases will be the same as indicated in Press Notes No.10,11,12 and 17 (1991 Series). Proposals which are not covered by paras 2 and 3 of this Press Note will be dealt with according to the general procedure in force and the procedure laid down in Press Notes No.10,11,12 and 17 may be followed for submission of applications.

New Delhi, the 25th November,1991.

Forwarded to the Press Information Bureau for wide publicity to the contents of the above Press Note. Sd/(L. Mansingh) Joint Secretary to the Government of India Press Information Officer, Press Information Bureau, Shastri Bhawan, New Delhi. Note: L The Norms have been revised vide Press Note No.1(1995 Series)

45

CHAPTER - I EXHIBIT NO. 15 PRESS NOTE NO.19 (1991 Series) IMPORT OF TECHNOLOGY AND CAPITAL GOODS UNDER TDF

1. The Technical Development Fund Scheme is one of the important schemes administered by the Department of Industrial Development to encourage modernisation and upgradation of technology, product-mix rationalisation and export promotion by industrial units. The scheme has proved very useful to the Industry due to its flexibility and fast track clearance. To encourage modernisation and technology upgradation, Government have decided to liberalise the Scheme further as follows: (i)

To counter the effect of depreciation of Indian Rupee against U.S. Dollar and other currencies and to retain the purchasing power as intended in 1989, the upper ceiling on the aggregate value of the Foreign Exchange that could be approved to an industrial unit in a financial year under the Scheme will, henceforth, be equivalent to Rs. 5 crore instead of the existing

No. 2(1)/91-TDF

ceiling of Rs. 3 crore. In deserving cases, this limit can be relaxed to some extent to enable a total technology package to be implemented without fragmentation. (II) The applications for import of Designs & Drawings as per the para 162 of Exim Policy 1990-93 which were being considered by a Committee chaired by Joint Secretary (SIA), shall, henceforth, be considered by the TDF Committee as all such proposals essentially aim at effecting modernisation and technological upgradation. 2. Provisions of this Department’s earlier Press Notes No. 2(1)/88-TDF dated 22nd April, 1988 and No. 2(1)/89-TDF dated 17th March, 1989, will continue to apply except the amendment to the extent cited above which will take effect from 25.8.1991.

New Delhi, the 9th December, 1991.

Forwarded to the Principal Information Officer, Press Information Bureau, Government of India for issuing the Press Note and giving it a wide publicity.

Sd/(L. Mansingh) Joint Secretary to the Government of India Press Information Officer Press Information Bureau Shastri Bhawan New Delhi.

46

Industrial Policy Highlights EXHIBIT NO.16 PRESS NOTE NO.20 (1991 Series) REVISION OF APPLICATION FORM FOR FOREIGN INVESTMENTS/TECHNOLOGY AGREEMENTS

1. Applications for approval of foreign investment and foreign technology agreement are being made by entrepreneurs in Form ‘FC’. Government have now substantially liberalised the provisions and simplified the procedures governing foreign investment and technology agreement approvals through:(i)

(ii)

Press Note No. 10 (1991 Series) dated 14-8-1991 relating to foreign technology agreements. Press Note No. 11 (1991 Series) dated 20-8-1991 relating to foreign investment.

(iii) Press Note No. 12 (1991 Series) dated 31-8-1991 containing amendments to Press Note No. 10 relating to foreign technology agreements. (iv) Press Note No. 17 (1991 Series) dated 19-11-1991 regarding increase in foreign equity to 51% in existing companies. 2. In the light of the above, it has become necessary to revise Form ‘FC’. A copy of the revised form, which will now be known as “Form FC (SIA)”, is attached. The Form FC (SIA) is meant for applications made to the Secretariat for Industrial Approvals (SIA), Ministry of Industry (Department of Industrial Development),

No. 11/43/91-LP

Udyog Bhawan, New Delhi-110 011, to obtain approval for foreign investment and/or foreign technology agreement. 3. For permission under paragraphs 39 B(i), 39 B(iv), 39 C(i) and 39 C(ii) of the Statement on Industrial Policy, the application is to be made to the Controller, Foreign Investment & Technology Transfer Section, Reserve Bank of India, Exchange Control Department, Central Office, Bombay-400 023. The Form prescribed by the RBI should be used for this purpose. To distinguish this Form FC(SIA) this Form, will henceforth be known as Form FC (RBI). The RBI is bringing out a shorter and simplified version in view of the liberalised procedures for clearances under the purview. 4. The revised Form will also be applicable to Non-Resident Indian investment and/or technology agreement proposals. In such cases, the applicant should superscribe ‘NRI’ in bold letters on top right-hand side corner of the first page of the Form. 5. There shall be no fee for applications made in Form ‘FC’. 6. Applications for foreign investments and/or foreign technology agreements may henceforth be submitted in the revised form.

New Delhi, the 13th December, 1991

Forwarded to the Press Information Bureau for wide publicity to the contents of the above Press Note. Sd/(L. Mansingh) Joint Secretary to the Government of India Press Information Officer Press Information Bureau Shastri Bhawan, New Delhi.

47

CHAPTER - I EXHIBIT NO.17 PRESS NOTE NO.22L(1991 Series) AMENDMENT TO THE INDUSTRIAL ENTREPRENEURS MEMORANDUMLL

1. Under the provisions of Press Note No. 9 (1991 Series) dated 2nd August, 1991, entrepreneurs are required to submit an Industrial Entrepreneurs Memorandum in the prescribed form alongwith the prescribed fee for undertaking the manufacture of any article exempted in terms of this Ministry’s notification No. 477 (E) dated 25th July, 1991. On filing the memorandum with the requisite number of copies, entrepreneurs are given an acknowledgement of receipt. 2. References are being received from entrepreneurs seeking amendments and modifications in the memorandum already filed by them and acknowledged by the SIA. In this connection, it is clarified that the requirement of the entrepreneurs having to file a memorandum is intended purely for statistical purposes and to conduct a limited postfacto check to see whether the proposed manufacturing activity requires an industrial licence

or not. The procedure is not in the nature of any registration involving scrutiny of the memorandum. Under these circumstances, it is in the interest of the entrepreneurs to fill in the memorandum correctly. 3. It is, therefore, notified for the information and guidance of the entre-preneurs that no amendments/ modifications will be made to the memorandum already filed and acknowledged by SIA, unless the error or omission is on account of wrong feeding of data in the computer by SIA. Where any correction or amendment is sought to be made, the entrepreneur will have to submit a fresh memorandum in the prescribed form alongwith the prescribed fee for issue of fresh acknowledgement. In such cases, entre-preneurs are advised to state clearly that the earlier memorandum is being withdrawn by them so that the acknowledgement issued earlier by the SIA could be cancelled.

No. 10(88)/91-LP

New Delhi, the 24th December, 1991

Forwarded to Press Information Bureau for wide publicity to the contents of the above Press Note. Sd/(G. Sundaram) Deputy Secretary to the Government of India

Press Information Officer, Press Information Bureau, Shastri Bhawan, New Delhi.

Note: L

Press Note No.21 of 1991 Series has been superseded by Press Note No.10 of 1992 Series

LL Further clarification in Press Note No.6 (1993 Series)

48

Industrial Policy Highlights EXHIBIT NO.18 PRESS NOTE NO.23 (1991 Series) PROCEDURE FOR FOREIGN INVESTMENT IN TRADING COMPANIES

(a)

1. Government tabled a Statement on Industrial Policy in both the Houses of Parlia-ment on July 24, 1991. The Statement has substantially liberalised the provisions and simplified the procedures governing foreign investment and foreign technology proposals. 2. Para 39(B) (iv) of the Statement on Industrial Policy lays down that “majority foreign equity holding upto 51 per cent equity will be allowed for trading companies primarily engaged in export activities. While the thrust would be on export activities, such trading houses shall be at par with domestic trading and export houses in accordance with the Import Export Policy”. 3. This Press Note sets out the principles and procedures for approval of foreign equity holding upto 51 per cent in trading compa-nies primarily engaged in export activities. 4. The criteria for grant of Export House, Trading House or Star Trading House certificates are laid down in paragraphs 218 and 226 of the ImportExport Policy, 1990-93. As amended by the Ministry of Commerce, Import Trade Control Public Notice No. 242-ITC(PN)/90-93 dated November 8, 1991, effective from April 1, 1992, the average net foreign exchange earnings in the three preceding licensing years should not be less than Rs. 6 crore for Export House Certification; Rs. 30 crore for Trading House Certification; Rs. 125 crore for Star Trading House certification. Further, such certification will also be granted if the minimum net foreign exchange earning in the immediate preceding licensing year is not less than Rs.12 crore for Export House; Rs. 60 crore for Trading House and Rs. 150 crore for Star Trading House. 5.

Provisions for approval

(i)

New Companies

In the case of a new company,the Reserve Bank of India will give automatic approval for foreign investment upto 51 per cent foreign equity on the following basis:

Such a company will register itself with the Ministry of Commerce (Office of CCI&E) as a registered exporter/importer.

(b) The repatriation of dividend will be permissible only after the company has registered itself with the Ministry of Commerce (Office of CCI&E) as an Export House/Trading House/Star Trading House under the provisions of the prevailing Import Export Policy. (ii)

Existing Companies

In the case of existing companies already registered as Export Trading/Star Trading House, the Reserve Bank will give automatic approval on an application for foreign investment upto 51 per cent foreign equity. The approval will be subject to the following requirements: (a)

On receipt of RBI approval the company must pass a special resolution under Section 81 (1A) of the Companies Act proposing preferential allocation of the required volume of fresh equity to the foreign investor.

(b)

The CCI will allow preferential allo-cation of equity in favour of the foreign investor on the basis of the RBI approval for expansion of foreign equity and the adoption of the special resolution by the company. For such cases, the price of new equity will be fixed by the CCI on the basis of market prices, computed on the basis of the average price for the six months period preceding the date on which the application is received in the CCI, with a discount of upto 10% if requested by the shareholders resolution. The market price will take into account any bonus issue which may have been declared in this period and adjust for the same. For companies undertaking such equity expansion disinvestment, if it occurs in future, will also be at market price computed on the same basis.

49

CHAPTER - I EXHIBIT NO.18(Contd.) PRESS NOTE NO.23 (1991 Series) PROCEDURES FOR FOREIGN INVESTMENT IN TRADING COMPANIES

6.

Application procedure

Applications for approval under the provisions of para 5 above will be filed with the Reserve Bank of India in the prescribed form. The Reserve Bank of India will issue the necessary permission for the foreign equity investment under the Foreign Exchange Regulation Act, 1973 (FERA). Interalia, this permission will include exemption from the operation of sections 26(7), 28, 29, and 31 of FERA. 7.

Dividend BalancingL

The outflow of foreign exchange on account of dividend payments are to be balanced by export earnings over a period of time in respect of all approvals given under the provisions outlined in para 5 above. Monitoring will be done by the

No.10/43/91-LP

Reserve Bank of India. The balancing will be done on the following basis: (i)

The balancing of dividend would be over a period of 7 years reckoned from the date of recognition as Export House/ Trading House/Star Trading House for new companies, and from the date of allotment of the shares raising the level of foreign equity to the approved level in the case of existing companies.

(ii)

The amount of dividend payment should be covered by export earnings recorded in years prior to the payment of dividend or in the year of payment of dividend.

The Reserve Bank of India will issue appropriate instructions to give effect to these provisions.

New Delhi, the 31st December, 1991.

The Press Information Bureau is requested to give wide publicity to this Press Note.

Sd/(L.Mansingh) Joint Secretary to the Government of India Principal Information Officer Press Information Bureau Shastri Bhawan, New Delhi.

Note: L This condition has been withdrawn (except for industries in Consumer goods Sector) vide Press Note No.12 (1992 Series)

50

Industrial Policy Highlights EXHIBIT NO.19 PRESS NOTE NO.1 (1992 Series) REVIEW OF THE SCHEME OF RECOGNITION OF ADDITIONAL CAPACITY

1. Under the New Industrial Policy, the requirement of licensing under the Industries (Development & Regulation) Act, 1951 has been abolished for all industrial undertakings except for a short list of 18 industries, Para 23 of the Statement on Industrial Poicy dated 24.7.1991 indicates the reasons for the inclusion of these 18 industries in Annex II to the Statement, viz., security and strategic concerns, social reasons, problems related to safety and overriding environmental issues, manufacture of products of hazardous nature and articles of elitist consumption. The detailed procedure with regard to industrial licensing in pursuance of this decision has already been announced through Press Note No.9 (1991 Series). 2. The question of continuation of the scheme of re-endorsement of capacity upto 49 per cent under modernisation/replacement/renovation of equipment as announced vide Press Note No. 2, (1986 series) dated 15.1.1986 has been considered in the light of

No. 10(50)/91-LP

the new Policy. It has been decided that since the requirement of industrial licensing has been done away with for all industrial undertakings, it is felt that it is no longer necessary to continue the said Scheme of reendorsement. The Scheme is, therefore, being discontinued with immediate effect. 3. Henceforth an entrepreneur will have to apply for grant of LOI, as per the procedure laid down in Press Note No.9 (1991 Series), for substantial expansion of capacity if the article to be manufactured is subject to compulsory licensing irrespective of the location of the industrial undertaking, i.e., whether or not the undertaking is located within a radius of 25 Kms, from the periphery of the standard urban area limits of a town with a population of more than one million. Similarly, even if the article of manufacture is not under compulsory licensing, but the undertaking is located in this restricted area, any proposal for substantial expansion would require a licence.

New Delhi, the 3rd January, 1992.

Forwarded to Press Information Bureau for wide publicity to the contents of the above Press Note.

Sd/(G. Sundaram) Deputy Secretary to the Government of India Principal Information Officer, Press Information Bureau, Shastri Bhawan, New Delhi.

51

CHAPTER - I EXHIBIT NO.20 PRESS NOTE NO. 2 (1992 Series) LICENSING POLICY FOR INDUSTRIAL ALCOHOL

Under the new Industrial Policy Industrial Alcohol is covered under ‘Hazardous chemicals’ and is, therefore, subject to compulsory licensing. Government have decided to delete ‘Industrial Alcohol’ from the list of compulsory licensing since it is not a hazardous chemical in the accepted sense of the term. Accordingly Industrial Alcohol mentioned under item No. 22.07 and 29.05 on the ITC system has been deleted from Generic Entry No. 15 - Hazardous chemicals of Annex II to the Press Note dated 2nd August, 1991. It is expected

that this de-licensing of Industrial Alcohol will give a further fillip to production of Industrial Alcohol, which in turn will help in growth and development of down-stream alcohol based industries. Since sugar units are readily allowed to diversify for the production of industrial alcohol and other downstream units under the guidelines laid down for licensing of sugar industry, it is hoped that delicensing of industrial alcohol will improve the viability of sugar units also.

EXHIBIT NO.21 PRESS NOTE NO.3 (1992 Series) LICENSING POLICY FOR VENEERS

Under the New Industrial Policy, decorative veneers are covered under compulsory licensing. The specific entry in Annex II to the Press Note No. 9 (1991 Series) dated 2nd August, 1991, relating to “decorative veneers” is reproduced below : 8.

“Plywood, decorative veneers and other wood-based products such as particle board, medium density fibre board, and block board.”

Since the emphasis under the New Industrial Policy in so far as wood products are concerned,

No.10/43/91-LP

is to conserve forest reserves of the country, the compulsory licensing discipline is applicable to the manufacture of veneers of all types. Hence, in order to remove the ambiguity, the relevant S.No.8 of Annex II to the aforementioned Press Note dated 2nd August, 1991 has been modified to read as follows : “Plywood, veneers of all types and other woodbased products such as particle board, medium density fibre board, and block board.”

New Delhi, the 14th February, 1992

Forwarded to Press Information Bureau for giving wide publicity to this note.

Sd/(L.Mansingh) Joint Secretary to the Government of India

Principal Information Officer, Press Information Bureau, Shastri Bhawan, New Delhi.

52

Industrial Policy Highlights EXHIBIT NO. 22 PRESS NOTE NO.4 (1992 Series) CONSEQUENCES OF LIBERALISED EXCHANGE RATE MANAGEMENT SYSTEM

1. Government tabled a Statement on Industrial Policy in both Houses of Parliament on July 24, 1991. The relevant portion of the statement dealing with Foreign Technology Agreements is as follows : “39

C. FOREIGN AGREEMENTS

TECHNOLOGY

i)

Automatic permission will be given for foreign technology agreements in high priority industries (Annex III) upto a lumpsum payment of Rs. 1 crore, 5% royalty for domestic sales and 8% for exports, subject to total payment of 8% of sales over a 10 year period from date of agreement or 7 years from commencement of production. The prescribed royalty rates are net of taxes and will be calculated according to standard procedures.

ii)

In respect of industries other than those in Annex III, automatic permission will be given subject to the same guidelines as above if no free foreign exchange is required for any payments.

iii)

All other proposals will need specific approval under the general procedures in force.”

No.1/1/92.FC.II

2. As a consequence of the Budget announcement for 1992-93, the Exim Scrip system stands discontinued w.e.f. 01-03-1992. It has been announced that, inter alia, foreign exchange required for payment on account of dividends, royalties and other remittances will have to be obtained at the market exchange rate. In view of this policy change in exchange rate management, it is clarified that conditions relating to free foreign exchange and Exim Scrips for financing payments approved by the RBI under para 39 C(i) and (ii) and the Government under para 39 C(iii) will no longer be applicable. In other words, all payments flowing from approval of foreign technology agreements given by the RBI and the government will have to be met through foreign exchange purchases at market rates. It is also clarified that in respect of approvals for technology agreements issued in the past, such conditions will now become inoperative and all payments will have to be met through foreign exchange purchased at market rates. Parties in possession of such approval letters will not be required to seek an amendment or deletion of these conditions. All other procedures for foreign technology agreements as laid down in Press Note No. 10 (1991 Series) and Press Note No. 12 (1991 Series) will remain unchanged.

New Delhi, the 20th March,1992

Forwarded to Press Information Bureau for wide publicity to the contents of the above Press Note.

Sd/(L.Mansingh) Joint Secretary to the Government of India Principal Information Officer, Press Information Bureau, Shastri Bhawan, New Delhi.

53

CHAPTER - I EXHIBIT NO. 23 PRESS NOTE NO.5 (1992 Series) FOREIGN INVESTMENT & FOREIGN COLLABORATION AGREEMENT FOR SOFTWARE INDUSTRY

1. In terms of Department of Electronics software policy announced in December, 1986, software development for domestic market is permitted to wholly owned Indian companies and companies having foreign equity upto 40 per cent. Companies with foreign equity exceeding 40 per cent are permitted only in 100% export projects. 2. Government have already liberalised the policy for foreign investment according to which automatic approval is given for investment upto 51 per cent

No. 10(68)/91-LP

foreign equity in high priority industries as listed in Annex III to this Ministry’s Press Notes No. 10, 11, 12 and 17 (1991 series) dated 14th August, 1991, 20th August, 1991, 31st August, 1991 and 19th November, 1991, respectively. Since software is a high priority industry, the facility of automatic approval for foreign technology agreement as well as for foreign investment approvals will be accorded to software industry, in terms of aforementioned Press Notes of this Ministry.

New Delhi, the 22nd April, 1992

Forwarded to Press Information Bureau for giving wide publicity to the contents of the above Press Note. Sd/(S.Bhavani) Deputy Secretary to the Government of India Principal Information Officer, Press Information Bureau, Shastri Bhawan, New Delhi.

EXHIBIT NO. 24 PRESS NOTE NO.6 (1992 Series) REMOVAL OF PROHIBITION ON USE OF FOREIGN BRAND NAMES/TRADE MARKS

1. Until recently, all LOIs and Foreign Collaboration Approvals issued by the Ministry of Industry, contained a condition prohibiting the use of any foreign brand name/trade mark on goods for sale within the country. This condition was not applicable in the case of exports. It has now been decided that henceforth no such condition would be imposed by this Ministry or RBI, while granting Letters of Intent/Foreign Collaboration Approvals.

No. 10(18)/92-LP

2. In all past cases, where such a condition was imposed in the LOIs/Foreign Collaboration approvals, the entrepreneur/company concerned, who desires formal deletion of the condition may take up the matter with the Secretariat for Industrial Approval, Department of Industrial Development, Ministry of Industry, Government of India, New Delhi.

New Delhi, the 14th May, 1992

Forwarded to Press Information Bureau for giving wide publicity to the contents of the above Press Note. Sd/(S.Bhavani) Deputy Secretary to the Government of India Principal Information Officer, Press Information Bureau, Shastri Bhawan, New Delhi.

54

Industrial Policy Highlights EXHIBIT NO. 25 PRESS NOTE NO.7 (1992 Series) DEEMED CONVERSION OF LETTERS OF INTENT ISSUED UNDER THE SCHEME OF 100% EXPORT ORIENTED UNITS INTO LETTERS OF PERMISSION

1. Under the scheme of 100% Export Oriented Units, Letters of Permission are issued for manufacture of an item(s) which is not covered under the First Schedule to the Industries (Development & Regulation) Act, 1951 or where the industry is exempted from the licensing provisions of the said Act. The Letter of Permission is issued with a validity period of three years to commence production. 2. With the announcement of the New Industrial Policy on 25th July, 1991, licensing has been abolished for all industries except for a short list of 18 industries, subject to permissible location. The question of conversion of Letters of Intent issued before 25th July, 1991 into Letters of Permission in the case of 100% Export Oriented Units for the industries now delicensed has been considered. With a view to simplify the administrative procedure and

No. 10(13)/92-LP

to obviate the need for industrial undertakings applying to the Administrative Ministry for conversion of Letters of Intent into Letters of Permission on a case to case basis, it has been decided that all the valid Letters of Intent issued prior to 25th July, 1991 for the industries which are now delicensed under the New Industrial Policy will be automatically deemed to be converted into Letters of Permission, subject to the same terms and conditions as laid down in the Letters of Intent. Validity period of these deemed converted Letters of Permission will be three years from the date of issue of the Letters of Intent. The industrial undertakings will be required to commence production within the validity period of three years and extension, if any, required in the commencement of commercial production will be granted by the Board for 100% EOU/Member Secretary, SIA.

New Delhi, the 19th May, 1992.

Forwarded to Press Information Bureau for giving wide publicity to the contents of the above Press Note.

Sd/(S. Behura) Joint Secretary to the Government of India Principal Information Officer, Press Information Bureau, Shastri Bhawan New Delhi.

55

CHAPTER - I EXHIBIT NO.26 PRESS NOTE NO.8(1992 Series) SUBMISSION OF MONTHLY PRODUCTION RETURNS

The procedure for availing of liberalised licensing facilities under the New Industrial Policy was laid down in this Ministry’s Press Note No. 9 (1991 series) dated 2nd August, 1991. In the case of exempted industries, industrial undertakings are required to file a Memorandum in the prescribed form to the Secretariat for Industrial Approvals (SIA), Ministry of Industry, as per procedure laid down in para 6 of the aforesaid Press Note. They are also required to file another Memorandum in the prescribed form with the SIA at the time of commencement of commercial production. Scheduled Industries (Submission of Production Return) Rules were notified by Government on 3rd May, 1979. According to these rules, all industrial undertakings are required to submit a monthly production return in the prescribed form attached to the Rules. In order to enable the Government to monitor the growth of production and utilisation of

No. 10(49)/91-LP

available capacities, it is hereby reiterated that all industrial undertakings whether they are exempted or not from the licensing provisions of the Industries (Development & Regulation) Act, 1951, are required to submit monthly production returns in time to the concerned technical authorities, namely, the DGTD, Iron and Steel Controller, Coal Controller, Directorate of Sugar, Directorate of Vanaspati, Vegetable Oil & Fats and the Textile Commissioner Bombay, as the case may be. A copy each of the production return shall be required to be submitted to concerned Administrative Ministry/Department also. In the case of small scale/ancillary industrial undertakings, the production return shall be submitted to the State Director or Commissioner of Industries and to the Department of Small Scale & Agro and Rural Industries (DCSSI) with a copy to Small Industries Service Institute.

New Delhi, the 20th May, 1992.

Forwarded to Press Information Bureau for giving wide publicity to the contents of the above Press Note.

Sd/(S. Behura) Joint Secretary to the Government of India Principal Information Officer, Press Information Bureau, Shastri Bhawan New Delhi.

56

Industrial Policy Highlights EXHIBIT NO. 27 PRESS NOTE NO.9 (1992 Series) INVESTMENT PROMOTION & PROJECT MONITORING CELL

1. An ‘Investment Promotion and Project Monitoring Cell’ commonly known as `Facilitation Cell’ has been set up in the Department of Industrial Development with effect from 7th May, 1992. The cell functions under the overall charge of the Member-Secretary, Secretariat for Industrial Approvals (SIA).

3. Current status of application for foreign investment, foreign technical collaboration, licensing etc. can be ascertained from the cell. The Facilitation Cell would also provide information to the entrepreneurs on the infrastructural facilities and incentives provided by various State Governments for setting up industries.

2. The Facilitation Cell attends to enquiries from entrepreneurs relating to a wide range of subjects like the licensing policy, tariff and duties, corporate taxation and company law. Nodal officers have been designated in Ministries such as Finance and Commerce and in the Reserve Bank of India (New Delhi and Bombay) and the Indian Investment Centre, New Delhi, to furnish clarifications on concerned matters. The Facilitation Cell will fix up meetings with the officers concerned at the entrepreneurs’ request.

4. Arrangements are being made to receive information from the State Governments through a computer network in coordination with the National Informatics Centre (NIC). The Cell would monitor the progress of implementation of various projects so as to facilitate grant of approvals at the State Government and other levels.

No. 10(23)/92-LP

5. The Entrepreneurs are invited to take advantage of these facilities. For the benefit of entrepreneurs, a list of the nodal offices in various ministries/ organisations is attached.

New Delhi, the 10th June, 1992.

Forwarded to Press Information Bureau for giving wide publicity to the contents of the above Press Note.

Sd/(S. Behura) Joint Secretary to the Government of India Principal Information Officer, Press Information Bureau, Shastri Bhawan New Delhi.

57

CHAPTER - I EXHIBIT NO.27(Contd.) PRESS NOTE NO.9 (1992 Series) INVESTMENT PROMOTION & PROJECT MONITORING CELL

NAMES, ADDRESSES AND TELEPHONE NUMBER OF OFFICERS CONNECTED WITH "INVESTMENT PROMOTION AND PROJECT MONITORING CELL" Tel. No.

Room No.

DEPARTMENT OF INDUSTRIAL DEVELOPMENT UDYOG BHAWAN NEW DELHI 1. Shri S. Behura, Joint Secretary

3011983

135

2. Shri A.E. Ahmed, Director, (Foreign Investment)

3016538

117

3. Shri Bimal Julka, Deputy Secretary, (Export Promotion, NRI Investments etc.)

3012794

271-A

4. Smt. Aditi S. Ray, Deputy Economic Adviser, (Industrial Approvals)

3013596

126-D

5. Smt. S. Bhavani, Director, (Industrial Policy)

3011714

256-A

DEPARTMENT OF ECONOMIC AFFAIRS NORTH BLOCK NEW DELHI. 1. Shri Navin Kumar, Director.

3015610 DEPARTMENT OF COMPANY AFFAIRS, SHASTRI BHAWAN NEW DELHI

1. Shri U.P. Mathur, Director 2. Shri V. Trivedi, Director

389172 3831080 CENTRAL BOARD OF DIRECT TAXES NORTH BLOCK NEW DELHI

1. Shri K.M. Sultan, Director (TPL)

3011765 CENTRAL BOARD OF EXCISE & CUSTOMS NORTH BLOCK NEW DELHI

1. Shri K.D. Manker, Director, (Tax Research Unit) 2. Shri K.D. Tyal, Commissioner (Drawback) 3. Shri J.K. Batra, Director (Customs)

3011634

311079 3013908

58

Industrial Policy Highlights EXHIBIT NO.27(Contd.) PRESS NOTE NO.9 (1992 Series) INVESTMENT PROMOTION & PROJECT MONITORING CELL

Tel. No.

Room No.

INDIAN INVESTMENT CENTRE JEEVAN VIHAR BUILDING SANSAD MARG NEW DELHI. 1. Shri D.P. Mittal, Senior Adviser (Taxation & Finance)

310938

2. Shri S.P. Kapur, Senior Adviser (NRIs & Engineering Industries)

311678

3. Shri S.K. Mitra, Senior Adviser (Direct Foreign Investment and Chemical Industries)

312626

4. Shri K.C.P. Nair, Adviser (Export Promotion and Engineering Industries)

310462

OFFICE OF CHIEF CONTROLLER OF IMPORTS & EXPORTS UDYOG BHAWAN NEW DELHI 1. Dr. R.K. Dhawan, Joint Chief Controller of Imports & Exports

3014801

R.B.I. CENTRAL OFFICE BUILDING 11TH FLOOR SHAHID BHAGAT SINGH ROAD BOMBAY 1. Shri Avinash Mishra, Joint Controller (ECD) 2. Shri V.S. Das, Deputy Controller (ECD)

2861672 Fax 2619330 2861602 (Ext 2242) RESERVE BANK OF INDIA SANSAD MARG NEW DELHI

1. Shri P.S. Arora, Joint Controller (ECD) 2. Shri H.R. Mehandiratta, Deputy Controller (ECD)

3714341 Fax 3711250 3714341

108

59

CHAPTER - I EXHIBIT NO. 28 PRESS NOTE NO.10L (1992 Series) REVISED LIST OF ANNEX-III ITEMS

1. Under the liberalised policy and procedures governing foreign investment and foreign technology agreements as per the New Industrial Policy, the list of industries eligible for automatic approval for technology agreements and for 51 per cent foreign equity approvals was published as Annex III to this Ministry's Press Notes No.10 and 11 (1991 Series) dated 14th August, 1991 and 20th August, 1991, respectively. 2. Some of the items under the ITC coding system falling under the generic descriptions did not find mention in the ITC list of Annex III. The extended list of these items was notified alongwith this Ministry’s Press Note no. 21 (1991 Series) dated 18th December, 1991.

No. 10(85)/91-LP

3. On further review of the items included in Annex III to the aforementioned Press Notes, the nomenclature in respect of certain items have been rationalised, certain items have been regrouped and some additional items have also been identified. The revised list of Annex III items for the purpose of automatic approval of foreign technology agreement and for 51 per cent foreign equity approvals in terms of this Ministry’s Press Notes referred to above and other Press Notes No. 12, 17 and 18 (1991 series) dated 31st August, 1991, 19th November, 1991, and 25th November, 1991, respectively, issued on foreign collaboration policy and procedure, is attached. All concerned may note for information and guidance.

New Delhi, the 24th June, 1992.

Forwarded to Press Information Bureau for giving wide publicity to the contents of the above Press Note.

Sd/( S. Bhavani ) Director Principal Information Officer, Press Information Bureau, Shastri Bhawan, New Delhi. Note:

L Press Note No.10(1992 Series) has been amended by Press Note No.14 (1997 Series)

60

Industrial Policy Highlights EXHIBIT NO. 28(Contd) PRESS NOTE NO.10(1992 Series) REVISED LIST OF ANNEX-III ITEMS

ANNEX III LIST OF INDUSTRIES FOR AUTOMATIC APPROVAL OF FOREIGN TECHNOLOGY AGREEMENTS AND FOR 51% FOREIGN EQUITY APPROVALS (In I.T.C. (HS) Classification) Note 1. This list is based on the Indian Trade Classification, which follows the Harmonized Commodity Description and Coding System, Government of India, Ministry of Commerce, Directorate General of Commercial Intelligence and Statistics, Calcutta. The code specified for the item description relates to this classification. Note 2. Items in respect of which approval of foreign technology agreements and of foreign equity is not automatic are: A. For Large and Medium Industries, The items reserved for the Small Scale Sector listed in Schedule III. B. For All Industries, i)

All items of electronic aerospace and defence equipment, whether specifically mentioned or not, in this list.

ii) All items related to the production or use of atomic energy including the carrying out of any process, preparatory or ancillary to such production or use, under the Atomic Energy Act, 1962. Note 3. The authentic description will be treated as specified in the item description given below. Where the description relates to a group of articles, all the sub-classifications superceding this description shall be taken as inclusive, unless specifically mentioned otherwise. Item Description. 1. METALLURGICAL INDUSTRIES. (i) Ferro alloys. 72.02

Ferro alloys.

(ii) Castings and forgings. 73.25

Other cast articles of iron or steel.

73.26

Other articles of iron or steel.

(iii) Non-ferrous metals and their alloys including aluminium foils. 74.01 to 74.14

Copper and articles thereof.

75.01 to 75.08

Nickel and articles thereof.

76.01 to 76.16

Aluminium and articles thereof.

78.01 to 78.06

Lead and articles thereof.

CHAPTER - I EXHIBIT NO. 28(Contd) PRESS NOTE NO.10(1992 Series) REVISED LIST OF ANNEX-III ITEMS

79.01 to 79.07

Zinc and articles thereof.

80.01 to 80.07

Tin and articles thereof.

81.01 to 81.13

Other base metals, cermets, articles thereof.

(iv) Sponge iron and pelletisation. 72.03

Ferrous products obtained by direct reduction or iron ore and other spongy ferrous products, in lumps, pellets or similar forms; iron having a minimum purity by weight of 99.94%, in lumps, pellets or similar forms.

(v) Iron and steel pipes and tubes and fittings thereof. 73.04

Tubes, pipes and hollow profiles, seamless, of iron and steel.

73.05

Other tubes and pipes (for exmaple, welded, riveted or similarly closed), having internal and external circular cross- sections, the external diameter of which exceeds 406.4 mm, of iron and steel.

73.06

Other tubes, pipes and hollow profiles, welded, of over 300 mm diameter, of iron and steel; and stainless steel pipes.

73.07

Tube or pipe fittings (for example, couplings, elbows, sleeves), of iron and steel, used solely or principally with headings No. 73.04 to 73.06.

(vi) Pig iron. 72.01

Pig iron and spiegeleisen in pigs, blocks or other primary forms.

72.05

Granules and powders, of pig iron, spiegeleisen, iron or steel,

72.06 to 72.29

Iron and steel including stainless steel;

2. BOILERS AND STEAM GENERATING PLANTS 84.02

Steam or other vapour generating boilers; super heated water boilers.

84.03

Central heating boilers.

84.04

Auxillary plant for use with boilers of heading No. 84.02 or 84.03 (for example, economisers, super-heaters, soot removers, gas recoverers); condensers for steam or other vapour power units.

84.05

Producer gas or water gas generators, with or without their purefiers, acetylene gas generators and similar water process gas generators, with or without their purifiers.

3. PRIME MOVERS (OTHER THAN ELECTRICAL GENERATORS) (i) Industrial turbines. 84.10

Hydraulic turbines, water wheels, and regulators thereof.

61

62

Industrial Policy Highlights EXHIBIT NO. 28(Contd) PRESS NOTE NO.10(1992 Series) REVISED LIST OF ANNEX-III ITEMS

ii)

Internal combustion engines. 84.07

Spark-ignition reciprocating or rotary internal combustion piston engines.

84.08

Compression-ignition internal combustion piston engines (diesel or semi-diesel engines).

84.09

Parts suitable for use solely or principally with the engines of heading No. 84.07 or 84.08.

85.11

Electrical ignition or starting equipment of a kind used for spark-ignition or compression ignition internal combustion engines, generators and cut-outs.

(iii) Alternate energy systems like solar, wind, etc., and equipments therefor. 84.12

Other engines and motors.

854140.01 Solar Cells, panels, modules. Not Speci- Wind mills, accesories and parts thereof. fically codified (iv) Gas/hydro/steam turbines. 84.06

Steam turbines and other vapour turbines.

84.11

Turbo-jets, turbo propellers and other gas turbines.

4. ELECTRICAL EQUIPMENT (i) Equipment for transmission and distribution of electricity including power and distribution transformers, power relays, HT-switch gear, synchronous condensers. 85.30

Electrical signalling, safety or traffic control equipment for Railways, tramways, roads, inland water-ways, parking facilities, port installations or air fields (other than those of heading 86.08)

85.31

Electrical sound or visual signalling apparatus (for example, bells, sirens, indicator panels, burglar or fire alarms), other than those of heading No. 85.12 or 85.30.

85.35

Electrical apparatus for switching or protecting electrical circuits, or for making connections to or in electrical circuits (for example, switches, fuses, lightning arresters, voltage limiters, surge suppressors, plugs, junction boxes), for a voltage exceeding 1,000 volts.

85.36

Electrical apparatus for switching or protecting electrical circuits, or for making connections to or in electrical circuits (for example, switches, relays, fuses, surge suppressors, plugs, sockets, lamp-holders, junction boxes), for a voltage not exceeding 1,000 volts.

85.37

Boards, panels (including numerical control panels), consoles, desks, cabinets and other bases, equipped with two or more apparatus of heading Nos. 85.35 or 85.36 for electric control or the distribution of electricity, other than switching apparatus of heading No. 85.17.

85.38

Parts suitable for use solely or principally with the apparatus of heading No. 85.35, 85.36 or 85.37.

85.44

Insulated (including enamelled or anodised) wire, cable (including co-axial cable) and other insulated electric conductors, whether or not fitted with connectors; optical fibre cables, made up of individually sheathed fibres, whether or not assembled with electric conductors or fitted with connectors.

85.46

Electrical insulators of any materials.

CHAPTER - I EXHIBIT NO. 28(Contd) PRESS NOTE NO.10(1992 Series) REVISED LIST OF ANNEX-III ITEMS

85.47

Insulating fitting for electrical machines, appliances or equipment, being fittings wholly of insulating material apart from any minor components of metal (for example, threaded sockets) incorporated during moulding solely for purposes of assembly, other than insulators of heading No. 85.46; electrical conduit tubing and joints therefor, of base metal lined with insulating material.

(ii) Electrical motors. 85.01

Electric motors and generators (excluding generating sets).

85.03

Parts suitable for use solely or principally with the machines of heading No. 85.01.

(iii) Electrical furnaces, industrial furnaces and induction heating equipment. 84.16

Furnace burners for liquid fuel, for pulverised solid fuel or for gas; mechanical stokers, mechanical grates, mechanical ash dischargers and similar appliances.

85.04

Electrical transformers, static converters (for example, rectifiers) and inductors.

85.14

Industrial or laboratory electric (including induction or dielectric) furnaces and ovens; other industrial or laboratory induction or dielectric heating equipment.

(iv) X-ray equipment. 9022.11

Apparatus based on the use of x-rays, for medical, surgical, dental or veterinary uses.

9022.19

Apparatus based on the use of x-rays for other uses.

902230.00 X-ray tubes. 902290.01 X-ray valves. 902290.02 Parts of X-ray apparatus. (v) Electronic equipment, components including subscribers’ end telecommuni-cation equipments. 84.69

Typewriters and word-processing machines.

84.70

Calculating machines; accounting machines, cash registers, postage franking machines, ticket issuing machines and similar machines, incorporating a calculating device.

84.71

Automatic data processing machines and units thereof; magnetic or optical readers, machines for transcribing data onto data media in coded form and machines for processing such data, not elsewhere specified or included.

84.73

Parts and accessories (other than covers, carrying cases and the like) suitable for use solely or principally with machines of heading nos. 84.69 to 84.71.

85.17

Electrical apparatus for line telephony or line telegraphy, including such apparatus for carrier-current line systems. Parts and accessories of apparatus of heading Nos. 85.19 to 85.21. Transmission apparatus for radio telephony, radio telegraphy, radio broadcasting or television, whether or not incorporating reception apparatus or sound recording or reproducing apparatus; television cameras. Radar apparatus, radio navigational aid apparatus and radio remote control apparatus.

85.22 85.25

85.26 85.27

Reception apparatus for radio-telephony, radio-telegraphy, or radio-broadcasting, whether or not combined in the same housing, with sound recording or reproducing apparatus or a clock.

63

64

Industrial Policy Highlights EXHIBIT NO. 28(Contd) PRESS NOTE NO.10(1992 Series) REVISED LIST OF ANNEX-III ITEMS

(vi)

85.29

Parts suitable for use solely or principally with the apparatus of heading nos. 85.25 to 85.28.

85.32

Electrical capacitors, fixed, variable or adjustable (pre-set).

85.33

Electrical resistors (including rheostats and potentiometers), other than heating resistors.

85.34

Printed circuits.

85.40

Thermionic, cold cathode or photo cathode valves and tubes (for example, vacuum or vapour or gas filled valves and tubes, mercury arc rectifying valves and tubes, cathode-ray tubes, television camera tubes).

85.41

Diodes, transistors and similar semi conductor devices; photosensitive semi conductor devices, including photovoltaic cells whether or not assembled in modules or made up into panels; light emitting diodes; mounted piezo-electric crystals.

85.42

Electronic integrated circuits and micro assemblies.

90.07

Cinematographic cameras and projectors, whether or not incorporating sound recording or reproducing apparatus.

90.08

Image projectors, other than cinemato-graphic; photographic (other than cinematographic) enlargers and reducers.

Component wires for manufacture of lead-in-wires. 854420.29

(vii)

Hydro/steam/gas generators/generating sets. 8502.30

(viii)

(ix)

84.13

Pumps for liquids, whether or not fitted with a measuring device; liquid elevators.

84.14

Air or vacuum pumps.

85.02

Electric generating sets.

85.03

Parts suitable for use solely or principally with the machines of heading No. 85.02.

Jelly filled telecommunication cables.

900110.00

Optical fibre cables. Optical fibres, optical fibre bundles and cables.

Energy efficient lamps. 85.39

(xii)

Jelly-filled cables.

Optic fibre. 8544.70

(xi)

Hydro/steam/gas generators/generating sets.

Generating sets and pumping sets.

854420.29 (x)

Component wires for manufacture of lead-in- wires.

Energy efficient electric filament or discharge lamps, including sealed beam lamp units and ultra-violet or infra-red lamps; arc-lamps.

Midget carbon electrodes. 85.45

Electrodes of carbon, midget.

CHAPTER - I EXHIBIT NO. 28(Contd) PRESS NOTE NO.10(1992 Series) REVISED LIST OF ANNEX-III ITEMS

5. TRANSPORTATION. (i) Mechanised sailing vessels upto 10,000 DWT including fishing trawlers. 89.01

Cruise ships, excursion boats, ferry boats, cargo ships, barges, and similar vessels for the transport of persons or goods (upto 10,000 DWT).

89.02

Fishing vessels; factory ships and other vessels for processing or preserving fishery products (upto 10,000 DWT).

89.04

Tugs and pusher craft (upto 10,000 DWT).

(ii) Ship ancillaries. 848510.00

Ship’s propellers and blades therefor; other ship ancillaries.

(iii) (a) Commercial vehicles, public transport vehicles including automotive commercial three wheelers, jeep type vehicles, industrial locomotives. 87.02 87.03 87.04 87.05 87.09

Public transport type passenger motor vehicles. Motor vehicles, other than motor cars and racing cars, principally designed for the transport of persons. Motor vehicles for the transport of goods. Special purpose motor vehicles, other than those principally designed for the transport of persons or goods. Works trucks, self-propelled, not fitted with lifting or handling equipment, of the type used in factories, warehouses, dock-areas, or airports for short distance transport of goods; tractors of the type used on railway station platforms; parts of the foregoing vehicles.

(b) Personal transport vehicles, automotive two-wheelers and three-wheelers. 87.11

Motor cycles (including mopeds) and cycles fitted with an auxiliary motor, with or without side cars; side-cars.

(c) Automotive components/spares and ancillaries. 85.12

Electrical lights or other signalling equipment, windscreen wipers, defrosters and demisters, of a kind used for motor vehicles.

87.06

Chassis fitted with engines for motor vehicles for headings No. 87.01 to 87.05.

87.07

Bodies (including cabs), for motor vehicles of headings No. 87.01, 87.02, 87.04 and 87.05.

87.08

Parts and accessories of the motor vehicles of headings No. 87.01 to 87.05.

(iv) Railway equipment. 86.05 Railway equipment to 86.09 6. INDUSTRIAL MACHINERY (i) Industrial machinery and equipment. 84.17

Industrial or laboratory furnaces and ovens, including incinerators, non-electric.

84.19

Machinery, plant or laboratory equipment, whether or not electrically heated, for the treatment of materials by a process involving a change of temperature such as heating, cooking, roasting, distilling, rectifying, sterlising, pasteurising, steaming, drying, evaporating, vaporising, condensing or cooling, other than machinery or plant of a kind used for domestic purposes; instantaneous or storage water heaters, non-electric.

65

66

Industrial Policy Highlights EXHIBIT NO. 28(Contd) PRESS NOTE NO.10(1992 Series) REVISED LIST OF ANNEX-III ITEMS

84.20

Calendering or other rolling machines, other than for metals or glass and cylinders therefor.

84.21

Centrifuges, including centrifugal dryers; filtering or purifying machinery and apparatus, for liquids or gases.

84.22

Dish washing machines (other than those of the household type); machinery for cleaning or drying bottles or other containers; machinery for filling, closing, sealing, capsuling or labelling bottles, cans, boxes, bags or other containers; other packing or wrapping machinery; machinery for aerating beverages.

84.23

Weighing machinery (excluding balances of a sensitivity of 5 cg or better), including weight operated counting or checking machines; weighing machine weights of all kinds.

84.24

Mechanical appliances for projecting, dispersing or spraying liquids or powders; fire extinguishers, whether or not charged; spray guns and similar appliances; steam or sand blasting machines and similar jet projecting machines.

84.25

Pulley tackle and hoists other than skip hoists; winches and capstans; jacks.

84.26

Derricks; cranes, including cable cranes; mobile lifting frames, straddle carriers and works trucks fitted with a crane.

84.27

Fork-lift trucks; other works trucks fitted with lifting or handling equipment.

84.28

Other lifting, handling, loading or unloading machinery (for example, lifts, escalators, conveyors, teleferics).

84.31

Parts suitable for use solely or principally with the machinery of headings No. 84.25 to 84.30.

84.34

Milking machines and dairy machinery.

84.35

Presses, crushers and similar machinery used in the manufacture of wine, cider, fruit juices, or similar beverages.

84.38

Machinery, not specified or included elsewhere, for the industrial preparation or manufacture of food or drink, other than machinery for the extraction or preparation of animal or fixed vegetable fats of oils.

84.39

Machinery for making pulp of fibrous cellulosic material or for making or finishing paper or paperboard.

84.40

Book-binding machinery, including book-sewing machines.

84.41

Other machinery for making up paper pulp, paper or paperboard, including cutting machines of all kinds.

84.44

Machines for extruding, drawing, texturing or cutting man-made textile materials.

84.45

Machines for preparing textiles fibres; spinning, doubling or twisting machines and other machinery for producing textile yarns; textile reeling or winding (including weft- winding) machines and machines for preparing textile yarns for use on the machines of heading No. 84.46 or 84.47.

84.46

Weaving machines (looms).

84.47

Knitting machines, stitch-bonding machines and machines for making gimped yarn, tulle, lace, embroidery, trimmings, braid or net and machines for tufting.

CHAPTER - I EXHIBIT NO. 28(Contd) PRESS NOTE NO.10(1992 Series) REVISED LIST OF ANNEX-III ITEMS

84.48

Auxillary machinery for use with machines of heading No. 84.44, 84.45, 84.46 or 84.47 (for example, dobbies, jacquards, automatic stop motions, shuttle changing mechanisms); parts and accessories suitable for use solely or principally with the machines of this heading or of heading No. 84.44, 84.45, 84.46 or 84.47(for example, spindles and spindle flyers, card clothing, combs, extruding nipples, shuttles, healds and heald-frames, hosiery needles)

84.49

Machinery for the manufacture of finishing of felt or non-wovens in the piece or in shapes, including machinery for making felt hats; blocks for making hats.

84.51

Machinery (other than machines of heading No. 84.50) for washing, cleaning, wringing, drying, ironing, pressing (including fusing presses), bleaching, dyeing, dressing, finishing, coating or impregnating textile yarns, fabrics or made up textile articles and machines for applying the paste to the base fabric or other support used in the manufacture of floor coverings such as linoleum; machines for reeling, unreeling, folding, cutting or pinking textile fabrics.

845221.00

Sewing machines, automatic units, other than of the household type.

84.53

Machinery for preparing, tanning or working hides, skins or leather or for making or repairing footwear or other articles of hides, skins or leather, other than sewing machines.

84.54

Converters, ladles, ingot moulds and casting machines, of a kind used in metallurgy or in metal foundries.

84.55

Metal-rolling mills and rolls therefor.

84.68

Machinery and apparatus for soldering, brazing or welding, whether or not capable of cutting, other than those of heading no. 85.15; gas operated surface tampering machines and appliances.

84.74

Machinery for sorting, screening, separating, washing, crushing, grinding, mixing or kneading earth, stone, ores or other mineral substances, in solid (including powder or paste) form; machinery for agglomerating, shaping or moulding solid mineral fuels, ceramic paste, unhardened cements, plastering materials or other mineral products in powder or paste form; machines for forming foundry moulds of sand.

84.75

Machines for assembling electric or electronic lamps, tubes or valves or flash-bulbs, in glass envelopes; machines for manufacturing or hot working glass or glassware.

84.78

Machinery for preparing or making up tobacco, not specified or included elsewhere.

84.79

Machines and mechanical appliances having individual functions, not specified or included elsewhere.

84.81

Taps, cocks, valves and similar appliances for pipes, boiler shells, tanks, vats or the like, including pressure-reducing valves and thermostatically controlled valves.

84.82

Ball or roller bearings.

84.83

Transmission shafts (including cam shafts and crank shafts) and cranks; bearing housings and plain shaft bearings; gears and gearing; ball screws; gear boxes and other speed changers, including torque converters; flywheels and pulleys, including pulley blocks; clutches and shaft couplings (including universal joints).

84.84

Gaskets and similar joints of metal sheeting combined with other material or of two or more layers of metals; sets or assortments of gaskets and similar joints, dissimilar in composition, put up in pouches, envelopes or similar packings.

67

68

Industrial Policy Highlights EXHIBIT NO. 28(Contd) PRESS NOTE NO.10(1992 Series) REVISED LIST OF ANNEX-III ITEMS

85.05

7.(i)

Electromagnets; permanent magnets and articles intended to become permanent magnets after magnetisation; electromagnetic or permanent magnet chucks, clamps and similar holding devices; electromagnetic couplings, chuches and brakes; electromagnetic lifting heads.

Machine tools and industrial robots and their controls and accessories. 84.56

Machine-tools for working any material by removal of material, by laser or other light or photon beam, ultrasonic, electro- discharge, electro-chemical, electron beam, ionic-beam or plasma arc processes.

84.57

Machining centres, unit construction machines (single station) and multi-station transfer machines, for working metal.

84.58

Lathes for removing metal.

84.59

Machine-tools (including way-type unit head machines) for drilling, boring, milling, threading or tapping by removing metal, other than lathes of heading No. 84.58.

84.60

Machine-tools for deburring, sharpening, grinding, honing, lapping, polishing or otherwise finishing metal, sintered metal carbides or cermets by means of grinding stones, abrasives or polishing products, other than gear cutting, gear grinding or gear finishing machines of heading No. 84.61

84.61

Machine-tools for planing, shaping, slotting, broaching, gear cutting, gear grinding or gear finishing, sawing, cutting-off and other machine-tools for working by removing metal, sintered metal carbides or cermets, not elsewhere specified or included.

84.62

Machine-tools (including presses) for working metal by forging, hammering or die stamping; machine-tools (including presses) for working metal by bending, folding, straightening, flattening, shearing, punching or notching; presses for working metal or metal carbides, not specified above.

84.63

Other machine-tools for working metal, sintered metal carbides or cermets, without removing material.

84.64

Machine tools for working stone, ceramics, concrete, asbestos-cement or like mineral materials or for cold working glass.

84.65

Machine-tools (including machines for nailing, stapling, glueing or otherwise assembling) for working wood, cork, bone, hard rubber, hard plastics or similar hard materials.

85.08

Electromechanical tools for working in the hand, with self contained electric motor.

85.15

Electric(including electrically heated gas), laser or other light or photon beam, ultrasonic, electron beam, magnetic pulse or plasma arc, soldering, welding or brazing machines and apparatus, whether or not capable of cutting; electric machines and apparatus for hot spraying of metals or sintered metal carbides.

(ii) Jigs, fixtures, tools and dies of specialised types and cross land tooling. 84.66

Parts and accessories suitable for use solely or principally with the machines of headings Nos. 84.56 to 84.65, including work or tool holders, self-opening dieheads, dividing heads and other special attachments for machine-tools; tool holders for any type of tool for working in the hand.

84.67

Tools for working in the hand, pneumatic or with self contained non-electric motor.

CHAPTER - I EXHIBIT NO. 28(Contd) PRESS NOTE NO.10(1992 Series) REVISED LIST OF ANNEX-III ITEMS

(iii)

Engineering production aids such as cutting and forming tools, patterns and dies and mining tools. 82.01

Handtools, the following: spades, showels, mattocks, picks, hoes, forks and rakes; axes, bill hooks and similar hewing tools; secateurs of any kind; scythes, sickles, hay-knives, hedge-shears, timber wedges and tools of a kind used in agriculture, horticulture or forestry.

82.02

Hand saws; blades for saws of all kinds (including slitting, slotting, or toothless saw blades).

82.03

Files, rasps, pliers (including cutting pliers), pincers, tweezers, metal cutting shears, pipe cutters, bolt croppers, perforating punches and similar hand tools.

82.04

Hand operated spanners and wrenches (including torque meter wrenches but not including tap wrenches); inter-changeable spanner sockets, with or without handles.

82.05

Hand tools (including glaziers’ diamonds), not elsewhere specified or included; blow lamps; vices, clamps and the like, other than accessories for and parts of, machine tools; anvils; portable forges; hand or pedal-operated grinding wheels with frameworks.

82.07

Interchangeable tools for hand tools, whether or not power operated, or for machine tools (for example for pressing, stamping, punching, tapping, threading, drilling, boring, broaching, milling, turning or screw driving), including dies for drawing or extruding metal, and rock drilling or earth boring tools.

82.08

Knives and cutting blades, for machines or for mechanical appliances.

82.09

Plates, sticks, tips and the like for tools, unmounted, of sintered metal carbides or cermets.

84.80

Moulding boxes for metal foundry; mould bases; moulding patterns; moulds for metal (other than ingot moulds), metal carbides, glass, mineral materials, rubber of plastics.

8. AGRICULTURAL MACHINERY (i) Tractors. 87.01

Tractors.

(ii) Self propelled harvestor combines. 843351.00

Combine harvester threshers, self propelled.

(iii) Rice transplanters. 843230.00

Rice transplanters.

9. EARTH MOVING MACHINERY (i) Earth moving machinery and construction machinery and components thereof. 84.29

Self-propelled buldozers, angledozers, graders, levellers, scrappers, mechanical shovels, excavators, shovel loaders, tamping machines and road rollers.

84.30

Other moving, grading, levelling, scrapping, excavating, tamping compacting, extracting or boring machinery, for earth, minerals or ores; pile-drivers and pileextractors; snow-ploughs and snow-blowers.

69

70

Industrial Policy Highlights EXHIBIT NO. 28(Contd) PRESS NOTE NO.10(1992 Series) REVISED LIST OF ANNEX-III ITEMS

10. INDUSTRIAL INSTRUMENTS. (i) Indicating, recording and regulating devices for pressure, temperature, rate of flow weights levels and the like. 90.24

Machines and appliances for testing the hardness, strength, compressibility, elasticity or other mechanical properties of materials (for example, metals, wood, textiles, paper, plastics).

90.25

Hydrometers and similar floating instruments, thermometers, pyrometers, barometers, hygrometers and prychrometers, recording or not, and any combination of these instruments.

90.26

Instruments and apparatus for measuring or checking the flow, level, pressure or other variables of liquids or gases (for example, flow meters, level gauges, manometers, heat meters), excluding instruments and apparatus of heading No. 90.14, 90.15, 90.28 or 90.32.

90.27

Instruments and apparatus for physical or chemical analysis (for example, polarimeters, refractometers, spectrometers, gas or smoke analysis apparatus); instruments and apparatus for measuring or checking viscosity, porosity, expansion, surface tension or the like; instruments and apparatus for measuring or checking quantities of heat, sound or light (including exposure meters); microtomes.

90.28

Gas, liquid or electricity supply or production meters including calibrating meters therefor.

90.29

Revolution counters, production counters, taximeters, mileometers, pedometers and the like; speed indicators and tachometers, other than those of heading No. 90.15; stroboscopes.

90.30

Oscilloscopes, spectrum analysers and other instruments and apparatus for measuring or checking electrical quantities, excluding meters of heading No. 90.28; instruments and apparatus for measuring or detecting alpha, beta, gamma, x-ray, cosmic or other ionising radiations.

90.31

Measuring or checking instruments, appliances and machines, not specified or included elsewhere; profile projectors.

90.32

Automatic regulating or controlling instruments and apparatus.

90.33

Parts and accessories (not specified elsewhere or included) for machines, of heading nos. 90.11 to 90.32.

11. SCIENTIFIC AND ELECTROMEDICAL INSTRUMENTS AND LABORATORY EQUIPMENT 85.43

Electrical machines and apparatus, having individual functions, not specified or included elsewhere.

90.05

Binoculars, monoculars, other optical telescopes, and mountings therefor; other astronomical instruments and mountings therefor, but not including instruments for radio-astronomy.

9006.10

Cameras of a kind used for preparing printing plates or cylinders.

9006.20

Cameras of a kind used for recording documents on microfilm, microfiche other microforms.

9006.30

Cameras specially designed for under water use, for aerial survey or for medical or surgical examination of internal organs, comparison cameras for forensic or criminology purposes.

or

CHAPTER - I EXHIBIT NO. 28(Contd) PRESS NOTE NO.10(1992 Series) REVISED LIST OF ANNEX-III ITEMS

9006.91

Parts and accessories for items listed above under the heading of 9006.10 to 9006.30

90.10

Apparatus and equipment for photographic (including cinematographic) laboratories (including apparatus for the projection of circuit patterns or sesitiated semi conductor materials), not specified or included elsewhere in this Chapter; negatoscopes; projection screens.

90.11

Compound optical microscopes, including those for micro photography, micro cinematography or micro projection.

90.12

Microscopes other than optical microscopes; diffraction apparatus.

90.13

Liquid crystal devices not constituting articles provided for more specifically in other headings; lasers, other than laser diodes; other optical appliances and instruments, not specified or included elsewhere.

90.14

Direction finding compasses; other navigational instruments and appliances.

90.15

Surveying (including photogrammetrical surveying), hydrographic, oceanographic, hydrological, meterological or geophysical instruments and appliances, excluding compasses; range-finders.

90.16

Balances of a sensitivity of 5 cg or better, with or without weights.

90.17

Drawing, marking-out or mathematical calculating instruments (for example, drafting machines, panto graphs, protractors, drawing sets, slide rules, disc calculators); instruments for measuring length, for use in the hand (for example, measuring rods and tapes, micrometers, callipers), not specified or included elsewhere.

90.18

Instruments and appliances used in medical, surgical, dental or veterinary sciences, including scintigraphic apparatus, other electro-medical apparatus and sight-testing instruments.

90.19

Medical equipments.

to 90.21 902221.00

Apparatus based on the use of alpha, beta or gamma radiations, for medical, surgical, dental or veterinary uses.

902229.00

Apparatus based on the use of alpha, beta or gamma radiations, for other uses.

12. NITROGENOUS AND PHOSPHATIC FERTILIZERS FALLING UNDER (i) Inorganic fertilizers under `18-Fertilizers’ in the First Schedule to IDR Act, 1951. 31.02

Mineral or chemical fertilisers, nitrogenous.

31.03

Mineral or chemical fertilisers, phosphatic.

13. CHEMICALS (OTHER THAN FERTILIZERS) (i) Organic chemicals. 29.01 Acyclic hydrocarbons. 29.02

Cyclic hydrocarbons.

29.03

Halogenated derivatives of hydrocarbons.

29.04

Sulphonated, nitrated or nitrosated derivatives of hydrocarbons, whether or not halogenated.

29.05

Acyclic alcohols and their halogenated, sulphonated, nitrated or nitrosated derivatives.

71

72

Industrial Policy Highlights EXHIBIT NO. 28(Contd) PRESS NOTE NO.10 (1992 Series) REVISED LIST OF ANNEX-III ITEMS

29.06

Cyclic alcohols and their halogenated, sulphonated, nitrated or nitrosated derivatives.

29.07

Phenols; phenol alocohols.

29.08

Halogenated, sulphonated, nitrated or nitrosated derivatives of phenols or phenolalcohol.

29.09

Ethers, ether-alcohols, ether-phenols, ether-alcohol-phenols, alcohol pero-xides, ether peroxides, ketone peroxides (whether or not chemically defined), and their halogenated, sulphonated, nitrated or nitrosated derivatives.

29.10

Epoxides, epoxyalcohols, epoxy-phenols and epoxyethers, with a three-membered ring and their halogenated, sulphonated, nitrated or nitrosated derivatives.

29.11

Acetals and hemiacetals, whether or not with other oxygen function, and their halogenated, sulphonated, nitrated or nitrosated derivatives.

29.12

Aldehydes, whether or not with other oxygen function; cyclic polymers of aldehydes; paraformaldehyde.

29.13

Halogenated, sulphonated, nitrated or nitrosated derivatives of products of heading No. 29.12.

29.14

Ketones and quinones, whether or not with other oxygen function, and their halogenated, sulphonated, nitrated or nitrosated derivatives.

29.15

Saturated acyclic monocarboxylic acids and their anhydrides, halides, peroxides and peroxy-acids; their halogenated, sulphonated, nitrated or nitrosated derivatives.

29.16

Unsaturated acyclic monocarboxylic acids, cyclic monocarboxylic acids, their anhydrides, halides, peroxides and peroxyacids; their halogenated, sulphonated, nitrated or nitrosated derivatives.

29.17

Polycarboxylic acids, their anhydrides, halides, peroxides and peroxyacids; their halogenated, sulphonated, nitrated or nitrosated derivatives.

29.18

Carboxylic acids with additional oxygen function and their anhydrides, halides, peroxides and peroxyacids; their halogenated, sulphonated, nitrated or nitrosated derivatives.

29.19

Phosphoric esters and their salts, including lactophosphates; their halogenated, sulphonated, nitrated or nitrosated derivatives.

29.20

Esters of other inorganic acids (excluding esters of hydrogen halides) and their salts; their halogenated, sulphonated, nitrated or nitrosated derivatives.

29.21

Amine-function compounds.

29.22

Oxygen-function amino-compounds.

29.23

Quaternary ammonium salts and hydroxides; lecithins and other phosphoaminolipids.

29.24

Carboxyamide-function compounds; amide-function compounds of carbonic acid.

29.25

Carboxyimide-function compounds (including saccharin and its salts) and iminefunction compounds.

29.26

Nitrile-function compounds.

29.27

Diazo-, azo- or azoxy-compounds.

CHAPTER - I EXHIBIT NO. 28(Contd) PRESS NOTE NO.10 (1992 Series) REVISED LIST OF ANNEX-III ITEMS

29.28 2929.10 292990.00

Organic derivatives of hydrazine or of hydroxylamine. Isocynate other than methyl isocynate. Compounds with other nitrogen function, other than isocyanates.

29.30

Organo-sulphur compounds.

29.31

Other organo-inorganic compounds.

29.32

Heterocyclic compounds with oxygen hetero- atom (s) only.

29.33

Heterocyclic compounds with nitrogen hetero- atom(s) only; nucleic acids and their salts.

29.34

Other heterocyclic compounds.

29.35

Sulphonamides.

29.40

Sugars, chemically pure, other than sucrose, lactose, maltose, glucose and fructose; sugar ethers and sugar esters and their salts, other than products of heading nos. 29.37 to 29.39.

29.42

Other heavy and fine organic compounds, not elsewhere specified.

(ii) Inorganic chemicals. 28.01

Fluoreine, Chlorine, Bromine and Iodine.

28.03

Carbon (carbon blacks and other forms of carbon not elsewhere specified or included).

28.06

Hydrogen Chloride (hydrochloric acid); Chlorosulphuric acid.

28.07

Sulphuric acid; Oleum.

28.08

Nitric acid; sulphonitric acid.

28.09

Diphosphorus pentaoxide; phosphoric acid and polyphosphric acids.

28.14

Ammonia, anhydrous or in aqueous solution.

28.15

Sodium hydroxide (caustic soda); potassium hydroxide (caustic potash); peroxides of sodium or potassium.

282300.01

Titanium Dioxide, anatase type.

282300.02

Titanium Dioxide, Rutile type.

28.25

Hydrazine and hydroxylamine and their inorganic salts; other inorganic bases; other metal oxides, hydroxides and peroxides.

28.26

Fluorides, fluorosilicates, fluoroaluminates and other complex fluorine salts.

28.27

Chlorides, chloride oxides and chloride hydroxides; bromides and bromide oxides; iodides and iodide oxides.

28.28

Hypochlorites; commercial calcium hypochlorite; chlorites; hypobromites.

28.29

Chlorates and perchlorates; bromates and perbromates; iodates and periodates.

28.30

Sulphides; polysulphides.

73

74

Industrial Policy Highlights EXHIBIT NO. 28(Contd) PRESS NOTE NO.10(1992 Series) REVISED LIST OF ANNEX-III ITEMS

28.31

Dithiomites and sulphoxylates.

28.32

Sulphites; thiosulphates.

28.33

Sulphates; alums; peroxosulphates (persulphates).

28.34

Nitrites; nitrates.

28.35

Phosphinates (hypophosphites), phosphonates (phosphites), phosphates and polyphosphates.

28.36

Carbonates; peroxocarbonates (percarbonates); commercial ammonium carbonate containing ammonium carbamate.

28.37

Cyanides, cyanideoxides and complex cyanides.

28.39

Silicates; commercial alkali metal silicates.

28.40

Borates; peroxoborates (perborates).

28.41

Salts of oxometallic or peroxometallic acids.

28.42

Other salts of inorganic acids or peroxoacids excluding azides.

28.47

Hydrogen peroxide, whether or not solidified with urea.

28.48

Phosphides, whether or not chemically defined, excluding ferro-phosphorus.

28.49

Carbides, whether or not chemically defined.

28.50

Hydrides, nitrides, azides, silicides and borides, whether or not chemically defined.

28.51

Other inorganic compounds (including distilled or conductivity water and water of similar purity ); liquid air (whether or not rare gases have been remo-ved); compressed air; amalgams, other than amalgams of precious metals.

(iii) Synthetic resins and plastics. 39.01

Polymers of ethylene, in primary forms.

39.02

Polymers of propylene or of other olefins, in primary forms.

39.03

Polymers of styrene, in primary forms.

39.04

Polymers of vinyl chloride or of other halogenated olefins, in primary forms.

39.05

Polymers of vinyl acetate or of other vinyl esters, in primary forms; other vinyl polymers in primary forms.

39.06

Acrylic polymers in primary forms.

39.07

Polyacetals, other polyethers and epoxide resins, in primary forms; polycarbonate, alkyd resins, polyallyl esters and other polyesters, in primary forms.

39.08

Polyamides, in primary forms.

39.09

Amino-resins, phenol resins and polyurethane, in primary forms.

39.10

Silicones, in primary forms.

39.11

Petroleum resins, coumarone-indene resins, polyterpenes, polysulphides, polysulphones and other products, not elsewhere specified or included, in primary forms.

CHAPTER - I EXHIBIT NO. 28(Contd) PRESS NOTE NO.10(1992 Series) REVISED LIST OF ANNEX-III ITEMS

39.12

Cellulose and its chemical derivatives, not elsewhere specified or included, in primary forms.

39.14

Ion-exchangers based on polymers of headings Nos. 39.01 to 39.12, in primary forms.

(iv) Man made fibres. 54.02

Synthetic filament yarn (other than sewing thread) not put up for retail sale including synthetic mono filament of less than 67 decitex.

54.03

Artificial filament yarn (other than sewing thread) not putup for retail sale including artificial mono filament of less than 67 decitex.

54.04

Synthetic monofilament of 67 decitex or more and of which no-cross sectional dimension exceeds 1mm; strip and the like (for example, artificial straw) of synthetic textile materials of an apparent width not exceeding 5 mm.

54.06

Artificial monofilament of 67 decitex or more and of which no-cross sectional dimension exceeds 1mm; strip and the like (for excample, artificial straw) of artificial textile materials of an apparent width not exceeding 5 mm.

54.05

Man-made filament yarn (other than sewing thread) put up for retail sale.

55.01

Synthetic filament tow.

55.02

Artificial filament tow.

55.03

Synthetic staple fibres, not carded, combed or otherwise processed for spinning.

55.04

Artificial staple fibres, not carded, combed or otherwise processed for spinning.

55.06

Synthetic staple fibres, carded, combed or otherwise processed for spinning.

55.07

Artificial staple fibres, carded, combed or otherwise processed for spinning.

(v) Synthetic rubber. 40.02

Synthetic rubber and factice derived from oils, in primary forms or in plates, sheets or strip; mixtures of any product of heading No. 40.01 with any product of this heading, in primary forms or in plates, sheets or strip.

(vi) Industrial explosives. 36.02

Prepared explosives, other than propellent powders.

36.03

Safety fuses; detonating fuses; percussion or detonating caps; igniters, electric detonators.

(vii) Technical grade insecticides, fungicides, weedicides, and the like. 38.08

Insecticides, rodenticides, fungicides, herbicides, anti-sprouting products and plantgrowth regulators, disinfectants and similar products, put up in forms or packings for retail sale or as preparations or articles (for example, sulphur-treated bands, wicks and candles, and fly-papers).

75

76

Industrial Policy Highlights EXHIBIT NO. 28(Contd) PRESS NOTE NO.10(1992 Series) REVISED LIST OF ANNEX-III ITEMS

(viii) Synthetics detergents. 340290.01

Synthetic detergents.

(ix) Miscellaneous chemicals (for industrial use only) (a) Catalysts and catalyst supports. 38.15

Reaction initiators, reaction accelerators and catalytic preparations, not elsewhere specified or included.

(b) Photographic chemicals. 370790.01

Chemical products mixed or compounded for photographic uses (for example, develops and fixers) whether or not in bulk.

(c) Rubber chemicals. 38.12

Prepared rubber accelerators; compound plasticisers for rubber or plastics, not elsewhere specified or included; anti- oxidising preparations and other compound stabilisers for rubber or plastics.

(d) Speciality chemicals for enhanced oil recovery. 38.11

Anti-knock preparations, oxidation inhibitors, gum inhibitors, viscosity improvers, anti-corrosive preparations and other prepared additives for mineral oils (including gasoline) or for other liquids used for the same purpose as mineral oils.

(e) Heating fluids. 382390.04

Heat transfer salts.

382390.05

Mixture of diphenyl and diphenyl oxide as heat transfer media.

(f) Coal tar distillation and products therefrom. 27.07

Oils and other products of the distillation of high temperature coal tar.

(g) Tonnage plants for the manufacture of industrial gases. Not Codified. (h) High altitude breathing oxygen/medical oxygen. 280440.00

Oxygen.

(i) Nitrous oxide. 281129.03

Nitrous Oxide.

(j) Refrigerant gases like liquid nitrogen, carbondioxide etc. in large volumes. 280430.00 2811.21

Nitrogen (liquid). Carbon dioxide.

(k) Argon and other rare gases. 280421.00 2804.29

Argon. Other rare gases.

CHAPTER - I EXHIBIT NO. 28(Contd) PRESS NOTE NO.10(1992 Series) REVISED LIST OF ANNEX-III ITEMS

(l) Alkali/Acid resisting cement compound. 38.16 382350.00

Refractory cements, mortars, concrete and similar compositions, other than products of heading No. 38.01. Non-refractory mortars and concretes. (Alkali/acid resisting).

(m) Leather chemicals and auxiliaries. 380999.00

Leather chemicals and auxiliaries.

14. DRUGS AND PHARMACEUTICALS. (ACCORDING TO THE DRUG POLICY)

15.(i)

29.36

Provitamins and vitamins, natural or reproduced by synthesis (including natural concentrates), derivatives thereof used primarily as vitamins, and intermixtures of the foregoing, whether or not in any solvent.

29.37

Hormones, natural or reproduced by synthesis; derivatives thereof, used primarily as hormones; other steroids used primarily as hormones.

29.38

Glycosides, natural or reproduced by synthesis, and their salts, ethers, esters and other derivatives.

29.39

Vegetable alkaloids, natural or reproduced by synthesis, and their salts, ethers, esters and other derivatives.

29.41

Antibiotics.

29.42

Other organic compounds (Synthetic drugs, not elsewhere included or specified).

30.01 to 30.06

Pharmaceutical products.

Paper and pulp including paper products 47.01 to

Pulp of wood or of other fibrous cellulosic material; waste and scrap of paper or paperboard.

47.07 48.01 to 48.19

Paper and paperboard; articles of paper pulp, of paper or of paperboard.

(ii) Industrial laminates.

16.(i)

59.02

Industrial laminates of nylon or other polyamides, polyesters or viscose rayon.

59.03

Textile fabrics, laminated with plastics, other than those of heading no. 59.02.

Automobile tyres and tubes 40.11

New pneumatic tyres, of rubber.

40.13

Inner tubes, of rubber.

(ii) Rubberised heavy duty industrial beltings of all types. 40.10

Conveyor or transmission belts or belting, of vulcanised rubber.

77

78

Industrial Policy Highlights EXHIBIT NO. 28(Contd) PRESS NOTE NO.10(1992 Series) REVISED LIST OF ANNEX-III ITEMS

(iii) Rubberised conveyor beltings. 401099.01

Conveyor belting, of rubber.

(iv) Rubber reinforced and lined fire fighting hose pipes. 400950.06

Fire fighting hoses.

(v) High pressure braided hoses. 40.09

Tubes, pipes and hoses, of vulcanised rubber other than hard rubber, with or without their fittings (for example, joints, elbows, flanges).

(vi) Engineering and industrial plastic products. 3917.31

Flexible tubes, pipes and hoses, having a minimum burst pressure of 27.6 MPs

39.20

Other plates, sheets, film and strips, of plastics, non-cellular and not reinforced, laminated, supported or similarly combined with other material.

39.21

Other plates, sheets, film, foil and strips, of plastics.

3925.90 392690.01

Other engineering and industrial plastic products. PVC Belt Conveyor.

17. PLATE GLASS i)

Glass shells for television tubes. 701120.00

Glass envelopes for cathode-ray tubes.

(ii) Float glass and plate glass. 70.05 (iii)

H.T. insulators. 854610.00

(iv)

Float glass and surface ground or polished glass, in sheets, whether or not having an absorbent or reflecting layer, but not otherwise worked.

Electrical insulators, of glass (HT).

Glass fibres of all types. 70.19

Glass fibres (including glass wool) and articles thereof (for example, yarn, woven fabrics).

18. CERAMICS. (i) Ceramics for industrial uses. 69.02

Refractory bricks, blocks, tiles and similar refractory ceramic constructional goods, other than those of siliceous fossil meals or similar siliceous earths.

69.03

Other refractory ceramic goods (for example, retorts, crucibles, muffles, nossles, plugs, supports, cupels, tubes, pipes, sheets and rods) other than those of siliceous fossil meals or of similar siliceous earths.

CHAPTER - I EXHIBIT NO. 28(Contd) PRESS NOTE NO.10(1992 Series) REVISED LIST OF ANNEX-III ITEMS

19. CEMENT PRODUCTS (i) Portland cement. 252321.00 2523.29

White cement, whether or not artificially coloured. Other portland cement.

(ii) Gypsum boards, wall boards and the like. 68.08

Gypsum boards, wall boards and the like.

20. HIGH TECHNOLOGY REPRODUCTION AND MULTIPLICATION EQUIPMENT 8469.10 847210.00 90.09

Automatic typewriters and word processing machines. Duplicating machines. Photocopying apparatus incorporating an optical system of the contact type and thermo-copying apparatus.

21. CARBON AND CARBON PRODUCTS (i) Graphite electrodes and anodes. 854519.01 Graphite electrodes and anodes. (ii) Impervious graphite blocks and sheets. 854590.09

Impervious graphite blocks and sheets.

22. PRETENSIONED HIGH PRESSURE RCC PIPES 681020.00

Pipes, reinforced.

23. RUBBER MACHINERY 84.77

Machinery for working rubber or plastics or for the manufacture of products from these materials, not specified or included elsewhere.

24. PRINTING MACHINERY (i) Web-fed high speed off-set rotary printing machine having output of 30,000 or more impressions per hour. 844311.00 Web-fed high speed offset rotary printing machines having output of 30,000 or more impressions per hour. (ii) Photo composing/type setting machines. 844210.00 Phototype-setting and composing machines. (iii) Multi-colour sheet-fed off-set printing machines of sizes of 18" x 25" and above. 844319.00 Multi-coloured sheet fed off-set printing machine of size of 18" x 25" and above. (iv) High speed rotograture printing machines having output of 30,000 or more impressions per hour. 844340.00

High speed rotograture printing machines having output of 30,000 or more impressions per hour.

79

80

Industrial Policy Highlights EXHIBIT NO. 28(Contd) PRESS NOTE NO.10(1992 Series) REVISED LIST OF ANNEX-III ITEMS

25. WELDING ELECTRODES OTHER THAN THOSE FOR WELDING MILD STEEL 831110.00

8311.20

Coated electrodes of base metal, for electric arc-welding, other than those for welding mild steel. Cored wire of base metal for electric arc welding.

26. INDUSTRIAL SYNTHETIC DIAMONDS 710420.00 Synthetic diamonds, industrial, unworked or simply sawn or roughly shaped. 710490.00 27.(i)

Synthetic diamonds, industrial, worked.

Photosynthesis improvers

(ii) Genetically modified free living symbiotic nitrogen fixers. (iii) Pheromones. (iv) Bio-insecticides. Not Codified. 28. EXTRACTION AND UPGRADING OF MINOR OILS 15.12

Sunflower-seed, safflower or cotton-seed oil, extracted and upgraded.

15.15

Other fixed vegetable oils (minor), extracted and upgraded.

29. PRE-FABRICATED BUILDING MATERIAL. 681091.00

Prefabricated structural components for buildings

30. SOYA PRODUCTS (i) Soya texture proteins. 210610.00

Protein concentrates and textured protein substances of soya.

(ii) Soya protein isolates. 210690.09

Protein isolates of soya.

(iii) Soya protein concentrates. 210610.00

Protein concentrates and textured protein substances of soya.

(iv) Other specialised products of soyabean. 210310.00

Soya sauce.

(v) Winterised and deodourised refined soyabean oil. 15.07 31. (a)

Refined soya bean oil, winterised and deodourised.

Certified high yielding hybrid seeds and synthetic seeds. 12.09

Certified high yielding hybrid seeds and synthetic seeds.

(b) Certified high yielding plantlets developed through plant tissue culture. 06.02

Other live plants (including their roots), cuttings and slips; mushroom spawn.

32. ALL FOOD PROCESSING INDUSTRIES OTHER THAN MILK FOOD, MALTED FOODS & FLOUR, BUT EXCLUDING THE ITEMS RESERVED FOR SMALL SCALE SECTOR. 16.01

Sausages and similar products, of meat or meat offal; food preparations based on these products.

16.02

Other prepared or preserved meat or meat offal.

CHAPTER - I EXHIBIT NO. 28(Contd) PRESS NOTE NO.10(1992 Series) REVISED LIST OF ANNEX-III ITEMS

16.03

Extracts and juices of meat, fish or crustaceans, molluscs or other aquatic invertebrates.

16.04

Prepared or preserved fish.

16.05

Crustaceans, molluscs and other aquatic invertebrates, prepared or preserved.

190190.09

Cereals, prepared or preserved.

19.02

Pasta, whether or not cooked or stuffed (with meat or other substances) or otherwise prepared.

19.03

Tapioca and substitutes therefor prepared from starch, in the form of flakes, grains, pearls, siftings or in similar forms.

19.04

Prepared foods obtained by the swelling or roasting of cereals or cereal products; cereals, other than maize (corn), in grain form, pre-cooked or otherwise prepared.

20.02

Tomatoes prepared or preserved otherwise than by vinegar or acetic acid.

20.03

Mushrooms and truffles, prepared or preserved otherwise than by vinegar or acetic acid.

20.04

Other vegetables prepared or preserved otherwise than by vinegar or acetic acid, frozen.

20.05

Other vegetables prepared or preserved otherwise than by vinegar or acetic acid, not frozen.

20.06

Fruit, nuts, fruit-peel and other parts of plants, preserved by sugar (drained, glace or crystallised).

20.07

Fruit jellies, marmalades, fruit or nut puree and fruit or nut pastes, being cooked preparations, whether or not containing added sugar or other sweetening matter.

20.08

Fruit, nuts and other edible parts of plants, otherwise prepared or preserved, whether or not containing added sugar or other sweetening matter or spirit, not elsewhere specified or included.

20.09

Fruit juices (including grape must) and vegetable juices, unfermented and not containing added spirit, whether or not containing added sugar or other sweetening matter.

210110.01

Instant coffee.

210120.01

Instant soluble tea.

210130.01

Chicery roasted coffee blends.

210320.00

Tomato and other sauces.

210390.01

Enriched coffee.

210410.00

Dehydrated soups.

33. ALL ITEMS OF PACKAGING FOR FOOD PROCESSING INDUSTRIES EXCLUDING THE ITEMS RESERVED FOR SMALL SCALE SECTOR 39.23 Articles for the conveyance or packing of goods, of plastics; stoppers, lids, caps and other closures, of plastics. 482390.01

Packing and wrapping paper.

34. HOTELS AND TOURISM-RELATED INDUSTRY. 35. SOFTWARE INDUSTRY8 Note :8 As included vide Press Note No.5 (1992 Series)

81

82

Industrial Policy Highlights EXHIBIT NO.29 PRESS NOTE NO.11 (1992 Series) ITC CODE FOR COLOUR TV RECEIVERS

1. In this Ministry’s Press Note No. 9 (1991 Series) dated 2nd August, 1991, Colour TV Receivers are included in the list of compulsory licensing. ITC Code allotted to Colour TV Receivers is 8528.10. 2. Since some of the other electronic industry items are covered under the above mentioned 6 digit

No. 10/85/91-LP

code, which are not under compulsory licensing, on review it has been decided to denote Colour TV Receivers by 8 digit ITC Code, namely 852810.01. 3. All concerned may kindly note the above mentioned change in ITC Code relating to Colour TV Receivers for information and guidance.

New Delhi, the 24th June, 1992

Forwarded to Press Information Bureau for giving wide publicity to the contents of the above Press Note. Sd./( S. Bhavani ) Director Principal Information Officer, Press Information Bureau, Shastri Bhawan New Delhi.

83

CHAPTER - I EXHIBIT NO.30 PRESS NOTE NO.12 (1992 Series) WITHDRAWAL OF THE CONDITION REGARDING "DIVIDEND BALANCING"

1. Government tabled a Statement on Industrial Policy in both Houses of Parliament on 24.7.1991. The Statement has substantially liberalised the provisions and simplified the pro-cedures governing foreign investment proposals. 2. Para 39 B(ii) of the Policy Statement provides for monitoring of outflow of foreign exchange on account of dividend payments which are to be balanced by export earnings over a period of time. This monitoring will be done by the Reserve Bank of India. Consequently, all approvals accorded for foreign equity investment by Reserve Bank of India and the government carried the condition of Dividend Balancing. 3. Government have since reconsidered the imposition of the condition of “Dividend Balancing” on foreign investment approvals. As a part of its continuing economic liberalisation and to further stimulate foreign investment into the country, Government have now decided to withdraw immediately the condition of “Dividend Balancing” in all foreign investment approvals except for industries in the consumer goods sector. The condition of “Dividend Balancing” will also not be applied to investments by approved international

No. 10(30)/92-LP

organisations like the International Finance Corporation (Washington), the D.E.G., the Commonwealth Development Corporation and the Asian Development Bank. 4. The list of consumer goods industries to which the condition of “Dividend Balancing” will continue to apply is annexed. A detailed list showing itemwise description as per the Indian Trade Classification (ITC) based on the harmonised system will be issued separately. 5. Following the issue of this Press Note, foreign investment approvals accorded by the Reserve Bank of India and the Government in the past which carry the condition of “Dividend Balancing” will be deemed to have been exempted from the operation of this condition. No separate amendment deleting the condition of “Dividend Balancing” in approval letters already issued would be necessary. It will be sufficient to attach a copy of this Press Note for purposes of obtaining exemption from the condition of “Dividend Balancing”. 6. This Press Note modifies all instructions relating to the condition of “Dividend Balancing” prescribed in earlier Press Notes of this Ministry.

New Delhi, the 26th June, 1992

Forwarded to Press Information Bureau for giving wide publicity to the contents of the above Press Note.

Sd./( A.E. Ahmed ) Director Principal Information Officer, Press Information Bureau, Shastri Bhawan, New Delhi.

84

Industrial Policy Highlights EXHIBIT NO.30(Contd.) PRESS NOTE NO.12 (1992 Series) WITHDRAWAL OF THE CONDITION REGARDING "DIVIDEND BALANCING"

ANNEX 1.

Manufacture of food and food products.

2.

Manufacture of dairy products.

3.

Grain mill products.

4.

Manufacture of bakery products.

5.

Manufacture and refining of sugar (vacuum pan sugar factories).

6.

Production of common salt.

7.

Manufacture of hydrogenated oil (vanaspati).

8.

Tea processing.

9.

Coffee.

10. Manufacture of beverages, tobacco and tobacco products. 11. Distilling, rectifying and blending of spirits, wine industries, malt liquors and malt, production of country liquors and toddy. 12. Soft drinks and carbonated water industry. 13. Manufacture of cigars, cigarettes, cheroot and cigarette tobacco. 14. Manufacture of wood and wood products, furniture and fixtures. 15. Manufacture of leather and leather and fur products. 16. Tanning, curing, finishing, embossing and japanning of leather. 17. Manufacture of footwear (excluding repair) except vulcanized or moulded rubber or plastic footwear. 18. Manufacture of footwear made primarily of vulcanized or moulded products. 19. Prophylactics (rubber contraceptive). 20. Motor cars. 21. Entertainment electronics (VCRs, Colour TVs, CD players, Tape Recorders). 22. White Goods (Domestic Refrigerators, Domestic Dishwashing Machines, Programmable Domestic Washing Machines, Microwave ovens, Airconditioners).

85

CHAPTER - I EXHIBIT NO. 31 PRESS NOTE NO.14L (1992 Series) DELETION OF ADDITIONAL CONDITIONS IMPOSED IN THE INDUSTRIAL APPROVALS

Before the announcement of the New Industrial Policy in July 1991, certain conditions were imposed in Letters of Intent and Industrial Licences. The stipulation of these conditions has been reviewed in the light of economic liberalisation measures announced by the Goverment since then and some of these conditions have been found to be no longer necessary. These conditions are: (i)

Impostion of export obligation.

(ii)

Conditions regarding financial management of the proposed ventures of the MRTP/FERA Companies.

(iii) Conditions prescribing foreign exchange neutrality and prohibiting access to domestic financial institutions.

No. 10(4)/92-LP

(iv) Conditions on setting up of joint sector units by State Industrial Development Corporations in association with private promoters. (v) Conditions regarding captive use of certain items of manufacture and prohibition of merchant sales of such items. Above conditions incorporated in Letters of Intent/Industrial Licences granted before announcement of the Industrial Policy in respect of items which are now de-licenced, may be treated as deleted from the date of issue of this Press Note. All concerned may note for information.

New Delhi, the 28th July, 1992

Forwarded to Press Information Bureau for giving wide publicity to the contents of the above Press Note.

Sd./( S. Bhavani ) Director Principal Information Officer, Press Information Bureau, Shastri Bhawan, New Delhi. Note:

L Press Note No.13(1992 Series) has been superceded by Press Note No.2 (1994 Series)

86

Industrial Policy Highlights EXHIBIT NO. 32 PRESS NOTE NO.15(1992 Series) EXEMPTION FROM OBTAINING COB LICENCE FOR SSIs/ANCILLARY UNITS

1. Under the New Industrial Policy announced on 24th July, 1991, small scale/ancillary industrial undertakings are exempted from locational restrictions. However, such industrial undertakings are required to obtain a Carry on Business (COB) licence from the Government if they exceed the investment limits prescribed for them. 2. To simplify and streamline the policy and procedure it has been decided that small scale/ ancillary undertakings engaged in the manu-facture of delicensed item(s) need not obtain a COB licence

No.10(43)/91-LP

on their crossing the prescribed investment limits. They may now file an Industrial Entrepreneurs Memorandum (IEM) as prescribed in para 6 of Press Note No. 9 (1991 series) dated 2nd August, 1991, with the Secretariat for Industrial Approvals (SIA) in the Department of Industrial Development and obtain an acknowledgement. The location of the undertakings will, of course, be subject to local land use and zoning laws and regulations. Such units would, however, require a COB licence if the item of manufacture is licensable.

New Delhi, the 12th August, 1992

Forwarded to Press Information Bureau for giving wide publicity to the contents of the above Press Note.

Sd./( S. Bhavani) Director Principal Information Officer, Press Information Bureau, Shastri Bhawan, New Delhi.

87

CHAPTER - I EXHIBIT NO. 33 PRESS NOTE NO.16 (1992 Series) ENFORCEMENT AGENCY FOR HAZARDOUS INDUSTRIES

1. At present, the following additional condition is stipulated in the letters of intent issued for hazardous industries, namely, chemicals & pharmaceuticals with regard to ensuring safety in the plant :-

be incorporated in all the letters of intent issued for hazardous industries, which are subject to industrial licensing. This condition will be carried forward in the converted industrial licence by the SIA:

“Adequate steps shall be taken to the satisfaction of the Government, in regard to process hazardous for ensuring safety in plants. Before going into trial production, adequacy of steps taken in this regard may be established to the satisfaction of appropriate Government authorities.”

“Adequate steps shall be taken to the satisfaction of the appropriate Government authority, namely, Chief Inspector of Factories, in regard to process hazards for ensuring safety in plants. Before going into trial production, adequacy of steps taken in this regard may be established to the satisfaction of the appropriate Government authority.”

2. The letters of intent issued for such hazardous industries are converted into industrial licence only after the industrial undertaking fulfils the abovementioned condition. In compliance with the above mentioned condition, normally an undertaking from the industrial unit is being obtained and accepted by the Administrative Ministry for recommending conversion of letters of intent into industrial licence. The question of designating an appropriate Government authority to the satisfaction of which the above mentioned condition will stand fulfilled, has been under consideration of the Government for quite some time. It has now been decided to designate the “Chief Inspector of Factories” as the appropriate Government authority for the purpose of fulfilment of the aforesaid stipulation. Accordingly, the following revised additional condition will now

No. 10/5/89-LP

3. In accordance with the above mentioned stipulation and as per the provisions contained in the Factories Act, 1948, the adequacy of steps taken by industrial undertaking in regard to process hazard for ensuring safety in plants would have to be established to the satisfaction of the Chief Inspector of Factories, before going into trial production of hazardous industries. Clearance certificate from the Chief Inspector of Factories will be required to be submitted for getting the letters of intent converted into industrial licences. 4. The above mentioned changes are brought to the notice of perspective entrepreneurs and all other concerned for information and strict compliance.

New Delhi, the 30th September, 1992

Forwarded to Press Information Bureau for giving wide publicity to the contents of the above Press Note.

Sd./( Bimal Julka ) Director Principal Information Officer, Press Information Bureau, Shastri Bhawan, New Delhi.

88

Industrial Policy Highlights EXHIBIT NO. 34 PRESS NOTE NO.17 (1992 Series) GUIDELINES FOR INDUSTRIAL LICENCE APPLICATIONS INVOLVING LOCATIONAL ANGLE

1. Under the new Industrial Policy, industrial licensing is compulsory only for 18 specified categories of industries. This exemption from licensing is, however, subject to certain locational restrictions as clarified in para 4(a) of Press Note No. 9 (1991 Series) issued by this Department. As per that Press Note, the proposed project should not be located within 25 kms. from the periphery of the standard urban area limits of a city having a population of more than 10 lakhs (23 cities listed in the abovementioned Press Note) according to 1991 census. However, if the industrial unit were to be located in an area designated as an ‘industrial area’ by the concerned State Government before July 25, 1991, this restriction on location will not apply. Industrial units other than electronics, computer software or printing, which are to be located outside such a designated ‘industrial area’ and within the 25 Kms.

No. 10(17)/92-LP

limit mentioned above, will require an industrial licence even if they are otherwise delicensed. 2. In accordance with the above policy on location, applications are being received for grant of industrial licences from industries for relaxation of locational angle. It is notified for guidance and information of all perspective entrepreneurs that capacity is not a constraint in consideration of industrial licence applications received for delicensed industries due to locational restrictions as mentioned in para 1 above. It is only the environmental, safety, land use, urban planning and related factors that are kept in view while considering the industrial licence applications received for such industries. The concerned Administrative Ministries/Departments have been advised to keep in mind these guidelines while examining the applications received for delicensed industries for issue of Letters of Intent.

New Delhi, the 2nd November, 1992.

Forwarded to Press Information Bureau for giving wide publicity to the contents of the above Press Note.

Sd/( Aditi S. Ray ) Deputy Economic Adviser

Principal Information Officer, Press Information Bureau, Shastri Bhawan, New Delhi.

89

CHAPTER - I EXHIBIT NO. 35 PRESS NOTE NO.18 (1992 Series) REVISION OF THE PRESCRIBED FORMS FOR GRANT OF ILs & IEMs

1. Industrial Undertakings are required to file a Memorandum in respect of industries for which Industrial Licence is not compulsory under the provisions of New Industrial Policy, in the prescribed form (Form IEM), a specimen copy of which was published with this Ministry’s Press Note No. 9 (1991 Series) dated, 2nd August, 1991. Where Industrial Licence is compulsory, industrial undertakings are required to submit the application in the prescribed form (Form IL). 2. A need has been felt to review both the prescribed forms with a view to streamline and eliminate those columns which are considered unnecessary. Government have, therefore, decided to revise both the forms -Form IEM and Form IL, a specimen copy of which are available with PR&CO, Department of Industrial Development, Udyog Bhawan, New Delhi. 3. In case of filing of Memorandum, the application should be submitted in the prescribed

No. 10(60)/92-LP

form (Form IEM) to the Secretariat for Industrial Approvals (SIA), Department of Industrial Development, Udyog Bhawan, New Delhi-110 011 with five spare copies and in the case of Industrial Licence in the prescribed form (Form IL) with eight spare copies alongwith a crossed Demand Draft of Rs. 1000 for filing of a Memorandum and Rs. 2500 in the case of grant of Industrial Licence drawn in favour of the Pay & Accounts Officer, Department of Industrial Development, Ministry of Industry, payable at the State Bank of India, Nirman Bhawan Branch, New Delhi. 4. There is no change in the prescribed form of Memorandum to be submitted by the exempted industrial undertakings at the time of commencement of commercial production. 5. The revised forms will be effective from 1st January, 1993 and all the applications must be submitted in the prescribed form from that date onwards.

New Delhi, the 30th December, 1992.

Fowarded to Press Information Bureau for giving wide publicity to the contents of the above Press Note. Sd/( S. Bhavani ) Director

Principal Information Officer, Press Information Bureau, Shastri Bhawan, New Delhi.

90

Industrial Policy Highlights EXHIBIT NO. 36 PRESS NOTE NO.19(1992 Series) IMPORT OF SECOND HAND CAPITAL GOODS

1. In terms of paragraph 26 of the Export-Import Policy, 1992-97, second hand capital goods other than those covered by paragraph 25 can be imported in accordance with a licence issued in this behalf. Paragraph 28 of the policy provides that the second hand capital goods shall not be more than 7 years old and shall have a minimum residual life of 5 years. Furthermore, import of second hand capital goods shall be subject to actual user condition in all cases. 2. In terms of paragraph 42 of the Handbook of Procedures an application for import of second hand capital goods of CIF value upto Rs. 50 lakh can be submitted to the regional licensing authority concerned, while an application for import of second hand capital goods of a higher value is to be submitted to the Director General of International Trade (DGIT). It has also been provided in paragraph 42 that in appropriate cases, relaxation of the condition stated in paragraph 28 of the policy may be made by the DGIT. 3.

It is hereby notified for the information and

No. 10(59)/92-LP

guidance of all concerned that concurrent powers are available with the Project Approval Board (PAB) under the chairmanship of Secretary, Department of Industrial Development, for consideration and approval of applications for import of second hand capital goods of any CIF value, as also capital goods more than 7 years old but with a minimum residual life of 5 years, provided the applications are in conformity with paragraph 27 of the Import and Export Policy, 1992-97, and the details of the second hand capital goods to be imported are furnished to the Project Approval Board. In such cases import licence will be issued by DGIT on receipt of the letter conveying the approval for import of second hand capital goods from the Secretariat for Industrial Approval (SIA). It is further clarified that the PAB will consider such cases only as a part of a composite proposal involving foreign technology collaboration etc. Where it is not possible for the applicant to furnish the details about the import of second hand capital goods to the Project Approval Board, he may submit his application to the DGIT in the normal course.

New Delhi the 30th December, 1992

Forwarded to Press Information Bureau for giving wide publicity to the contents of the above Press Note. Sd/( S. Behura ) Joint Secretary to the Government of India

Principal Information Officer Press Information Bureau, Shastri Bhawan, New Delhi.

91

CHAPTER - I EXHIBIT NO.37 PRESS NOTE NO.1 (1993 Series) ABOLITION OF THE SPECIAL COMMITTEE OF SECRETARIES ON FERTILISER PROJECTS

1. The Special Committee of Secretaries on fertiliser projects was constituted under the Industries (Development and Regulation) Act & Rules, in 1976 vide Government Notification S.O. 163(E)/RLIU/ 10(2)/76. All applications for grant of industrial licences, foreign investment and technical collaboration proposals, and import of capital goods for setting up fertiliser projects are considered by the Committee. 2. Under the New Industrial Policy of July, 1991, the fertiliser industry has been delicensed except in cases where a licence is needed on locational grounds. The import of capital goods for the fertiliser industry has been liberalised and put on OGL. Foreign technical collaboration proposals and proposals for foreign equity participation falling within the prescribed parameters are eligible for automatic approval to be granted by Reserve Bank of India(RBI) for all industries, including fertilisers. Foreign technical collaboration agreements which do not fall within the purview of RBI’s automatic approval are considered by the Project Approval Board (PAB).

No. 10(57)/92-L.P.

Foreign investment proposals which are not covered under the RBI’s automatic approval route are considered by the Foreign Investment Promotion Board (FIPB). 3. The need for continuance of the Special Committee of Secretaries on fertiliser projects has been considered in the light of above mentioned measures taken by the Government and it has been decided to abolish the committee with immediate effect. Henceforth all applications for grant of industrial licence for the manufacture of fertilisers, wherever necessary, will be placed before the Licensing Committee or the Project Approval Board in the Department of Industrial Development, Ministry of Industry, as the case may be, for their consideration. Applications involving foreign technical collaboration or foreign equity participation falling within the purview of RBI for grant of automatic approval should be made to the RBI. Cases falling outside the purview of RBI’s automatic approval powers will be considered by the PAB or the FIPB as the case may be.

New Delhi, the 8th January, 1993.

Forwarded to Press Information Bureau for giving wide publicity to the contents of the above Press Note. Sd/( S. Bhavani ) Director

Principal Information Officer, Press Information Bureau, Shastri Bhawan, New Delhi.

92

Industrial Policy Highlights EXHIBIT NO.38 PRESS NOTE NO.2 (1993 Series) SETTING UP OF INTER-MINISTERIAL STANDING COMMITTEE FOR EHTPs AND ESTPs

For building up a strong Electronics Industry, with focus on enhancing its export potential and developing an efficient electronic component industry in the country, Government has announced two schemes called the Electronic Hardware Technology Park Scheme (EHTP) and Software Technology Park (STP) Scheme. Two InterMinisterial Standing Committees (IMSC) had been set up under the Chairmanship of Secretary, Department of Electronics, for considering applications to set up units under these schemes. It has now been decided to merge these two Committees and form a single Committee which will deal with applications under both the schemes. The composition of this single Committee will be as follows: Chairman 1. Secretary, Department of Electronics, (or his nominee). Members 2. Secretary, Department of Industrial Development, (or his nominee). 3. Secretary, Department of Science and Technology, (or his nominee). 4. Secretary, Ministry of Commerce, (or his nominee). 5. Chairman, Central Board of Excise and Customs, (or his nominee). 6. Secretary, Department of Economic Affairs, Ministry of Finance, (or his nominee). 7. Secretary, Planning Commission, (or his nominee).

8. Economic Adviser, Department of Electronics,(or his nominee). 9. Secretary, Department of Small Scale Industries and Agro and Rural Industries, (or his nominee). 10. Joint Secretary, Department of Electronics, Member Secretary. The Committee will be serviced by the Secretariat for Industrial Approval (SIA) in the Department of Industrial Development. 2. The Committee will consider applications for grant of Industrial Approvals, including approval of proposals for Industrial Licence, Foreign Technology Agreements and import of Capital Goods. 3. Necessary Notification specifying the membership and functions of the IMSC under the Industries (Development & Regulation) Act, 1951 has been issued on 22nd February, 1993 as amended on 2nd March, 1993. Cases involving foreign equity will, however, be considered only by the Foreign Investment Promotion Board. 4. All applications in the specified form should be addressed to Secretariat for Industrial Approvals, Department of Industrial Development, Government of India superimposed with Applications for EHTP/ STP Scheme. Applications, which do not seek a Letter of Intent, will be accompanied by a Crossed Demand for Rs.1000/- (Rupees one thousand only) in favour of the Pay and Accounts Officer, Department of Industrial Development, Ministry of Industry, payable at State Bank of India, Nirman Bhawan Branch, New Delhi - 110 011. The application will be accompanied by a Crossed Demand Draft for Rs.2500/- (Rupees two thousand five hundred only) if the item of manufacture requires a Letter of Intent.

No. 10(58)/92-LP

New Delhi, the 9th March, 1993.

Forwarded to Press Information Bureau for giving wide publicity to the contents of the above Press Note. Sd/( Aditi S. Ray ) Deputy Economic Adviser Principal Information Officer, Press Information Bureau, New Delhi.

93

CHAPTER - I EXHIBIT NO.39 PRESS NOTE NO.3 (1993 Series) DERESERVATION OF CERTAIN MINERALS FROM ANNEX-I

Under the Industrial Policy of July, 1991, the following minerals and mineral bearing areas have been reserved for the public sector:(i) Mining of iron ore, manganese ore, chrome ore, gypsum, sulphur, gold and diamond. (ii) Mining of copper, lead, zinc, tin molybdenum and wolfram. 2. The National Mineral Policy of 1990 has been reviewed by the Ministry of Mines in the light of the New Industrial Policy of July, 1991. Under the National Mineral Policy of 1993, Government has

No. 10(31)/92-LP

deleted all the 13 minerals which had earlier been reserved under the National Mineral Policy for exclusive exploitation by the public sector and has thrown them open for exploitation by the private sector. 3. Consequent upon the amendment of National Mineral Policy, it has been decided to delete the above mentioned minerals and mineral areas is being issued separately under the provisions of Industries (Development & Regulation) Act, 1951.

New Delhi, the 26th March, 1993

Forwarded to Press Information Bureau for giving wide publicity to the contents of the above Press Note. Sd/( S. Behura ) Joint Secretary to the Government of India

Principal Information Officer, Press Information Bureau, New Delhi.

94

Industrial Policy Highlights EXHIBIT NO.40 PRESS NOTE NO.4 (1993 Series) FURTHER LIBERALISATION IN INDUSTRIAL LICENSING

In July, 1991, Government delicensed all except 18 specific industries, subject to certain conditions. The procedure for Industrial Licen-sing was announced vide Press Note No.9 (1991 Series) which was amended, from time to time.

particularly in rural areas, requires injection of substantial investments in the leather industry and, therefore, it has been decided to delicense rawhides and skins, leather and patent leather, excluding Chamois Leather.

Government has not reviewed the list of industries covered under compulsory licensing. In the light of the Import Policy which has removed almost all restrictions on the import of capital goods, raw materials and components, and modification of the Liberalised Exchange Rate Management System introducing unified exchange rate for the ‘Rupee’ effective from 1st March, 1993, it has now been decided to delicense the ‘motor-car’ and the ‘white goods’ industry. White goods industries cover domestic refrigerators, domestic dishwashing machines, programmable domestic washing machines, microwave-ovens and air-conditioners.

Delicensing is not extended to items exclusively reserved for manufacture in the Small Scale Sector. Items reserved for the Small Scale Sector will continue to attract the Licensing Provisions under the Industries (Development and Regulation) Act, 1951.

Modernisation of leather industries with a view to promote exports, improve productivity, encourage ancillary industries and generate employment,

No. 10(49)/92-LP

The delicensing of the above mentioned industries will be subject to the locational conditions, as given in the Press Note dated 2nd August, 1991. Entrepreneurs who wish to avail of the liberalised facility of delicensing for the above mentioned industries are requested to follow the same procedure as laid down in the aforementioned Press Note dated 2nd August, 1991, as amended from time to time.

New Delhi, the 23rd April, 1993

Forwarded to Press Information Bureau for giving wide publicity to the contents of the above Press Note. Sd/( S. Behura ) Joint Secretary to the Government of India

Principal Information Officer, Press Information Bureau, New Delhi.

95

CHAPTER - I EXHIBIT NO. 41 PRESS NOTE NO.6L (1993 Series) CANCELLATION/DELETION OF IEMs

Attention of the entrepreneurs is invited to the Press Note No.22 (1991 Series) dated 24th December, 1991 in which it was mentioned that no amendments shall be admissible in the IEM filled by the entrepreneurs, and they will be required to file a fresh IEM in lieu of the previous IEM.

No. 10(88)/91-L.P.

2. It is further clarified that an IEM would be cancelled/ deleted from the records of SIA if, on scrutiny, it is found that the proposal contained in IEM is not exempted from licensing. Secretariat for Industrial Approvals (SIA), Ministry of Industry will give due intimation to the entrepreneur in this regard and request him to file an IL application.

New Delhi, the 29th July, 1993.

Forwarded to Press Information Bureau for giving wide publicity to the contents of the above Press Note.

Sd/( S. Bhavani ) Director

Principal Information Officer, Press Information Bureau, Shastri Bhawan, New Delhi. Note: L Press Note No.5(1993 Series has been superseded by Press Note No.4 (1995 Series)

96

Industrial Policy Highlights EXHIBIT NO. 42 PRESS NOTE NO.7 (1993 Series) TECHNOLOGY UPGRADATION IN GARMENT SECTOR

Government have reserved a number of items for production in the small scale sector as a measure to promote and develop small scale industries in the country. These items are listed in Schedule III of the Ministry of Industry’s notification No.S.O.477(E) dated 25th July, 1991. The investment limits for small scale/ancillary industrial undertakings were enhanced to Rs.60 lakhs/Rs.75 lakhs respectively, vide Ministry of Industry’s notification No.S.O.232(E) dated 2nd April, 1991. 2. Manufacture of readymade garments is reserved for exclusive production by the ancillary/small scale industrial undertakings. In case large scale undertakings wish to take up manufacture of readymade garments, they are required to undertake an export obligation of a minimum of 75% of new or additional production to be achieved within a maximum period of 3 years. 3. In recent months, Government has been considering the need to increase the permissible investment limit in export oriented small scale readymade garment units so that these units may upgrade themselves technologically and compete effectively in the international market. It was felt that in order to set up units for garment manufacture which would be modern, have a viable production capacity and export competitiveness, investments needed in plant and equipment would be more than the currently permissible limits for small scale units. Government have, therefore, issued a notification on 17th June, 1993 exempting industrial undertakings engaged in the manufacture of ready-made garments from the operation of provisions of the sub-section 2A to 2G of Section 29-B of the Industries (Development and Regulation) Act, 1951. Readymade garments includes knitted (hosiery)

garments. The exemption is subject to the following conditions, namely: i) that the investment in fixed assets in plant and machinery in the Industrial Undertaking, whether held on ownership terms or on lease or by hire purchase, shall not exceed Rs.3 crores; ii) that such industrial undertakings shall undertake to export a minimum of 50 per cent of the new or additional annual production to be achieved within a maximum period of three years; and iii) not less than 5% of the export obligation undertaken in (ii) above shall be achieved by way of non-quota exports. 4. The calculation of the export obligation will be done in "value terms", that is, industrial undertakings have to export to the extent of 50% of the exFactory value of the goods produced, on annual basis. 5. For manufacture of readymade garments, with investment in fixed assets between 75.00 lakhs and 3.00 crores, entrepreneurs will have to apply and obtain an industrial licence. Letters of Intent in such cases will have to be issued subject to the conditions indicated in para 3 above. In respect of Industrial Undertakings with investment in fixed assets beyond Rs.300 lakhs, the present policy of granting of Industrial Licence with an export obligation of 75% will continue. 6. Entrepreneurs intending to avail of this facility are required to submit their Industrial Licence application to the Secretariat for Industrial Approvals, Department of Industrial Development, Udyog Bhawan, New Delhi, accompanied by a Demand Draft for Rs.2500/- (Rupees two thousand five hundred) drawn in the name of Pay & Accounts Officer, Department of Industrial Development.

No. 10(13)/93-L.P.

New Delhi, the 29th July, 1993.

Forwarded to Press Information Bureau for giving wide publicity to the contents of the above Press Note. Sd/( S. Bhavani ) Director Principal Information Officer, Press Information Bureau, New Delhi.

97

CHAPTER - I EXHIBIT NO. 43 PRESS NOTE NO.8 (1993 Series) SETTING UP OF INDUSTRIES IN BACKWARD STATES

As a follow-up to the announcement in this year’s Budget regarding 5-year Tax Holiday to new Industrial Undertakings located in backward States under Section 80-IA of the Income Tax Act, 1961, Government has removed the restriction, i.e. articles listed in Eleventh Schedule of the said Act should be manufactured only by Small Scale Industries. Consequently, industrial units in the medium and large sectors which will be set up in the backward States will also be eligible for Tax-Holiday under Section 80-IA even if they manufacture items listed in the Eleventh Schedule of the Income-Tax Act. 2. In terms of Notification No.477(E) dated 25th July, 1991, as amended from time to time, all industrial undertakings have been exempted from the licensing provisions of the Industries (Development and Regulation) Act, 1951 if the article(s) of manufacture is not an article included in Schedule I (Industries reserved for public sector), Schedule II (Industries kept under compulsory licensing) and Schedule III (items reserved for small scale sector). This exemption is also subject to certain locational restrictions. Small scale/ancillary industrial undertakings are also exempted from licensing for all articles of manufacture which are

No. 10(16)/93-L.P.

not covered by Schedule I and Schedule II. In addition, they are exempted from Industrial Licensing for the articles of manufacture exclusively reserved for small scale/ancillary sector even if they happen to be included in Schedule II. Industrial Undertakings including small scale/ancillary industrial undertakings are required to obtain Industrial Licence if they do not qualify for exemption from licensing provided in the notification dated 25th July, 1991. 3. Queries have been received in this Department seeking clarification whether exemption from licensing has been provided for setting up of industries in the backward States. It is clarified that extending the benefits of Tax-Holiday under Section 80-IA of the Income Tax Act for setting up of industries included in the Eleventh Schedule of the said Act in the backward States is independent of the requirement of industrial licensing under the provisions of the Industries (Development & Regulation) Act, 1951. Industrial Licence, wherever necessary, will require to be obtained for setting up of industries in backward States. In respect of delicensed industries also, entrepreneurs will be required to file an Information Memorandum with the Secretariat for Industrial Approvals in the prescribed manner.

New Delhi, the 15th October, 1993.

Forwarded to Press Information Bureau for giving wide publicity to the contents of the above Press Note. Sd/( Jayalakshmi Jayaraman) Director

Principal Information Officer, Press Information Bureau, Shastri Bhawan, New Delhi.

98

Industrial Policy Highlights EXHIBIT NO.44 PRESS NOTE NO.1(1994 Series) ABOLOTION OF PHASED MANUFACTURING PROGRAMME FOR EXISTING UNITS

In the New Industrial Policy (NIP), 1991, Phased Manufacturing Programme(PMP) was abolished for new projects. However, projects approved before the NIP continued to carry the PMP condition, where stipulated. Instructions in this regard were issued through Press Note No.9 (1991 Series) dated 2nd August, 1991.

No. 10(29)/93-L.P.

The question of the continuation of the scheme of Phased Manufacturing Programme for the existing units has been reviewed and it has been decided to withdraw, with immediate effect, the conditions of Phased Manufacturing Programme for the existing units also.

New Delhi, the 28th April, 1994

Forwarded to Press Information Bureau for giving wide publicity to the contents of the above Press Note. Sd/( Jayalakshmi Jayaraman) Director

Principal Information Officer, Press Information Bureau, Shastri Bhawan, New Delhi.

99

CHAPTER - I EXHIBIT NO.45 PRESS NOTE NO.2 (1994 Series) REVISED GUIDELINES FOR DETERMINING ISSUE PRICE OF PREFERENTIAL SHARES

In implementing the Statement on Industrial Policy of July 1991, the procedure for raising foreign equity in existing companies in India, including those which do not have any foreign equity at present, has been laid down in this Ministry’s Press Note No.13 of 1992 issued on 29th June, 1992. In supersession of Press Note No.13, of 1992 the revised guidelines for determining the issue price of Preferential Shares are outlined below: A. Eligibility Criteria for Increase in Foreign Equity The following categories of companies will receive automatic approval from the Reserve Bank of India for raising foreign equity, including those which have no foreign equity at present. (i) Companies wishing to raise foreign equity as part of an expansion programme. An existing company wishing to raise foreign equity upto 51 per cent may do so as part of an expansion programme. The expansion programme must be in high priority industries shown in Annex.III to the Statement on Industrial Policy of 24th July, 1991. The fresh/additional equity should be part of the financing of the expan-sion programme. The increase in equity level must result from expansion of equity base of the existing company and the money to be remitted should be in foreign exchange. The company itself need not be exclusively engaged in activities listed in Annex III, only the proposed expansion must be predomi-nantly in the high priority industries shown in Annex III. (ii) Companies wishing to raise foreign equity without any expansion programme. An existing company predominantly engaged in high priority industry listed in Annex III can also raise foreign equity upto 51 per cent without an expansion progra-mme. The increase in equity level must result from expansion of the equity base of the existing company. The foreign equity must be from remittance of foreign exchange.

2. Other Proposals All other proposals for inducting or raising foreign equity in existing companies will be subject to prior approval of the Government. This will include proposals for raising foreign equity upto 51% in existing companies which do not meet any or all of the criteria outlined for automatic approval as also proposals for raising foreign equity beyond 51% in existing companies. B. Requirement Allocation

for

Preferential

Share

3. Preferential share allocation of the required volume of equity to the foreign investor will have to be approved by the shareholders through a special resolution under Section 81 (1A) of the Companies Act. All proposals for raising foreign equity or inducting new foreign equity in existing companies through prefer-ential share allocation must be accompanied by this resolution. C. Issue of Shares and Share Valuation 4. Consequent to the repeal of the Capital Issues (Control) Act of 1947 and issue of guidelines by the SEBI on 11th and 17th June, 1992, existing companies wishing to raise foreign equity can make the issue at the price determined by the shareholders a special reso-lution under Section 81 (1A) of the Companies Act. However, some proposals received from existing companies for enhancement of foreign equity show a tendency for the issues to be significantly under-priced in relation to the market price. Whereas companies are able to issue foreign equity at a large discount to the market price, the present RBI policy for dis-investment permit shares etc. to be sold at the prevailing market related price. This can cause distortion in the balance of inflow/ outflow of foreign exchange. Thus further rationalisation of policy is required with the following objectives. i)

To prevent a few shareholders from getting substantial and undue enrichment and unearned gains.

ii)

To prevent undue reductions in foreign equity inflow.

iii)

To make both investment and disinves-tment market-related.

100

Industrial Policy Highlights EXHIBIT NO.45 (Contd.) PRESS NOTE NO.2 (1994 Series) REVISED GUIDELINES FOR DETERMINING ISSUE PRICE OF PREFERENTIAL SHARES

In pursuance of these objectives the Government of India in consultation with the Reserve Bank of India, have decided that preferential allotment of shares by companies shall be at market related price and accordingly would apply the following guidelines in this regard:"Every preferential allotment of shares by companies (Allotment of shares other than allotment on rights basis) shall be at market value of the shares. The issue prices shall be determined on the basis of their average price during the immediate preceding 6 months at the main listing centre. This would be calculated on the monthly average of the high and low rates quoted for the shares at such centres. While submitting applications for raising foreign equity under automatic route to RBI, the companies would work out the price according to the above guidelines and enclose them duly certified by a Chartered Accountant." The above guidelines of pricing in connection with preferential allotment to non-residents will apply to all foreign investment approvals to be issued by the Reserve Bank of India under the automatic route as well as by the Government of India (SIA). While submitting applications for raising foreign equity or for inducting foreign equity under automatic norms to the Reserve Bank of India or for obtaining approval of the Reserve Bank of India for allotment of shares under the applicable provisions of the Foreign Exchange Regulation Act, 1973 and guidelines thereunder, the companies shall work out the price according to the above guidelines and enclose them duly certified by a Chartered Accountant. However, in case of approvals from the government, the question of pricing of shares would be considered in accordance with above guidelines by the RBI and only after such government approval is given. The Government approval thus, would not go into the question of pricing of shares. The above guidelines shall also apply to all pending applications. D.

Procedures for Approvals

5. Applications for automatic approval under the eligibility criteria in para A will be filed with the Reserve Bank of India. In the case of expansion programme the application shall state clearly the description of the article to be manufactured in

ITC(HS) classification. The proposal shall be a composite one including detailed information on the capital goods to be imported for the project expansion programme. Under the provisions of the policy the proposed foreign equity must cover the import of capital goods required for the expansion programme. Similarly, in the case of companies not undertaking expansion programmes, the application shall describe the existing products of the company in ITC (HS) classification. 6. The Reserve Bank of India will issue the necessary permission for the foreign equity investment under the Foreign Exchange Regulation Act, 1973 (FERA) and guidelines thereon. Simultaneously the Reserve Bank of India will confirm that the import of capital goods is covered by the foreign equity. The import of capital goods will be governed by the import and Export Policy in force. E.

Dividend Balancing

7. The Statement on Industrial Policy had provided for the monitoring of outflow of foreign exchange on account of dividend payments which are to be balanced by export earnings over a period of time, and that this monitoring will be done by the Reserve Bank of India. The dividend balancing will be done on the following basis only in respect of foreign investment approvals in the consumer goods sector: i)

The balancing of dividend would be over a period of 7 years reckoned from the date of commencement of production for companies raising foreign equity for an expansion programme. For companies which are raising foreign equity without an expansion programme, this period will start from the date of allotment of the shares for raising foreign equity.

ii)

Remittance of dividends should be covered by earnings of the company from export of items in Annex-111. The amount of dividend payment maybe covered by export earnings of such items recorded in years of payment of dividend. The Reserve Bank of India will issue appropriate instructions to give effect to these provisions.

101

CHAPTER - I EXHIBIT NO.45 (Contd.) PRESS NOTE NO.2 (1994 Series) REVISED GUIDELINES FOR DETERMINING ISSUE PRICE OF PREFERENTIAL SHARES

F.

Other Proposals for Raising Foreign Equity in Existing Companies.

8. All other proposals for inducting or raising foreign equity in existing companies will be subject to usual procedures. Applications will be made to the Secretariat of Industrial Approvals in the Department of Industrial Development, Udyog Bhavan, New Delhi in the prescribed form FC (SIA) or to the Chairman FIPB, PM's Office, South Block, New Delhi. Plain paper applications carrying all relevant details are also accepted. No fee is payable. These applications can also be filed with the Indian Mission/ Embassies abroad. This will include proposals involving raising foreign equity upto 51% in existing companies which do not meet any or all of the criteria outlined for automatic approval.

No. 9(30)/92-F.C.(I)

G.

Classification System

9. Entrepreneurs may note that the description of article(s) to be manufactured should be stated according to the India Trade Classification (Harmonised System). 10. The description of Industries listed in Annex III of the Statement on Industrial Policy in the Indian Trade Classification (Harmonised System) is available in Press Notes No.ll (1991 Series). (Copies of the Indian Trade Classification Based on Harmonised Commodity Description and Coding System), published by the Ministry of Commerce, Directorate General of Commercial Intelligence and Statistics, Calcutta, can be obtained on payment from the Secretariat of Controller of Publications, I, Civil Lines, Delhi 110 054 or from any of the agents authorised to sell Government of India publications.

New Delhi, the 3rd June, 1994

The Press Information Bureau is requested to give wide publicity to this Press Note. Sd/(S. Behura) Joint Secretary to the Government of India

Principal Information Officer Press Information Bureau Shastri Bhawan New Delhi.

102

Industrial Policy Highlights EXHIBIT NO.46 PRESS NOTE NO.3 (1994 Series) SUBMISSION OF MONTHLY PRODUCTION RETURNS

According to the Scheduled Industries (Submission of Production Returns) Rules, 1979 notified by the Government under S.O. 328(E) dated 3rd May, 1979, all the Industrial Undertakings are required to submit monthly production returns to the concerned technical authorities and administrative ministries.

The new units or the existing ones who have commenced production of new articles are also required to furnish the monthly returns at the above address. If for such units, factory/product codes are not known, the returns may be filed without these codes until the codes are assigned and intimated to them by the Department.

The technical authority, namely, the Directorate General of Technical Development (DGTD) having been wound up on the 31st March, 1994, all the industrial undertakings who are to submit the returns to DGTD in Form-A and Form-B are directed to submit them hereafter at the following address in the new simplified proforma annexed hereto.

In order to capture the dynamism and emerging scenario in the industrial sector well within time by means of indicators like the Index of Industrial Production and to build an up-to-date information base, the industrial units are required to submit the returns for a particular month by the 10th ofthe next month without fail, as enjoined in the Scheduled Industries Rule, 1979.

Deputy Director (Statistics), Department of Industrial Development, Udyog Bhawan, New Delhi - 110 001

F. No. 10(30)/94-LP

New Delhi, the 20 October, 1994

Forwarded to Press Information Bureau for giving wide publicity to the contents of the above Press Note. Sd/(Jayalakshmi Jayaraman) Director

Principal Information Officer Press Information Bureau Shastri Bhawan New Delhi.

EXHIBIT NO. 46(Contd.) PRESS NOTE NO.3 (1994 Series)

Monthly Production Return Proforma Factor Name:

Month

Factory Address:

Year

Factory

Total Number

Code

of Employees

SI. No.

Product Name

Product Code Allocated

A/C Unit Code See Back

Installed Capacity

Production During the month in A/C Unit

in Rs.'000

1. 2. 3. 4. 5.

* 1. 4. 6.

Choose one Major Constraint if any, from below for each product. Indicate Sr. No. of Major Constraint Demand 2. Raw Material 3. Pawer Labour 5. Procedural Delay Machine Break Down

For More Products use another Name: Designation: Signature: Telephone:

To, Deputy Director (Statistics) Deptt. Of Industrial Development, Udyog Bhavan, New Delhi - 110 011 Fax : (011) - 3011770 Telex : (031) - 66565

Telex: Fax: Tel. No. of local contact if any:

Upto the Month (in A/C Unit) Since April

104

Industrial Policy Highlights EXHIBIT NO.46 (Contd.) PRESS NOTE NO.3 (1994 Series) SUBMISSION OF MONTHLY PRODUCTION RETURNS

SI. No.

Accounting Unit Name

1. 2. 3. 4. 5. 6. 7. 8. 9. 10. 11. 12. 13. 14. 15. 16. 17. 18. 19. 20. 21. 22. 23. 24. 25. 26. 27. 28. 29. 30. 31. 32. 33. 34. 35. 36. 37. 38. 39. 40. 41. 42. 43. 44. 45. 46.

Carates Core Km. Cub. Meter FWU H.P. K. Litre K. Meter K.V.A. KVAR KW Kg. Lack Boxes Lash Nos. Lakh H.P. Litre M.M.U. M.R.M. MIL.CU.MTR Meter Mil. Bottles Mill. Boxes Mill K.V.A. Mill. Mtrs. Mill. Nos. Mill. Pairs No. Bats. No. Pairs Numbers Reams Rs. Lakhs Run. Mtrs. Sq. Mtrs. TH.RS. Th. Lines Th. Run Mt. Th. Bottles Th. Cu. Mtrs. Th. M.U. Th. Nos. Th. Pairs Th. Pcs Th. Reams Th. Rolls Th. Sq. Mtrs. Th. Tonnes Tonnes

Accounting Code 49 17 34 55 61 32 12 63 68 69 41 92 53 67 31 66 16 36 11 88 85 64 13 54 78 58 91 51 72 71 14 21 70 93 15 87 35 65 52 77 79 73 89 22 43 42

CHAPTER - I EXHIBIT NO.47 PRESS NOTE NO.4 (1994 Series) MODIFIED POLICY FOR DRUGS & PHARMACEUTICALS INDUSTRY

The licensing aspects of drugs and pharmaceutical industry are regulated by the provisions of the Industries (Development and Regulation)Act, 1951. Till recently the drugs and pharmaceutical industry was under licensing in terms of Ministry of Industry's exemption Notification No.477(E) dated 25th July, 1991. The review of the Drug Policy of 1986 was under consideration of the Government for quite sometime in the context of the liberalised economic policies introduced since mid 1991. Government have now finalised the modifications required to be made in the Drug Policy, 1986. Details of such modifications have been outlined in the booklet "Modifications in Drug Policy, 1986" issued by the Department of Chemicals & Petrochemicals in September, 1994. The modified Policy relating to industrial licensing, foreign investment and foreign technology agreement is as follows: 1. Licensing Industrial licensing for all bulk drugs and their formulations and for intermediates stands abolished except for the following: (a) Bulk drugs (reserved for public sector) ITC Code

Item Description

1. 253622.00 2. 293623.00

Vitamin Bl (Thiamin anacin) and its salts and derivatives Vitamin B2 (Riboflavin) and its salts and derivatives

3. 293629.02

Folic acid

4. 294130.09

Tetracycline and its salts

5. 294130.10

Oxytetracycline and its salts

(b)

(c)

Bulk drugs involving use of re-combiant DNA technology and bulk drugs requiring in vivo use of nucleic acids as the active principles. Formulation based on use of specific cells/tissue-targetted formulations.

(Note: An illustrative list of the items falling under category (b) and (c) above is at Annex-1. These items have not been classified under Indian Trade Classification (Harmonised system).

In respect of all other items, industrial undertakings are required to file a Memos randum in the prescribed form (Form IEM) along with the proforma attached (Annex-11) with this Press Note with the Secretariat for Industrial Approvals (SIA), Department of Industrial Development, Udyog Bhawan, New Delhi-110 011 with 5 spare copies along with a crossed Demand Draft of Rs.1000/drawn in favour of the 'Pay and Accounts Officer, Department of Industrial development, Ministry of Industry' payable at the State Bank of India, Nirman Bhawan Branch, New Delhi. All units wanting to go in for expansion would also have to file the IEM as above. However, even for delicensed items, licence would be required for locational reason. Non-Small Scale Units proposing to manufacture items reserved for small scale sector will also require industrial licence. Where industrial licence is compulsory, entrepreneurs are required to submit the application in the prescribed form (Form IL) I along with the application fee of Rs.2500/-.The instructions relating to locational restrictions, substantial expansion and broad banding/manufacture of new article contained* in Press Note No.9 (1991 Series) dated 2nd August, 1991 will also apply to drugs and pharmaceutical industry. Grant of COB licence ' will also be in accordance with the existing policy and procedures. 2. Processing of pending IL Applications Applications pending for grant of Letter of Intent and other pending cases such as representations against prima facie rejection, change of name, change of location, conversion of LOI to IL etc. which do not come within the purview of compulsory licensing in terms of the modified Drug Policy will be scrutinised in the light of this Press Note and in respect of those cases which qualify for exemption from licensing, the applicants will be advised to submit Memoranda to the SIA as per procedure outlined above. 3. Position of LOI Holder In respect of Letters of Intent (LOIs) granted in the past for the manufacture of items now falling under exempted category, LoI holder need not file an initial memorandum if he has already taken steps to implement the project. In such cases the LOI holder shall only file that part of the memorandum which is required to be submitted at the time of announcement

105

106

Industrial Policy Highlights EXHIBIT NO.47 (Contd.) PRESS NOTE NO.4 (1994 Series) MODIFIED POLICY FOR DRUGS & PHARMACEUTICALS INDUSTRY

of commercial production. In such cases no application fee will be paid. It is, however, open to entrepreneurs to file an initial memorandum if they so desire wherever any variation is comtemplated from the conditions stipulated in the Letter of Intent. 4. Foreign Investment/Foreign Technology Agreements At present drugs and pharmaceutical industry is included in Annex-III to the Statement on Industrial Policy on Jully, 1991. However, approval for foreign investments/foreign technology agreements was being accorded according to the provisions of Drug Policy, 1986. It has now been decided that foreign investment upto 51% and foreign technology agreements in the case of all bulk drugs, their intermediates and

F. No. 10(11)/92-LP

formulations thereof (except those produced by the use of recombinant DNA technology) will be granted automatic approval subject to the parameters by the Reserve Bank of India. The automatic approval of RBI will be available to all the items of drugs and pharmaceutical industry covered by the Annex-III of the Press Note No. 10 (1992 Series) dated 24th June, 1992. Other proposals which do not qualify for automatic approval schemes require approval of the Government on a case to case basis. Applications for such proposals will be required to be submitted Secretariat for Industrial Approvals (SIA), Department of Industrial Development, Ministry of Industry, Udyog Bhawan, New Delhi or FIPB, PM's Office, South Block, New Delhi in Form FC(SIA) as per the existing procedure.

New Delhi, the 25 October, 1994

Forwarded to Press Information Bureau for giving wide publicity to the contents of the above Press Note. Sd/(Jayalakshmi Jayaraman) Director

Principal Information Officer Press Information Bureau Shastri Bhawan New Delhi.

107

CHAPTER - I EXHIBIT NO.47 (Contd.) PRESS NOTE NO.4 (1994 Series) MODIFIED POLICY FOR DRUGS & PHARMACEUTICALS INDUSTRY

ANNEX-I Illustrative List of Products produced by recombinant DNA technologies intended to be used as therapeutics, prophy-lactics, immunostimulators, and any other uses related to health of human and animal 1.

Bioactive therapeutic proteins and protein hormones.

2.

Nucleic acids.

3.

Peptides.

4.

Therapeutic enzymes.

5.

Immunogenic agents.

6.

Others.

108

Industrial Policy Highlights EXHIBIT NO.47 (Contd.) PRESS NOTE NO.4 (1994 Series) MODIFIED POLICY FOR DRUGS & PHARMACEUTICALS INDUSTRY

ANNEX-II ADDENDUM TO THE MEMORANDUM TO BE FILLED BY THE ENTREPRENEURS IN RESPECT OF PROPOSALS FOR DRUGS AND PHARMACEUTICALS COVERED UNDER NOTIFICATION REGARDING EXEMPTION FROM INDUSTRIAL APPROVALS Information to be furnished for each item of manufacture separately : A.

PROPOSALS FOR BULK DRUGS/DRUG INTERMEDIATES 1.

Name of the proposed item of manufacture :

2.

Approval under Drugs and Cosmetics Act, 1940 and Rules made thereunder : (Please indicate date and reference number of the approval, for use in the country, of the proposed Bulk Drug or of the Bulk Drug for which the proposed Drug Intermediates will be used, as the case may be, and enclose a copy thereof)

3.

Proposed Annual Capacity :

a.

Quantity (Unit)

b.

Ex-factory Value of Production (Rs. in lakhs) :

c.

CIF Value of :

4.

i)

Imported raw materials required per kg of product (Rs.)

ii)

Product (if imported) (Rs. per kg.)

Description of proposed process : (Please furnish schematic diagram of chemical reaction sequences by giving chemical structures of reactants and products at each step.)

5.

Source of Technology : a.

Developed through own R&D : (Please give details of work done)

b.

Procured from indigenous sources (*) :

c.

Involves Foreign Collaboration (*) : (* Please furnish name and address of the source and terms of payment)

6.

Raw Material requirement for the proposed annual capacity :

SI. No.

Name of Raw Material

(1)

(2)

B. SI. No.

(1)

Unit

(3)

Quantity

Rs. in lakhs CIF Value if imported

Cost at Factory

(4)

(5)

(6)

Bulk Drug

PROPOSALS FOR FORMULATIONS Name of the Formulation and Dosage Form

(2)

Capacity

(3)

Name

Strength

Total Qty Kg/Lit

(4)

(5)

(6)

Value Rs. in Lakhs (7)

SDC Approval no. and Date (8)

109

CHAPTER - I EXHIBIT NO.48 PRESS NOTE NO.5 (1994 Series) MANUFACTURE OF CAUSTIC AND CHLORINE

Under the New Industrial Policy, Chlorine and Caustic Soda are covered under 'Hazardous Chemicals' and are, therefore, subjected to compulsory licensing. Entrepreneurs intending to manufacture these items are required to obtain industrial licence from the Department of Industrial Development. While considering IL applications for these items, environmental interests are given due consideration keeping in view the hazardous nature of these items. Most often information relating to chlorine utilisation programme is not available in the applications filed by

the entrepreneurs and due to lack of this information it becomes difficult to take a decision on such applications. In order to ensure speedy disposal of applications for grant of letter of intent for the manufacture of chlorine and caustic soda along with other associated products and to obviate the need of back references to the entrepreneurs, it has been decided that entrepreneurs will furnish information regarding chlorine utilisation programme in the enclosed proforma along with the IL applications.

F. No.10(43)/94-LP

New Delhi, the 28 December, 1994

Forwarded to Press Information Bureau for giving wide publicity to the contents of the above Press Note. Sd/(Dhiraj Mathur) Deputy Secretary

Principal Information Officer Press Information Bureau Shastri Bhawan New Delhi.

ANNEX CHLORINE UTILISATION PROGRAMME Name of Distance Item of Consuming from the Consumption unit proposed location (in Kms)

Annual Consumn of the unit during last year (TPA)

Present source from which consumed

Distance of the source from the consumer unit (in Kms)

Likely Reasons consumption for consfrom the mntion proposed from the unit (TPA) proposed unit

(1)

(4)

(5)

(6)

(7)

(2)

(3)

(8)

110

Industrial Policy Highlights EXHIBIT NO.49 PRESS NOTE NO.1 (1995 Series) REVISED NORMS FOR AUTOMATIC APPROVAL OF FOREIGN TECHNOLOGY AGREEMENTS IN THE HOTEL INDUSTRY

This Ministry's Press Note No.18(1991 Series) dated 25th November, 1991 has prescribed separate norms for grant of automatic approval by the Reserve bank of India for foreign technical collaborations in respect of hotel industry. These were stipulated in para 3 of the said Press Note as detailed below :(a)

Technical and Consultancy Service: Lumpsum fee not exceeding US $ 200.000.

(b) Franchising & Marketing/Publicity support: Upto 3% of the gross room sales. (c) Management Fees: Upto 10% of the foreign exchange earnings provided the foreign party puts in 25% of the equity. This will also cover payments for marketing and publicity support. 2. The Government have reviewed these norms in the context of the practice in the hotel sector and the availability of foreign exchange at market determined rates. Consequently, the Government has now decided to prescribe the following revised norms for grant of automatic approval by Reserve Bank of India for foreign technical collaborations in the hotel industry:(i)

Technical and Consultancy Services including Fees for Architect, Design, Supervision, etc. Upto 3% of the capital cost of the project (less cost of land and finance).

(ii)

Financing Fee:

and Marketing/Publicity Support

Upto 3% of net turnover (Net turnover is gross

F. No.5(43)/94-FC(I)

receipts less credit card charges, travel agents' commission, sales tax, statutory payments, etc.) (iii) Management Fees (including incentive Fee): Upto 10% of gross operating profit. 3. The above norms are applicable provided, the collaboration is proposed with companies running/ managing hotel(s) with atleast 500 rooms. 4. It may be mentioned that the parameters mentioned in para 2 are applicable only for obtaining automatic approval from the Reserve Bank of India for foreign technical collaboration in respect of the hotel sector. As such, the norms prescribed for other industries, i.e. lumpsum payment of Rs.l crore. 5% royalty for domestic sales and 8% for exports, subject to a total payments of 8% on sales over a period of 10 years from the date of agreement or 7 years of commencement of production are not applicable for the hotel sector. As already prescribed, the application for automatic approval for such foreign technology agreements has to be submitted in Form FC(RBI) to the Reserve Bank of India, Exchange Control Department, Shaheed Bhagat Singh Road, Bombay - 400 023. 5. Proposals for foreign technical collaboration in the hotel sector which are not covered by the norms indicated above will be dealt under the normal procedure. Applications in respect of such proposals have to be submitt.cd in Form FC(SIA) to the Secretariat for Industrial Approvals, Ministry of Industry. Udvoe Bhavan. New Delhi.

New Delhi, the 21st March, 1995

Forwarded to Press Information Bureau for giving wide publicity to the contents of the above Press Note. Sd/(Ashok Kumar) Joint Secretary

Principal Information Officer Press Information Bureau New Delhi.

111

CHAPTER - I EXHIBIT NO.50 PRESS NOTE NO.2 (1995 Series) REVISED GUIDELINES ISSUED FOR DETERMINING ISSUE PRICE OF PREFERENTIAL SHARES

The procedure for raising foreign equity in existing companies in India and the guidelines for determining the issue price of preferential shares, have been laid down in this Ministry's Press Note No.2(1994 Series) issued on 3rd June, 1994. In pursuance of the objective set out in paragraph 4 of this Press Note No.2 of 1994, the Government of India, in consultation with the Reserve Bank of India, had decided that preferential allotment of shares by companies would be at market related price. Accordingly, the guidelines for determining the price were also specified in the said paragraph 4. After issue of these guidelines, fresh guidelines had been issued by the Securities & Exchange Board of India as contained in its press release dated 4 August, 1994. While the SEBI guidelines were also issued to ensure that the pricing of preferential allotment is market related, the pricing formula has been different than the pricing formula specified in this Ministry's Press Note No.2 (1994 Series). In order to avoid any conflict between the two sets of guidelines and to ensure that the companies follow similar guidelines as regards the pricing of preferential issues, the Government of India, in consultation with the Reserve Bank of India, have decided to substitute Paragraph 4 of Press Note No.2 (1994 Series) dated 3rd June, 1994 with the following:"Issue of Shares and Share Valuation 4. Consequent to the repeal of the Capital Issues (Control) Act of 1947 and issue of guidelines by the SEBI on 11th and 17th June, 1992, existing companies wishing to raise foreign equity can make the issue at the price determined by the shareholders in a special resolution under Section 81(IA) of the Companies Act. However, some proposals received from existing companies for enhancement of foreign equity show a tendency for the issues to be significantly underpriced in relation to the market price. Whereas companies are able to issue foreign equity at a large discount to the market price, the present RBI policy for dis-investment permits shares etc. to be sold at the prevailing market related price. This can cause distortion in the balance of inflow/outflow of foreign exchange. This further rationalisation of policy is required with the following objectives.

i)

To prevent a few shareholders from getting substantial and undue enrichment and unearned gains.

ii)

To prevent undue reductions in foreign equity inflow.

iii)

To make both investment and disinvestment market-related.

In pursuance of these objectives, the Government of India, in consultation with the Reserve Bank of India) have decided that henceforth every preferential allotment of shares by companies raising foreign equity shall, unless the Reserve Bank, in consultation with the Government determine otherwise, by a notification, be at a price to be determined as provided hereunder: Every preferential allotment of shares (other than allotment on rights basis) by listed companies, to foreign investors shall be at market price of the shares. For the purpose, the price shall not be less than the higher of the following: The average of the weekly high and low of the closing prices of the related shares quoted on the stock exchange during the six months preceding the relevant date: OR the average of the weekly high and low of the closing prices of the related shares quoted on a stock exchange during the two weeks preceding the relevant date. Explanation: (a)

"relevant date" for this purpose means the date thirty days prior to the date on which the meeting of General Body of shareholders is convened, in terms of Section 81(IA) of the Companies Act to consider the proposed issue:

(b) "stock exchange" shall mean any of the stock exchanges in which the shares are listed and in which the highest trading volume in respect of the shares of the company has been recorded during the preceding six months prior to the relevant date.

112

Industrial Policy Highlights EXHIBIT NO.50 (Contd.) PRESS NOTE NO.2 (1995 Series) REVISED GUIDELINES ISSUED FOR DETERMINING ISSUE PRICE OF PREFERENTIAL SHARES

The above guidelines of pricing in connection with preferential allotment to nonresidents will apply to all foreign investment approvals to be issued by the Reserve Bank of India under the automatic route as well as by the Government. While submitting applications for raising foreign equity or for indicating foreign equity under automatic norms to the Reserve Bank of India or for obtaining approval of the Reserve Bank of India for allotment of shares under the applicable provisions of the Foreign Exchange Regulation Act, 1973 and the guidelines thereunder, the companies shall work out the price according to the above guidelines and enclose them duly certified by Statutory auditors. However, in case of approvals from the Government, the question of pricing of

F. No.9(30)/92-F.C.(I)

shares would be considered in accordance with above guidelines by the RBI and only after such government approval is given. The Government approval thus, would now go into the question of pricing of shares. The shares allotted on preferential basis will not be transferable in any manner for a period of five years from the date of their allotment." The guidelines contained in paragraph 4 of this Ministry's Press Note No.2 (1994 Series) shall stand amended accordingly. These amendments shall come into force with immediate effect and shall apply to all application pending with the Reserve Bank.

New Delhi, the 10 April, 1995

Forwarded to Press Information Bureau for giving wide publicity to the contents of the above Press Note. Sd/(Ashok Kumar) Joint Secretary

Principal Information Officer Press Information Bureau New Delhi.

113

CHAPTER - I EXHIBIT NO.51 PRESS NOTE NO.3 (1995 Series) REVISED POLICY AND PROCEDURE GOVERNING APPROVAL UNDER THE SCHEME FOR 100% EOUS & EPZS

The policy and procedure governing approvals under the schemes for EOUs and EPZ units was prescribed vide Press Note No.l3(1991 Series) dated 9th October, 1991. In the context of the ongoing economic liberalisation, Government have further reviewed the policy and procedure governing such approvals. Accordingly, Government have now decided to supersede Press Note No.l3(1991 Series) with the following guidelines:A) Approvals: i)

ii)

B)

All proposals confirming to the prescribed parameters (specified in this Press Note) shall receive automatic approval within two weeks from the Secretariat for Industrial Approvals (SIA), Ministry of Industry (Department of Industrial Development) in the case of 100% EOUs and from the Development Commissioners (DCs) concerned for units to be set up in the Export Processing Zones (EPZ). All other proposals which do not confirm to the parameters for automatic approval, shall be considered by the Board of Approvals (80A) and disposed within 45 days through the SIA in the Ministry of Industry (Department of Industrial Development).

Procedure for Application:

Applications for securing both types of approvals (automatic or through the 80A) shall be submitted to the SIA for 100% EOUs and to the Development Commissioners concerned in respect of units to be set up under EPZs. The application form shall be same namely "Application form for EOU/EPZ Unit". The application form shall be submitted in 10 copies. The application will be accompanied by Crossed Demand Draft for RS.IOOO/- (Rs.2500/- in case of items falling under Schedule I and 11 of Notification No.477(E) dated 25.7.1991, (as subsequently amended) of the Department of Industrial Development) drawn in favour of the Pay and Accounts Officer, Department of Industrial Development, Ministry of Industry, payable at the State Bank of India, Nirman Bhavan Branch, New Delhi.

Receipt of the application will be acknowledged by the SIA or the DCs as the case may be and a reference number will be given which the applicant shall quote in all future correspondence. C.

Criteria for automatic approvals.

The following will be the criteria for securing automatic approval from the SIA in respect of 100% EOUs and from the Development Commissioners concerned in respect of EPZ Units: (i)

the project is not included in Schedule I or II of Notification No.477 (E) dated 25.7.1991 (as subsequently amended) issued under the Industries (Development & Regulation) Act, 1951;

(ii)

the project is located either within an EPZ, for which availability of space and confirmity with the environmental and other standards of the EPZ has been confirmed from the DCs, or in an area other than EPZs for which the locational conditions stipulated by the Department of Industrial Development have been compiled with;

(iii) the project undertakes to achieve Value Addition, as per the norms specifically fixed for the items concerned in the EXIM Policy or atleast 15% for Electronic Hardware manufacturing Units or 20% in case of any other industries; (iv) the GIF value of imported Capital Goods is financed through foreign equity or foreign exchange required for import of plant/equipment (net of taxes) is within the ceiling of Rs.lO crores. Import of second-hand CG may be allowed provided an Import licence is not required; (v) the foreign technology agreement, if any, entered into by the unit, is restricted to a lumpsum payment of Rs.l crore or 8% royalty (net of taxes), over a period of 5 years from the commencement of production;

114

Industrial Policy Highlights EXHIBIT NO.51 (Contd.) PRESS NOTE NO.3L (1995 Series) REVISED POLICY AND PROCEDURE GOVERNING APPROVAL UNDER THE SCHEME FOR 100% EOUS & EPZS

(vi) the exports by the unit are not to be physically made to the GCA (General Currency Area);

(c) setting up private bonded warehouse under para 115 of the EXIM Policy 1992-97. (d) setting up unbonded integrated Aquaculture/Horticulture projects, and

(vii) the unit meets the requirements of the Custom Authorities in so far as; (a)

(e)

It involves manufacturing activities within the ambit of Section 3 of the Central Excises and Salt Act, 1944;

(b) it is amenable to bonding by the Customs; (c) all the manufacturing operations are carried out in the same premises and the proposal does not envisage sending out of the bonded area any RM or inter-mediate products for any other manufacturing or processing activity. (viii) the unit has projected minimum export turnover, as specified in the Handbook of Procedure. Conversion of DTA Units: Applications for conversion of existing DTA units into EOUs, where there is no outstanding export obligation under EPCG Scheme or Advanced Licensing Scheme, will be allowed, if such DTA unit satisfies the parameters for automatic approval. Ratification by BOA: The SIA and the DCs concerned shall place before the BOA in its next meeting summary of each order issued by them under the powers delegated to them for ratification. Note: Applications envisaging (a)

'Deemed Experts' under EXIM Policy.

(b) DTA sale by EOUs/EPZ units requiring formal approval of BOA under Appendix XXXIII of Handbook of ProcedureVolume I.

D.

Import/Export of items covered under EXIM Policy restrictions, will not be eligible for consideration under Automatic Approval Scheme and will be placed before the Board of Approvals.

Miscellaneous

Schedule I, II, III : The industries that appear in Schedule I, II and III of Notification No.477(E) dated 25.7.1991 of the Department of Industrial Development (as amended from time to time) shall also be permitted for being set-up as 100% EOUs or in the Export Processing Zones. Customs Requirements: EOUs and EPZ Units shall meet the requirement of Custom Authorities in regard to bonding, nature of activity carried out, subcontracting etc. ITC Classification: Entrepreneurs may note that the description of article(s) to be manufactured should be stated according to the Indian Trade Classification System. Copies of the Indian Trade Classification (based on the Harmonised) Commodity Description and Coding System), published by the Ministry of Commerce, Directorate General of Commercial Intelligence and Statistics, Calcutta, can be obtained on payment from the Controller of Publications, I, Civil Lines, Delhi - 110 054 or from any of the agents authorised to sell Government of India Publications.

F. No.10(53)/91-LP

New Delhi, the 19th April, 1995

Forwarded to Press Information Bureau for giving wide publicity to the contents of the above Press Note. Sd/(Dhiraj Mathur) Deputy Secretary Principal Information Officer, Press Information Bureau, New Delhi. Note:

LPress Note No.3(1995 Series) has been amended by Press Note No.8(1997 Series)

115

CHAPTER - I EXHIBIT NO.51 (Contd.) PRESS NOTE NO.3 (1995 Series) REVISED POLICY AND PROCEDURE GOVERNING APPROVAL UNDER THE SCHEME FOR 100% EOUS & EPZS

APPENDIX MINIMUM VALUE ADDITION REQUIREMENT FOR CERTAIN ITEMS UNDER EOU/EPZ SCHEME I.

ELECTRONICS Computer Software

II.

60%

TEXTILES (a)

Readymade garments

40%

(b) Made-ups

30%

(c) Cotton yarn and cotton polyster yarn (ring spindles spun)

30%

(d) Cotton Yarn and cotton polyster yarn (open-end spinning)

30%

(e)

Piece Goods

30%

(f)

Denim fabrics

30%

(g) Terry towels

30%

(h) Silk fabrics

30%

III. Leather Products (a)

Leather footwear

30%

(b) Leather shoe uppers

30%

(c) Leather garments/goods

30%

(d) Sports shoes/sports footwear

30%

IV. Gem & Jewellery (a)

V.

Plain gold jewellery

10%

(b) Studded gold jewellery

15%

(c) Silver jewellery

25%

Others (a)

Latex gloves

40%

(b) Granite

50%

(c) Test and measuring instruments; industrial control/valves, photo-copies and medical and scientific instruments

20%

(d) Clocks/Time pieces/Wrist Watches

30%

(e)

Cigarettes

35%

(f)

Cigarette lighters

40%

(g) Bristles, including brushes

30%

(h) Tissue culture plants

60%

116

Industrial Policy Highlights EXHIBIT NO.52 PRESS NOTE NO.4 (1995 Series) DELEGATION OF POWERS FOR 100% EOUS EPZ UNITS

Government had delegated powers to the Development Commissioners of the Export Processing Zones (EPZs)vide Press Note No. 14 (1991 Series) dated 26th September, 1991 and Press Note No.5 (1993 Series) dated 30th June, 1993. In the context of the ongoing economic liberalisation. Government have further reviewed the position and decided to supersede these press notes with the revised delegation of powers to DCs under the EPZ/ EOU Scheme, within their respective jurisdiction. The delegation of powers authorises the Development Commissioners of the Export Processing Zones to exercise the following powers: 1.

6.

To authorise the change in the name of the company or the implementing agency subject to the following conditions: (1) For change from an individual to a Company provided:

Additional import of capital goods (CG):

To allow increase in the total value of imported Capital Goods to the extent of 50% of approved value, subject to a maximum of Rs.lO.OO crores, whether by import of additional items, or by increase in the price of permitted items. One or more requests can be entertained in this regard. 2.

a)

the new company is promoted by the applicant;

b)

he is a subscriber to the Articles and Memorandum of Association of the new company;

c)

he subscribes to the tune of atleast 10% of the issued equity capital of the new capital and;

d)

the individual is a Director of the new Company.

(2) For change from a company to another company provided:

Currency fluctuations:

To allow increase in the value of Capital Goods imports in terms of Rupees, owing to foreign exchange rate fluctuations vis-a-vis foreign currencies. 3.

Change in name:

Attestation of list of imported capital goods:

a)

the transferee Company is a fullyowned subsidiary of the company holding the letter of intent or permission letter or viceversa; or

b)

a new company has been promoted for the purpose of implementing the Scheme after the grant of Letter of Intent or Letter of Approval, with atleast 10% of the issued equity held by the existing company; and change of name would be permitted only if the new unit undertakes to take over the assets and liabilities of the existing unit.

To attest list of imported capital goods, both new and second-hand, within the approved value, including additional value permitted in (1) above. 4.

Capacity enhancement:

To permit capacity enhancement ofEOUs/ EPZ units, without any limit in respect of delicensed industries only, provided the requirement of additional imported Capital Goods does not exceed 50% of approved value subject to a maximum of Rs.lO.OO crores. 5.

Broad Banding:

To permit broad-banding subject to the condition that it does not result in procurement of additional capital goods imports beyond 50% subject to a maximum of Rs.lO.OO crores. Broad-banding will be allowed in respect of only those industries, the design and production facilities of which are common and have similar manufacturing process and where physical exports are envisaged.

7.

Change of location:

To permit change of location from the place mentioned in the Letter of Approval/Letter of Intent to another, provided: a)

no change in other terms and conditions of the approval is envisaged;

b)

the new location is within the territorial jurisdiction of the DCs;

c)

the new location is at a warehousing station declared by the Custom Authorities;

117

CHAPTER - I EXHIBIT NO.52 (Contd.) PRESS NOTE NO.4L (1995 Series) DELEGATION OF POWERS FOR 100% EOUS EPZ UNITS

d)

8.

other locational, zoning, land-use or environmental conditions are also complied with.

Extension of validity of Letters of Intent/ Letters of Approval:

To extend the validity of Letters of lntent/ Letters of Approval: a)

in the case of EPZ units by one year beyond the initial validity period of one year; and

b)

in the case of EOUs by one year beyond the initial validity period of three years.

provided that DCs are satisfied that the party has taken bonafide steps to implement the Letters of Intent/Letter of Permission. 9.

Change in value addition:

To receive the value addition percentage upward or downward upto the minimum Value Addition percentage as prescribed for the item of manufacture under the Policy. 10. Disposal of Obsolete Capital Goods: To allow disposal of obsolete Capital Goods on the payment of duties. While granting permission for the disposal of obsolete machinery, the DCs and EPZ

F. No.10(53)/91-LP

shall give due consideration as to whether the machinery has been used for a period of 5 years and also whether the machinery being disposed of will be replaced. 11. Import of Office Equipment: To permit import of Office Equipment, not exceeding 20% of the total capital goods value, subject to a maximum of Rs-25.00 (twenty five) lakhs. Member Secretary of Board of Approvals for 100% EOUs shall also exercise the powers delegated above in respect of EOUs. 3. All cases of units originally approved under Automatic Approval Scheme, shall be brought to the Board of Approvals when the revised parameters do not conform to the conditions laid-down under this Scheme. 4. The Secretariat for Industrial Approvals, Ministry of Industry, (Department of Industrial Development) and the Development Commissioners concerned shall place before Board of Approvals in its next meeting summary of each order issued by them under the powers delegated to them for ratification.

New Delhi, the 19th April, 1995

Forwarded to Press Information Bureau for giving wide publicity to the contents of the above Press Note. Sd/(Dhiraj Mathur) Deputy Secretary

Principal Information Officer Press Information Bureau New Delhi. Note:

LPress Note No.4(1995 Series) has been amended by Press Note No.15(1997 Series)

118

Industrial Policy Highlights EXHIBIT NO.52 (Contd.) PRESS NOTE NO.4 (1995 Series) DELEGATION OF POWERS FOR 100% EOUs EPZ UNITS

JURISDICTION OF DEVELOPMENT COMMISSIONER OF EPZs/EOU 1. The Development/Joint Development/ SEEPROZONE Deputy Development/Assistant Develop BOMBAY ment Commissioner, Santa Cruz EPZ, Tlx: 011-75027 Andheri East, Bombay. SEEPZ IN Fax: 022-8321169

Units Situated in Santa Cruz EPZ and approved 100% EOUs located in Maharashtra, Goa, Daman & Diu, Dadra and Nagar Haveli.

2. The Development/Joint Development/ Deputy Development/Assistant Development Commissioner, Kandla Free Trade Kandla, Gandhidham.

KAFTZ GANDHIDHAM Tlx: 105-214 KFTZIN Fax: 02836-52194

Units Situated in Kandia Free Zone and approved 100% EOUs situated in Gujarat.

3. The Development/Joint Development/ Deputy Development/Assistant Development Commissioner, Madras Export Processing Zone, G.S.T. Road, N.H.45, Tambaram, Madras 600 045.

MEPZ MADRAS Tlx: 041-26047 MEPZ IN Fax: 044-465220

Units Situated in Madras Export Procssing Zone and approved 100% EOUs situated in Tamil Nadu, Andaman & Nicobar Islands, Union Territory of Pondicherry excluding Maha and Yanam

4. The Development/Joint Development/ Deputy Development/Assistant Development Commissioner, Cochin Export Processing Zone, Kakkanad, Cochin - 682 030.

CEPZONE ERNAKULAM Tlx: 088-56590 CEPZ IN Fax: 0484-422530

Units Situated in Cochin Export Procssing Zone and approved 100% EOUs situated in Kerala, Karnataka, Lakshadweep and Maha.

5. The Development/Joint Development/ Deputy Development/Assistant Develop ment Commissioner, Noida Export Processing Zone, Noida Dadri Road, Phase-11, Noida Distt.-Ghaziabad-201 305.

LIVWELL NEW DELHI Tlx: 0595201 CEPZ IN Fax: 89-62314

Units Situated in Noida Export Procssing Zone and approved 100% EOUs situated in Delhi, Uttar Pradesh, Punjab, Haryana, Himachal Pradesh, Jammu & Kashir, Rajasthan, Madhya Pradesh and Chandigarh.

6. The Development/Joint Development/ Deputy Development/Assistant Development Commissioner, Falta Export Processing Zone, 2nd MSO Building, Room No,4, Nizam Palace, 234/4, Bose Road, Calcutta.

FEPZ CALCUTTA Tlx: 0215292 FEPZ IN Fax: 033-2477923

Units Situated in Falta Export Procssing Zone and approved 100% EOUs situated in West Bengal, Orissa, Bihar, Assam, Arunachal Pradesh, Tripura, Manipur, Meghlaya, Nagaland, Mizoram, & Sikkim.

7. The Development/Joint Development/ Deputy Development/Assistant Development Commissioner, Visakhapatnam Export Processing Zone, Udyog Bhavan Complex, Siripuram Junction.

VEPZ VISAKHAPATNAM Tlx: 0495334 VEPZ IN Fax: 0891-51259

Units Situated in Visakhapatnam Export Processing Zone and approved 100% EOU situated in Andhra Pradesh and Yanam.

119

CHAPTER - I EXHIBIT NO.53 PRESS NOTE NO.1 (1996 Series) MANUFACTURE OF ASBESTOS & ASBESTOS BASED PRODUCTS

The Government had set up a Technical Committee to undertake a comprehensive study, covering all aspects relating to asbestos and asbestos based products. After examining the matter in depth, the Technical Committee has given its report to the Government. The Government, after considering the report, has accepted the recommendation of the Technical Committee. 2. Keeping in view the recommendations of the Technical Committee, the Government has interalia decided that the applications for the manufacture of asbestos and asbestos based products, for the grant of LOI/IL shall be considered subject to the following conditions: (i)

(ii)

The Company shall obtain necessary central environmental clearance before converting LOI into licence, as stipulated in GOI Notification No.S.0.60(E), dated 27th January, 1994 of Ministry of Environment & Forests; The discharge of asbestos fibre in the factory premises shall be so controlled that it does not exceed the limit of 2 fibre/ cc. Continuous measurement of its pollutants in the area may be taken and record must be maintained.

F. No.10(6)/96-L.P.

(iii) The BIS Standards prescribed for use of asbestos under controlled and regulated conditions, which are listed at Annexure1 must be followed compulsorily by the Company; (iv) The Company shall provide medical health care facilities regularly at the workplace and if cases of harmful effect of asbestos have been noticed on any worker, necessary compensation shall be arranged under the existing laws; and (v) The Company shall adhere to all other existing laws regarding safety of labourers, employment of child labour, Factories Act, ptr 3. In order to ensure speedy disposal of applications for grant of Letter of Intent/Industrial Licence, for manufacture of asbestos and asbestosbased products and to obviate the need of back reference to the entrepreneurs, it has been decided that all applications for grant of industrial license in the asbestos sector would be considered in the Approval Committee(s) only after these have been examined in depth by the Administrative Ministry/ Desk concerned vyith respect to the prescribed standards/safeguards as mentioned above.

New Delhi, the 8th March, 1996.

Forwarded to Press Information Bureau for giving wide publicity to the contents of the above Press Note. Sd/(Aditi S. Ray) Deputy Economic Adviser

Principal Information Officer Press Information Bureau New Delhi.

120

Industrial Policy Highlights EXHIBIT NO.53 (Contd.) PRESS NOTE NO.1 (1996 Series) MANUFACTURE OF ASBESTOS & ASBESTOS BASED PRODUCTS

ANNEX-I LIST OF BIS STANDARDS 1.

IS:11450-1986 Method for determination of airborne asbestos fibre concentration in work environment by light microscopy (membrane filter method)

2.

IS:11451-1986 Recommendations for safety and health requirements relating to occupational exposure to asbestos.

3.

IS:11767-1986 Recommendations for cleaning of premises and plants using asbestos fibres.

4.

IS:11768-1986 Recommendations for disposal of asbestos waste material.

5.

IS:11769 (Part-1)-1987 Guidelines for safe use of products containing asbestos : Asbestos Cement products.

6.

IS:11769 (Part-2)-1986 Guidelines for safe use of products containing asbestos : Friction material.

7.

IS:11769 (Part-3)-1986 Guidelines for safe use of products containing asbestos : Non-cement asbestos products other than friction material.

8.

IS:11770 (Part 1)-1987 Recommendations for control of emission of asbestos dust in premises manufacturing products containing asbestos dust in premises manufacturing products containing asbestos : Asbestos Cement Products.

9.

IS:11770 (Part 2)-1987 Recommendations for control of emission of asbestos dust in premises manufacturing products containing asbestos : Friction materials.

10. IS:11770(Part 3)-1987 Recommendations for control of emission of asbestos dust in premises manufacturing products containing asbestos : Non-cement asbestos products other than friction material. 11. IS:12078-1987 Recommendatios for personal protection of workers engaged in handling asbestos. 12. IS:12079-1987 Recommendations for packaging transport and storage of asbestos. 13. IS:12080-1987 Recommendations for local exhaust ventilation systems in premises manufacturing products containing asbestos. 14. IS:12081 (Part-1)-1987 Recommendations for pictorial warning signs and precautionary notices for asbestos and products containing asbestos : Workplaces. 15. IS:12081 (Part 2)-1987 Recommendations for pictorial warning signs and precautionary notices for asbestos and products containing asbestos : Asbestos and its products. 16. IS:12082 (Part 1)-1987 Recommendations for control of asbestos emission : Mining of asbestos ore.

121

CHAPTER - I

EXHIBIT NO.54 PRESS NOTE NO.2 (1996 Series) MANUFACTURE OF CELLULOSE FIBRE CEMENT BASED ON ASBESTOS FREE AND NON-WOOD PULP MATERIAL

Subject: Exemption from obtaining Industrial Licence for the Manufacture of Cellulose Fibre Cement based on Asbestos free and non-wood pulp material. Under the New Industrial Policy announced on 24th July, 1991, asbestos and asbestos based products had been retained under compulsory licensing. Articles of asbestos cement and cellulose fibre cement have a common ITC Code 68.11 included under compulsory licensing. Though manufacture of asbestos is considered process hazardous, the same is not true of cellulose fibre cement as it is considered asbestos free. 2. To simplify and streamline the Policy and Procedure for filing Industrial Entrepreneur

F. No.10(43)/91-LP

Meinoranda(IEM), it has been decided that the licensing discipline, hence forth, would not apply to manufacture of "articles of cellulose fibre cement based on asbestos-free and nonwood pulp raw material." The entrepreneurs, therefore, who intend to manufacture "articles of cellulose fibre cement(asbestos free), not using wood pulp", under ITC Code 68.11 need not apply for Industrial License. They may now file an Industrial Entrepreneurs Memoranda(IEM) as prescribed in Para 6 of Press Note NO.9(1991 Series) dated 2nd August, 1991, with the Secretariat for Industrial Approvals(SIA) in the Department of Industrial Policy and Promotion, and obtain the acknowledgement. The location of the undertaking will, of course, be subject to Local land use and Zoning Laws and Regulations.

New Delhi, the 31st July, 1996.

Forwarded to Press Information Bureau for giving wide publicity to the contents of the above Press Note. Sd/(Aditi S. Ray) Deputy Economic Adviser

Principal Information Officer Press Information Bureau New Delhi.

122

Industrial Policy Highlights EXHIBIT NO.55 PRESS NOTE NO.3L (1996 Series) REMOVAL OF STIPULATION RELATING TO MINIMUM EQUITY STAKE OF SIDC IN THE JOINT VENTURE AND ASSISTED UNITS

Subject: Removal of stipulation relating to minimum equity stake of SIDC in the joint venture and assisted units. Under the existing policy relating to the pattern of share holding and disposal of equity holding in projects promoted by State Industrial Development Corporations(SIDC) and other State Government Industrial Promotions Agencies, a stipulation had been imposed that a SIDC/Promotional Agency shall hold at least 26% equity in the paid up capital of the company. 2.

In the post-liberalised regime, the Government

F. No.10(18)/96-LP

has taken a series of steps to provide greater flexibility to investors in important areas of the economy. In continuation of these measures, it has now been decided by the Government to do away with the stipulation relating to minimum equity stake of SIDCs/ Promotional Agency in joint venture projects. 3. In all past cases where such a stipulation was imposed in the LOI/IL, the entrepreneur/ company concerned, wishing to avail of waiver of such a stipulation may apply to the Secretariat of Indutrial Approval, Department of Industrial Policy and Promotion, Ministry of Industry, Government of India, New Delhi.

New Delhi, the 20th September, 1996.

Forwarded to Press Information Bureau for giving wide publicity to the contents of the above Press Note. Sd/(Aditi S. Ray) Deputy Economic Adviser

Principal Information Officer Press Information Bureau, New Delhi. Note : LPress Note No.3(1996 Series) has been amended by Press Note No.7(1997 Series)

123

CHAPTER - I

EXHIBIT NO.56 PRESS NOTE NO.4 (1996 Series) FURTHER LIBERALISATION IN PARAMETERS FOR AUTOMATIC APPROVAL IN FOREIGN COLLABORATION

Subject: Further liberalisation in parameters for Automatic Approval in Foreign Collaboration. The Industrial Policy Statement of 1991 contains a list of 35 industries as Annex.Ill, in respect of which the RAF accords automatic approval to foreign investment proposals involving foreign equity capital upto 51% in the Indian Company. The other two conditions are that the foreign equity should cover the foreign exchange requirements for import of capital goods needed for the project, and the plant and machinery should be new and not second hand. 2. For foreign collaboration proposals, automatic approval for all industries are accorded by RBI where payment of lumpsum fee is upto Rs.l crore, and/or involves 5% royalty for domestic sale and 8% for exports, subject to a total payment of 8% on sales over a period of a 10 year period from the date of agreement or 7 years from commencement of production.

F. No.10(29)/96-LP

3. As announced in the last Budget Session of the Parliament, the above provisions are being further liberalised to facilitate better and increased flow of foreign technology and equity and provide greater attraction to prospective investors. Henceforth, the proposals for automatic approval will be covered by the following guidelines:(i)

It will no longer be necessary for automatic approvals by RBI that the amount of foreign equity should cover the foreign exchange requirements for import of capital goods needed for the project. The import of capital goods for the project would be, however, subject to the EXIM Policy.

(ii)

The existing ceiling of Rs.l crore by way of payment of lumpsum fee for automatic approval will be raised to US $ 2 million.

All other terms and conditions for automatic approvals will remain unchanged as notified earlier.

New Delhi, the 5th November, 1996.

The Press Information Bureau is requested to give wide publicity to this Press Note. Sd/(Ashok Kumar) Joint Secretary to the Govt. of India

Principal Information Officer Press Information Bureau, New Delhi.

124

Industrial Policy Highlights EXHIBIT NO.57 PRESS NOTE NO.5 (1996 Series) FURTHER LIBERALISATION IN INDUSTRIAL LICENSING

Subject: Further Liberalisation in Industrial Licensing Under the New Industrial Policy, announced in July, 1991, the Government had delicensed all except 18 specific industries subject to certain conditions. The Government had further reviewed the list of industries covered under compulsory licensing in April 1993, and the motor car, white goods industry, raw hides and skins, leather and patent leather were de-licensed. After review of the Drug Policy in 1994, the Government delicensed all bulk drugs and their formulations and intermediates except few identified bulk drugs and formulations. 2. The Government has recently reviewed the list of industries retained under compulsory licensing and decided to remove entertainment electronics(including Video Casettee Recorders, Colour Televisions, Compact Disk Players and Tape Recorders) from the list of industries requiring compulsory licensing in view of the considerations outlined below. 3. The Indian audio visual system industry has now come of age. Nearly all components for assembling these are now being manufactured in India. Even the import contents of the components manufactured in India have sharply declined. Moreover, all over the world, consumer electroics have been providing the dynamic thrust for the expansion of electronic industries. The latest technology trends indicate convergence of consumer electronics with information technology and

F. No.10(19)/96-LP

professional electronics. Delicensing of entertainment electronic industries would provide greater freedom to the entrepreneurs to take investment and technology decision in the industrial sector which would contribute to greater industrial growth and employment. 4. The delicensing of this industry will however be subject to locational conditions as given in the Press Note dt.2nd August, 1991. The delicensing is also not extended to items exclusively reserved for manufacture in the small scale sector. Items reserved for small scale sector will continue to attract the licensing provisions under the lndustries(Development and Regulation) Act, 1951. 5. The entrepreneurs who wish to avail of the liberalised facility of delicensing for the above mentioned industry are requested to follow the same procedure as laid down in the aforementioned Press Note dt. 2nd August, 1991 as amended from time to time. 6. The entrepreneurs who have been issued letters of intent for manufacture of items now falling under exempted category, the LOI holder need not file an initial memorandum. In such cases, the LOI holder shall enly file part B of the memorandum at the time of commencement of commercial production against the LOI issued to them. It is however open to entrepreneurs to file an initial memorandum (in lieu of the LOI/IL held by them) if they so desire, whenever any variation from the conditions stipulated in the Letter of Intent/Industrial License is contemplated.

New Delhi, the 2nd December, 1996.

Forwarded to Press Information Bureau for wide publicity to the above Press Note. Sd/(Ashok Kumar) Joint Secretary to the Govt. of India

Principal Information Officer Press Information Bureau, New Delhi.

125

CHAPTER - I EXHIBIT NO.58 PRESS NOTE NO.1L (1997 Series) GUIDELINES FOR INDUSTRIAL LICENCES FOR SUGAR FACTORIES

Subject: Guidelines for considering applications for industrial licenses for sugar factories The Government of India have reviewed Guidelines for licensing new and expansion of existing sugar factories issued vide this Ministry's Press Note No. 16(1991) dated 8.11.91. The existing guidelines need revision in order to take into account the changes in the business scenario following economic liberalisation, the need for introducing simplified and transparent procedures and the technological changes that have taken place in the sugar industry over the years. In supersession of the aforesaid Press Note, Government has now formulated the following revised guidelines: i)

New Sugar factories will continue to be licensed for a minimum economic capacity of 2500 tonnes cane crushed per day(TCD). There will not be any maximum limit on such capacity.

ii)

Preference in licensing would be given to the proposals involving larger capacity, modern technology and development of integrated complexes producing value added products and co-generation of power.

iii)

For the consideration of application, a revenue district will be taken as the unit. In case more than one application is received for any unit of operation, other things being equal, priority will be given to the application received earlier.

iv)

Licences of new sugar factories will be issued subect to the condition that the distance between the proposed new factory and an existing/already licenced sugar factory should be not less than 15 kilometers.

F. No.10(20)/96-LP

v)

The basic criterion for grant of licence of new sugar units would be cane availability or the potential for the development of sugarcane or both.

vi)

Other things being equal, preference in licensing will be given to the proposals from the Growers' Cooperative Societies. However, industrial licence issued to such a cooperative cannot be transferred to any other entity.

vii) All applications for expansion of the existing factories will be cleared automatically. viii) Applications for grant of industrial licenses for the establishment of new sugar factories as well as expansion of existing units should be submitted to the Secretariat for Industrial Assistance(SIA) in the Department of Industrial Policy and Promotion, Ministry of Industry, New Delhi in Form IL, along with the prescribed fee of Rs.2500/-. The applications received for grant of licences would be referred by SIA to the Department of Food and the concerned State Governments/UTs for their comments. If no comments are received from either Department of Food or the concerned State Governments/ UTs within one month after their comments are asked for, it shall be deemed that they have no comments to offer. The Licensing Committee would thereafter consider the application for industrial licence and make appropriate recommendations. B. The procedure and guidelines, as given above, are brought to the notice of the entrepreneurs for their information and guidance. New Delhi, the 10th January, 1996

Forwarded to Press Information Bureau for wide publicity to the contents of the above Press Note. Sd/(Ashok Kumar) Joint Secretary to the Govt. of India Press Information Officer, Press Information Bureau, New Delhi. Note:

LPress Note No.1(1997 Series) has been amended by Press Note No.6(1997 Series)

126

Industrial Policy Highlights EXHIBIT NO.59 PRESS NOTE NO.2 (1997 Series) EXPANSION OF LIST OF INDUSTRIES FOR AUTOMATIC APPROVAL FOR FOREIGN EQUITY

Subject: Expansion of List of Industries for Automatic Approval for foreign equity

51% OR 74% would be determined in terms of the instant Press Note.

Under the liberalised polices and procedures governing foreign investment and foreign technology and transfer agreements as per the Statement of Industrial Policy, 1991, the list of 35 industries eligible for Automatic Approval by Reserve Bank of lndia(RBI) for foreign equity up to 51% was published as ANNEX-III to this Ministry's Press Note No. 10(1992 Series) dated 24.6.1992

3. No automatic approval shall be granted by the RBI for any item reserved for the small scale sector or for any other item which requires industrial licence under the existing policy. The applicant shall have to necessarily state in his/her application to RBI whether he/ she proposes to manufacture any item reserved for the small scale sector or not.

2. On a review of the policy on foreign direct investment, it has been decided to include 3 categories of industries/items relating to mining activities for foreign equity up to 50%, 13 additional categories of industries/items for foreign equity upto 51% and 9 categories of industries equity upto 74% in the list of industries/items eligible for automatic approval by the Reserve Bank of India. These industries are listed under the heading "Part 'A', Part' B' and Part 'C' of ANNEXURE-III" appended to this Press Note. These lists would be a supplement to the existing list of 35 industries (presently listed under Annex-III of the Industrial Policy) which qualify for automatic approval for foreign direct investment. In case any specific item now shown in Part B or Part C of Annex-III, already features in the 35 sectors included in the existing Annexure-III of Press Note No.lO (1992 Series) dated 24.6.92, the status of that item for eligibility for automatic approval foreign equity up to

F. No.10(31)/97-LP

4. The foreign equity limits for automatic approval as per the attached lists would also be applicable to all proposals for Units in the Electronics Hardware Technology Park Schemes (EHTPs) and units under the Software Technology Park Schemes(STPs), wherever such proposals contain request for approval for foreign direct investment as well. The other parameters of eligibility with respect to these specific schemes(EHTPs, STPs) would be applicable in the same manner as they are applicable for proposals not containing any element of foreign investment under these schemes. 5. The attached lists are based on the National Industrial Classification of all Economic Activities(NIC), 1987. The entrepreneurs/investors should henceforth give description of their activities in this classification system while submitting their application to the RBI/ Government for various industrial approvals.

New Delhi, the 17th January, 1997

Forwarded to Press Information Bureau for wide publicity to the contents above Press Note. Sd/(Ashok Kumar) Joint Secretary to the Govt. of India

Principal Information Officer Press Information Bureau, New Delhi.

127

CHAPTER - I EXHIBIT NO.59(Contd.) PRESS NOTE NO.2 (1997 Series) EXPANSION OF LIST OF INDUSTRIES FOR AUTOMATIC APPROVAL FOR FOREIGN EQUITY

ANNEXURE-III Note 1:

This list is based on NIC Code, 1987

Note 2:

Items for which approval of foreign investment and/or foreign technology agreements is not covered by automatic approval are:-

(i)

Items reserved for the small scale sector;

(ii)

Items which require licence under existing policy;

(iii) all items of aerospace and defence equipment whether specifically mentioned or not; and (iv) all items related to production or use of atomic energy including carrying out of any process, prepartory or ancillary to such production or use, under the Atomic Energy Act, 1962. Note 3:

Wherever the description in the attached list varies from the description against its assigned NIC Code, the description as given in the list shall be treated as authentic and shall prevail over the standard description for the given NIC Code. Where the description relates to a group of articles, all sub-classifications under this Group shall be taken as inclusive unless specifically mentioned otherwise.

128

Industrial Policy Highlights EXHIBIT NO.59(Contd.) PRESS NOTE NO.2 (1997 Series) EXPANSION OF LIST OF INDUSTRIES FOR AUTOMATIC APPROVAL FOR FOREIGN EQUITY

ANNEXURE-III (Contd.)

PART 'A' LIST OF INDUSTRIES/ITEMS FOR AUTOMATIC APPROVAL FOR FOREIGN EQUITY UPTO 50% SI. NO.

NIC CODE

Description

Division

Group

Class

1

2

3

4

A-1

12

MINING OF IRON ORE 120

A-2

A-3

B-1

5

Mining of Iron Ore

13

MINING OF METAL ORES OTHER THAN IRON ORE (Mining of Uranium Group ores is not covered) 130

Mining of Manganese Ore

131

Chromite

132

Bauxite

134

Copper Ore

135

Mining of Lead and Zinc Ores.

15

MINING OF NON-METALLIC MINERALS NOT ELSEWHERE CLASSIFIED 150

Mining and quarrying of rock aggregates, sand and clays

151

Mining/quarrying of minerals for construction other than rock aggregates, sand and clays.

152

Mining of fertilizer and chemical minerals.

153

Mining of ceramic, refractory and glass minerals.

154

Salt mining and quarrying including crushing, screening and evaporating in pans

155

Mining of Mica

159

Mining of other non-metallic minerals.

20,21

MANUFACTURE OF FOOD PRODUCTS 200 200.5

Preservation of meats except by canning

200.6

Processing and canning of meat

201

Manufacture of dairy products 201.1

Manufacture of milk powder, ice-cream, powder and condensed milk except baby milk foods.

CHAPTER - I EXHIBIT NO.59(Contd.) PRESS NOTE NO.2 (1997 Series) EXPANSION OF LIST OF INDUSTRIES FOR AUTOMATIC APPROVAL FOR FOREIGN EQUITY

SI. NO. 1

NIC CODE

Description

Division

Group

Class

2

3

4 201.2

Manufacture of baby milk foods.

201.3

Manufature of butter, cream, ghee, cheese and khoya etc.

201.4

Manufacture ofpasturised milk whether or not in bottles/polythene packs etc.(plain or flavoured)

201,9

Manufacture of other dairy products n.e.c.

202

Canning and preservation of fruits and vegetables 202.1

Sun-drying of fruits and vegetables.

202.2

Artificial dehydration of fruits and vegetables

202.3

Radiation preservation of fruits and vegetables

202.4

Manufacture of fruits/vegetable juices and their concentrates, squashes and powders.

202.5

Manufacture of sauces, jams, jellies and marmalades etc.

202.7

Canning of fruits and vegetables

202.9

Fruit and vegetable preservation n.e.c.

203

Processing, canning and preserving of fish, Crustacea and similar foods.

204

Grain milling 204.1

Flour milling by power machine.

204.9

Other grain milling and processing activities n.e.c.

208

Production of common salt

209

Manufacture of cocoa products and sugar confectionery(including sweetmeats). 209.1

218 B-2

23

Manufacture of cocoa products Manufacture of starch and its derivatives MANUFACTURE OF COTTON TEXTILES

235 B-3

5

24

Cotton spinning, weaving and processing in integrated mills. MANUFACTURE OF WOOL, SILK AND MAN-MADE FIBRE TEXTILES

242

Wool spinning, weaving and processing in integrated mills.

129

130

Industrial Policy Highlights EXHIBIT NO.59(Contd.) PRESS NOTE NO.2 (1997 Series) EXPANSION OF LIST OF INDUSTRIES FOR AUTOMATIC APPROVAL FOR FOREIGN EQUITY

SI. NO. 1

B-4

NIC CODE

Description

Division

Group

Class

2

3

4

245

Spinning, weaving and processing of silk (textiles) in integrated mills.

247

Spinning, weaving and processing of man-made textiles fibres in integrated mills. 247.1

Spinning of staple fibres in mills.

247.2

Spinning of staple fibres and weaving of artificial/ synthetic textile fabrics in mills.

247.3

Weaving and processing(bleaching, dyeing and printing) of artificial/ synthetic textile fabrics in mills.

247.4

Composite artificial textile fibres mills (spinning, weaving and processing).

26

MANUFACTURE OF TEXTILE PRODUCTS 268

B-5

B-6

5

30

Manufacture of water-proof textile faebrics. MANUFACTURE OF BASIC CHEMICALS & CHEMICALS PRODUCTS(EXCEPT PRODUCTS OF PETROLEUM AND COAL)

300

Manufacture of industrial organic and inorganic chemicals

301

Manufacture of fertilizers and pesticide

302

Manufacture of plastics in primary forms; manufacture of synthetic rubber.

303

Manufacture of paints, varnishes, and related products; artists' colours and ink.

304

Manufacture of drugs, medicines and allied products.

306

Manufacture of man-made fibres.

309

Manufacture of chemical products n.e.c.

31

MANUFACTURE OF RUBBER, PLASTIC, PETROLEUM AND COAL PRODUCTS 310

Tyre and tube industries

312

Manufacture of rubber products n.e.c.

313

Manufacture of plastic products n.e.c.

318

Manufacture of coke oven products

319

Manufacture of other coal and coal-tar products n.e.c.

CHAPTER - I EXHIBIT NO.59(Contd.) PRESS NOTE NO.2 (1997 Series) EXPANSION OF LIST OF INDUSTRIES FOR AUTOMATIC APPROVAL FOR FOREIGN EQUITY

SI. NO.

NIC CODE

Description

Division

Group

Class

1

2

3

4

B-7

34

MANUFACTURE OF METAL PRODUCTS AND PARTS EXCEPT MACHINERY AND EQUIPMENT 341

344 B-8

5

35&36

Manufacture of fabricated metal products. 341.1

Manufacture of railway and ship containers used in container-traffic.

341.2

Manufacture of gas cylinders(industrial or house-hold).

341.3

Manufacture of tanks, reservoirs and containers of metals n.e.c.

341.4

Manufacture of reinforced safes, vaults, strongroom doors and gates and the likes (manufacture of almirahs and filling cabinets etc. is classified in Group 342).

341.5

Manufacture of Steel trunks.

341.6

Manufacture of sanitary and plumbing fixtures and fitting of metals.

341.9

Manufacture of other fabricated metal products n.e.c. Forging, pressing, stamping and roll-forming of metal, power metallurgy. MANUFACTURE OF MACHINERY AND EQUIPMENT OTHER THAN TRANSPORT EQUIPMENT

350

Manufacture of agricultural machinery and equipment and parts thereof.

351

Manufacture of machinery and equipment used by construction and mining industries.

352

Manufacture of prime movers, boilers

353

Manufacture of industrial machinery for food and textile industries(including bottling and filling machinery).

354

Manufacture of industrial machinery for other than food and textile industries.

355

Manufacture of refrigerators, air-conditioners and fire fighting equipment and their parts and accessories.

356

Manufacture of general purpose non-electrical machinery/ equipment, their components and accessories n.e.c.

357

Manufacture of machine tools, their parts and accessories.

358

Manufacture of office, computing and accounting machinery and parts.

131

132

Industrial Policy Highlights EXHIBIT NO.59(Contd.) PRESS NOTE NO.2 (1997 Series) EXPANSION OF LIST OF INDUSTRIES FOR AUTOMATIC APPROVAL FOR FOREIGN EQUITY

SI. NO. 1

NIC CODE

Description

Division

Group

Class

2

3

4

359

B-9

Manufacture of special purpose machinery/equipment, their components and accessories n.e.c. 359.1

Manufacture of sewing and knitting machines.

359.2

Manufacture of weighting machinery.

359.3

Manufacture of washing centrifugal clothes dries).

359.5

Manufacture of filtering and purifying machinery for liquid and gases.

359.6

Manufacture of distilling and rectifying plants (including heat exchangers).

359.8

Manufacture of parts and accessories n.e.c. for special purpose nonelectrical machinery/equipment n.e.c.

359.9

Manufacture of special purpose non-electrical machinery/equipment n.e.c.

and

laundrying machines(including

360

Manufacture of electrical industrial machinery apparatus and parts thereof.

361

Manufacture of insulated wires and cables, including manufacture of optical fibre cables.

362

Manufacture of accumulators primary cells and primary batteries.

363

Manufacture of electric lamps.

70

363.2

Manufacture of ultra-voilet or infra-red lamps.

363.3

Manufacture of discharge lamps; flourescent, hot-cathode or other discharge lamps.

363.4

Manufacture of arc lamps.

363.5

Manufacture of flash bulbs used in photography. LAND TRANSPORT (SUPPORT SERVICES)

708 B-10

5

71

Support services to land transport like operation of high-way bridges, toll roads, vehicular tunnels. WATER TRANSPORT(SUPPORT SERVICES)

712

Support services to water-transport like operation and maintenance of piers, loading and discharging of vessels.

CHAPTER - I EXHIBIT NO.59(Contd.) PRESS NOTE NO.2 (1997 Series) EXPANSION OF LIST OF INDUSTRIES FOR AUTOMATIC APPROVAL FOR FOREIGN EQUITY

SI. NO.

NIC CODE

Description

Division

Group

Class

1

2

3

4

B-11

73

B-12

SERVICE INCIDENTAL TO TRANSPORT NOT ELSEWHERE CLASSIFIED 730

Cargo handling incidental to land transport.

731

Cargo handling incidental to water transport.

732

Cargo handling incidental to air transport

733

Renting and leasing(except financial leasing) of motor vehicles,without operator, for passenger transport.

734

Renting and leasing(except financial leasing) of motor vehicles, without operator, for freight transport.

739

Renting and leasing of refrigerated/cold transport.

85

RENTING AND LEASING NOT ELSEWHERE CLASSIFIED 850

Renting of transport equipment without operator. 850.9

B-13

Renting of other transport equipment n.e.c.

852

Renting of office accounting and computing machinery and equipment, without operator.

853

Renting of other industrial machinery and equipment.

89

BUSINESS SERVICES NOT ELSEWHERE CLASSIFIED 893

Business and management consultancy activities. 893.2

93

5

Market Research Services.

895

Technical testing & analysis services.

899

Research & Development Services(excluding basic research and setting up of R&D/academic institutions which would award degrees/diplomas/ certificates). HEALTH AND MEDICAL SERVICES

133

134

Industrial Policy Highlights EXHIBIT NO.59(Contd.) PRESS NOTE NO.2 (1997 Series) EXPANSION OF LIST OF INDUSTRIES FOR AUTOMATIC APPROVAL FOR FOREIGN EQUITY

ANNEXURE-III (Contd.) PART -'C' LIST OF INDUSTRIES/ITEMS FOR AUTOMATIC APPROVAL FOR FOREIGN EQUITY UPTO 74% SI. NO.

NIC CODE

Description

Division

Group

Class

1

2

3

4

C-1

19

C-2

5 MINING SERVICES

190

Oil and Gas Field services, except Exploration and production services.

191

Services incidental to mining viz. drilling, shafting, reclamation of mines, surveys/mapping - excluding services related to gold, silver and precious/semi-precious stones.

33

BASIC METALS & ALLOYS INDUSTRIES 330 331

Manufacture of Iron ore pellets, pig iron, sponge iron and steel in Primary/semi-finished/finished forms. Manufacture of semi-finished Iron and Steel products in re-rolling mills, cold-rolling mills and wire drawing mills.

332

Manufacturing of ferro-alloys.

333

Copper manufacturing

334

Brass manufacturing

335

Aluminium manufacturing

336

Zinc manufacturing

337

Casting of metals

339

Other non-ferrous metal industries, excluding Gold, Silver and Platinum.

38

OTHER MANUFACTURING INDUSTRIES 380

Manufacturing of medical, surgical, scientific and measuring equipment except optical equipment.

380.1

Manufacture of medical/surgical equipment and orthopaedic appliances(manufacture of apparatus based on the use of X-Ray or other radiators is classified in Class 369.1)

380.2

Manufacture of industrial process control equipment (this class include manufacture of apparatus used for continuous measurement and control or variable such

CHAPTER - I EXHIBIT NO.59(Contd.) PRESS NOTE NO.2 (1997 Series) EXPANSION OF LIST OF INDUSTRIES FOR AUTOMATIC APPROVAL FOR FOREIGN EQUITY

SI. NO. 1

NIC CODE

Description

Division

Group

Class

2

3

4

5 as temperature, presstire, viscosity etc. of materials and products as they are being manufactured or otherwise processed).

380.3

Manufacture of regulating or controlling instruments and apparatus, except industrial process control equipment.

380.4

Manufacture of supply meters for electricity, water or gas.

380.5

Manufacture of sensitive balance and mathematical calculating instruments. Manufacture of laboratory and scientific instruments n.e.c (includes manufacture of non-optical microscopes, diffraction equipments; apparatus for measuring or checking electrical quantities, e.g oscilloscopes, spectrum analysers, voltmeters, with or without recording device; apparatus for measuring non-electrical quantities, e.g. radiation detectors and counters, cross-talk meters and other instruments specially designed for telecommunications; apparatus for testing the physical properties for materials, e.g. apparatus for testing hardness and other properties of metals, for testing the wear and tear and other properties of textiles, and for testing the physical properties of paper, linoleum, plastic, rubber, wood, concrete and so forth; apparatus for carrying out physical or chemical analysis, e.g. polarimeters, refractometers, calorimeters, Orsob's apparatus, Ph-meters, viscometers, surface tension instruments and so forth and instruments and apparatus for measuring or checking the flow, level, pressure or other variables of liquids or gases, manometers, heatmeters, and so forth, except industrial process control equipment).

380.6

380.8

Manufacture of parts and accessories n.e.c. for instruments and apparatus included in this group.

380.9

Manufacture of other medical surgical, scientific and measuring equipment n.e.c. (includes manufacture of hydrometers, thermometers, pedometer, techometers, balancing machines, test benches, comparators (include optical comparators and other optical type measuring and checking applicances and instruments); instruments for checking watches or watch parts and so forth).

135

136

Industrial Policy Highlights EXHIBIT NO.59(Contd.) PRESS NOTE NO.2 (1997 Series) EXPANSION OF LIST OF INDUSTRIES FOR AUTOMATIC APPROVAL FOR FOREIGN EQUITY

SI. NO. 1

C-4

NIC CODE

Description

Division

Group

Class

2

3

4

5

381

Manufacture of photographic, cinematographic and optical goods and equipment (excluding photochemicals, sensitised paper and film).

388

Manufacture of items based on solar energy like solar cells, cookers, air and water heating systems and other related items.

40

ELECTRIC GENERATION AND TRANSMISSION 400

Generation and transmission of electric energy. 400.1

Generation and transmission of electric energy produced in hydroelectric power plants.

400.2

Generation and transmission of electric energy produced in coal based thermal power plants.

400.3

Generation and transmission of electric energy produced in oil based thermal power plants.

400.4

Generation and transmission of electric energy produced in gas based thermal power plants.

C-5

43

NON-CONVENTIONAL ENERGY GENERATION ANB DISTRIBUTION

C-6

50

CONSTRUCTION

C-7

501

Construction and maintenance of roads, railbeds, bridges, tunnels, pipelines, ropeways, ports, harbours and runways.

503

Construction and Maintenance of waterways and water reservoirs.

504

Construction and Maintenance of hydroelectric projects.

505

Construction & Maintenance of power plants.

70

LAND TRANSPORT 707

C-8

C-9

71

Pipeline transport excluding Crude Oil, petroleum products and natural gas pipelines. WATER TRANSPORT

710

Ocean and Water transport

711

Inland water transport

74

STORAGE AND WAREHOUSING SERVICES 741

Warehousing of agricultural products with refrigeration (cold storages).

137

CHAPTER - I EXHIBIT NO.60 PRESS NOTE NO.3L (1997 Series) GUIDELINES FOR CONSIDERATION OF FOREIGN DIRECT INVESTMENT PROPOSALS BY FOREIGN INVESTMENT PROMOTION BOARD

The Government has taken series of steps to further liberalise and streamline the procedures and mechanism for approval of both domestic and foreign direct investment in fulfilment of its commitment to provide greater transparency in decision making, the Government has announced a set of Guidelines for

F. No.10(32)/97-IP

consideration of foreign direct investment proposals by the Foreign Investment Promotion Board. A set of Guidelines announced in this regard is enclosed for general information and for information of investors.

New Delhi, the 17th January, 1997

Forwarded to Press Information Bureau for wide publicity to the contents of the above Press Note. Sd/(Ashok Kumar) Joint Secretary to the Govt. of India Press Information Officer Press Information Bureau, New Delhi. Note:

L Press Note No.3(1997 Series) has been amended by Press Note No.4(1997 Series) &Press Note No. 13(1997 Series).

138

Industrial Policy Highlights EXHIBIT NO.60(Contd.) PRESS NOTE NO.3 (1997 Series) GUIDELINES FOR CONSIDERATION OF FOREIGN DIRECT INVESTMENT PROPOSALS BY FOREIGN INVESTMENT PROMOTION BOARD

Guidelines for the consideration of Foreign Direct Investment (FBI) proposals by the Foreign Investment Promotion Board(FIPB)

The following Guidelines are laid-down to enable the Foreign Investment Promotion Board (FIPB) to consider the proposals for Foreign Direct Investment (FDI) and formulate its recommendations. 1. All applications should be put before the FIBP by the SIA (Secretariat of Industrial Assistance) within 15 days and it should be ensured that comments of the administrative ministries are placed before the Board either prior to/or in the meeting of the Board. 2. Proposals should be considered by the Board keeping in view the time frame of 6 weeks for communicating Government Decision (i.e. approval oflM/CCFI or rejection as the case may be). 3. In cases in which either the proposal is not cleared or further information is required, in order to obviate delays presentation by applicant in the meeting of the FIPB should be resorted to. 4. While considering cases and making recommendations, FIBP should keep in mind the sectoral requirements and the sectoral policies vis-a-vis the proposal(s). 5. FIPB would consider each proposals in totality (i.e. if it includes apart from foreign investment, technical collaboration/industrial licence) for composite approval or otherwise. However, the FIBP's recommendation would relate only to the approval for foreign financial and technical collaboration and the foreign investor will need to take other prescribed clearences separately. 6.

The Board should examine the following while considering proposals submitted to it for consideration. i)

Whether the items of activity involve industrial licence or not and if so, the considerations for grant of industrial licence must be gone into.

ii)

Whether the proposal involves tehenical collaborations and if so - (a) the source and nature of technology sought to be transferred (b) the terms of payment (payment of royalty by 100% subsidiaries is not permitted)

iii)

Whether the proposal involves any mandatory requirement for exports and if so, whether the applicant is prepared to undertake such obligation (this is for Small Industry units, as also for dividend balancing and for 100% EOUs/EPZ units)

iv)

Whether the proposal involves any export projection and if so, the items of export and the projected destinations.

v)

Whether the proposal has concurrent commitment under other schemes such as EPCG Scheme, etc.

vi)

In the case of Export Oriented Units(EOUs) whether the prescribed minimum value addition norms and the minimum turn over of exports are met or not.

vii) Whether the proposal involves relaxation of locational restrictions stipulated in the industrial licensing policy; and viii) Whether the proposal has any strategic or defence related considerations.

CHAPTER - I EXHIBIT NO.60(Contd.) PRESS NOTE NO.3 (1997 Series) GUIDELINES FOR CONSIDERATION OF FOREIGN DIRECT INVESTMENT PROPOSALS BY FOREIGN INVESTMENT PROMOTION BOARD

7.

While considering proposals the following may be prioritised (a)

Items falling within Annexure-lll of the New Industrial Policy (i.e. those which do not qualify for automatic approval).

(b) Items falling in infrastructure sector. (c) Items which have an export potential. (d) Items which have large scale employment potential and especially for rural people (e)

Items which have a direct or backward linkage with agro business/farm sector.

(f)

Items which have greater social relevance such as hospitals, human resource development, life saving drugs and equipment.

(g) Proposals which result in induction of technology or infusion of capital. 8.

The following should be especially considered during the scrutiny and consideration of proposals. (a)

The extent of foreign equity proposed to be held (keeping in view sectoral caps if any - e.g. 24% for SSI units, 40% for air taxi/airlines operators, 49% in basic/cellular/ paging etc. in Telecom sector)

(b) Extent of equity with composition of foreign/NRI (which may include OCB)/resident Indians. (c) Extent of equity from the point of view whether the proposed project would amount to a holding company/wholly owned subsidiary/a company with dominant foreign investment (i.e. 76% or more venture) (d) Whether the proposed foreign equity is for setting up a new project (joint venture or otherwise) or whether it is for enlargement of foreign/NRI equity or whether it is for fresh induction of foreign equity/NRI equity in an existing Indian Company. (e)

In the case of fresh induction of foreign/NRI equity and/or in cases of enlargement of foreign/ NRI equity in existing Indian Companies whether there is a resolution of the Board of Directors supporting the said induction/enlargement of foreign/NRI equity and whether there is a shareholders agreement or not.

(f)

In the case of induction of fresh equity in the existing Indian companies and/or enlargement of foreign equity in existing Indian Companies, the reason why the proposal has been made and the modality for induction/enhancement (i.e. whether by increase of paid up capital/authorised capital, transfer ofshares(hostile or otherwise) whether by rights issue, or by what modality)

(g) Issue/transfer/pricing of shares will be as per SEB/RBI guidelines (h) Whether the activity is an industrial or a service activity or a combination of both. (i)

Whether the item of activity involves any restriction by way of reservation for the small scale sector

(j)

whether there are any sectoral restrictions on the activity (eg. there is ban on foreign investment in real estate while it is not so for NRI/OCB investment)

(k) Whether the items involves only trading activity and if so whether it involves export or both export and import, or also includes domestic trading and if domestic trading whether it also includes retail trading. (l)

whether the proposal involves import of items which are either hazardous, banned or detrimental to environment (eg. import of plastic scrap or recycled plastics)

139

140

Industrial Policy Highlights EXHIBIT NO.60(Contd.) PRESS NOTE NO.3 (1997 Series) GUIDELINES FOR CONSIDERATION OF FOREIGN DIRECT INVESTMENT PROPOSALS BY FOREIGN INVESTMENT PROMOTION BOARD

9. In respect of the industries/activities listed in Annex.III of the New Industrial Policy automatic approval for majority equity holding (50/51/74 percent) is accorded by the Reserve Bank of India. FIPB may consider recommending higher levels of foreign equity in respect of these activities keeping in view the special requirements and merit of each case. 10. In respect of other Industries/activities the Board may consider recommending 61 per cent foreign equity on examination of each individual proposal. For higher levels of equity Up to 74 per cent, the Board may consider such proposals keeping in view COHBiderationB such as the extent of capital needed for the project, the nature and quality of technology, the I-fequirements of marketing and management skills and the commitment fof exports. 11. FIPB may consider and recommend proposals for 100 per cent foreign owned holding/subsidiary companies based on the following criteria: (a)

where only "holding" operation is involved and all subsequent/downstream investments to be carried out would require prior approval of the Government.

(b) where proprietary technology is sought to be protected or sophisticated technology is to be brought in; (c) where atleast 50% of the production is to be exported. (d) proposals for consultancy; and (e)

proposals for power, road, ports and industrial model towns/industrial parks or estates.

12. In special cases, where the foreign investor is unable initially to identify an Indian Joint Ventue partner, the Board may consider and recommend proposals permitting 100 per cent foreign equity on a temporary basis on the condition that the foreign investor would divest to the Indian parties (either individual, joint venture partners or general public or both) at least 26 per cent of its equity within a period of 3-5 years. 13. Similarly in the case of a joint venture, where the Indian partner is unable to raise resources for expansion/technological upgradation of the existing industrial activity, the Board may consider and recommend increase in the proportion/percentage (up to 100 per cent) of the foreign equity in the enterprise. 14. In respect of trading companies, 100 per cent foreign equity may be permitted in the case of the activities involving the following: i)

exports;

ii)

bulk imports with export/expanded warehouse sales;

iii)

cash and carry wholesale trading;

iv)

other import of goods or services provided atleast 75% is for procurement and sale of goods and services along the companies of the same group.

15. In respect of the companies in the infrastructure/services sector where there is a prescribed cap for foreign investment, only the direct investment should be considered for the prescribed cap and foreign investment in an investing company should not be set off against this cap provided the foreign direct investment in such investing company does not exceed 49 per cent and the management of the investing company is with the Indian owners. 16. No condition specific to the letter of approval issued to a foreign investor would be changed or additional condition imposed subsequent to the issue of a letter of approval. This would not prohibit changes in general policies and regulations applicable to the industrial sector.

CHAPTER - I EXHIBIT NO.60(Contd.) PRESS NOTE NO.3 (1997 Series) GUIDELINES FOR CONSIDERATION OF FOREIGN DIRECT INVESTMENT PROPOSALS BY FOREIGN INVESTMENT PROMOTION BOARD

17. Where in case of a proposal (not being 100% subsidiary) foreign direct investment has been approved up to a designated percentage of foreign equity in the joint venture company, the percentage would not be reduced while permitting induction of additional capacity subsequently. Also in the case of approved activities, if the foreign investor(s) concerned wishes to bring in additional capital on later dates keeping the investment on such approved activities. FIPB would recommend such cases for approval on an automatic basis. 18. As regards proposal for private sector banks, the application would be considered only after "in principle" permission is obtained from the Reserve Bank of lndia(RBI). 19. The restrictions prescribed for proposals in various sectors as obtained, at present, are given in the Annex and these should be kept in view while considering the proposals. These Guidelines are meant to assist the FIPB to consider the proposals in an objective and transparent manner. These would not in any way restrict the flexibility or bind the FIPB from considering the proposals in their totality or making recommendations based on other criteria or special circumstances or features it considers relevant. Besides there are in nature of administrative Guidelines and would not in any way be legally binding in respect of any recommendation made by the FIBP or decisions to be taken by the Government in cases involving Foreign Direct lnvestment(FDI). These guidelines are issued without prejudic to the Government's right to issue fresh guidelines or change the legal provisions and policies whenever considered necessary.

141

142

Industrial Policy Highlights EXHIBIT NO.60(Contd.) PRESS NOTE NO.3 (1997 Series) GUIDELINES FOR CONSIDERATION OF FOREIGN DIRECT INVESTMENT PROPOSALS BY FOREIGN INVESTMENT PROMOTION BOARD

ANNEX SECTOR SPECIFIC GUIDELINES FOR FOREIGN DIRECT INVESTMENT S.No. 1.

Sector

Banking NRI 40%

2. Non-banking financial services

3.

Domestic Air-Taxi Operations/Airlines

Guidelines Foreign investment of upto 20% Is permitted. i)

Upto 61% foreign equity, no special conditiona are attached except those requiring approval of SEBI/RBI etc.

ii)

For foreign equity beyond 51% but upto 75%, it is necessary that foreign investment should be minimum US $ 5 million and it should come in one lot.

iii)

For foreign investment beyond 76% minimum foreign investment should be US $ 60 million.

i)

Foreign equity upto 40% can be permitted on a caaeby-case basis.

ii)

100% by NRIs.

4.

Power

Foreign investment in power sector can either be in the form of a joint venture with an Indian partner or as a fully-owned operation with 100% foreign equity.

5.

Telecommunication (Basic, Value Added)

In basic, Cellular Mobile and paging services, foreign investments are limited to 49% subject to grant of licence from DoT.

6.

Drugs and Pharmaceuticals Industry

Foreign investment upto 61% in the case of bulk drugs, their intermediates and formulations thereof (except those produced by the use of recombinant DNA technology) are granted automatic approval by the RBI. Other proposals are considered on merit on a case-bycase basis by the Government Manufacturing activity essential for FDI above 61% as per Drug Policy.

7.

Petroleum

Foreign companies can invest upto 100% of the equity in any venture in petroleum sector.

8.

Real Estate

No foreign investment in this sector is permitted. NRIs/ OCBs are allowed.

9.

Road and Highways

Private sector including foreign equity participants upto 100% in the highways is envisaged on Build Operate and Transfer(BOT) concept. Investors in identified highway projects would be permitted to recover their investment by way of collection of tolls for specific periods. At the end of the agreed concession period, the facilities will revert to the Government.

143

CHAPTER - I EXHIBIT NO.60(Contd.) PRESS NOTE NO.3 (1997 Series) GUIDELINES FOR CONSIDERATION OF FOREIGN DIRECT INVESTMENT PROPOSALS BY FOREIGN INVESTMENT PROMOTION BOARD

Construction of bypasses, bridges and widening of high density corridors, of National Highways have been identified for four laning through the BOT route. The Government has, in the Budget Session of 1995, passed the necessary legislation for collection of toll tax. rhe rates of toll charges as well as the period of concession will be on the basis of competition/bids and land requirement for he construction and operation of facilities would be provided by the Government free from encumbrances. Private parties would also be allowed to develop service and rest areas along the roads entrusted to them. 10.

PortsIndian ports offer significant potential to foreign investors in major operational and infrastructural areas. The following areas have been identified for participation/ investment by the private sector. (i)

Leasing out existing assets of the Port.

(ii)

Constrution/creation of additional assets, such as (a)

Construction and operation of container terminals.

(b) Construction and operation bulk, break bulk, multipurpose and specialised cargo berths. (c) Warehousing, Container Frieght Stations, storage facilities and tank farms. (d) Cranage/Handling Equipment (e)

setting up of captive power plants

(f)

Dry docking and ship repair facilities

(iii) Leasing of equipment for port handling and leasing of floating crafts from the private sector (iv) Capitive facilities for Port based industries. These areas indicative in nature. Further details regarding participation by the foreign investors are available with individual port authorities and the Ministry of Surface Transport, Government of India. 11. Tourism

This is a sector with immense possibilities for foreign investment. 100% foreign equity is permissible in the sector and automatic approvals are also granted by the Reserve Bank of India for foreign equity upto 51% and subject to specified parameters.

144

Industrial Policy Highlights EXHIBIT NO.60(Contd.) PRESS NOTE NO.3 (1997 Series) GUIDELINES FOR CONSIDERATION OF FOREIGN DIRECT INVESTMENT PROPOSALS BY FOREIGN INVESTMENT PROMOTION BOARD

12. Mining

I) Foreign equity participation of upto 50% in the mining sector will be automatic except for except gold, silver, diamonds and previous stones. For gold, silver, diamonds and precious stones, approvals would be given keeping in view inter alia, the following parameters. a)

The size of the project

b)

Commitment of external resources for funding project cost.

c)

Track record of the company in the mining sector

d)

The level of technology sought to be employed in the project.

e)

Financial strength of the company

f)

Level of the Indian equity in the Joint venture at the mining stage for the JV partner/Indian Partner.

For companies who seek to set up 100 per cent wholly owned subsidiaries, permission may be given subject to the condition that in case the company wishes to enter into ajoint venture for investment in mining where a foreign equity holding in excess of 50 per cent is envisaged, prior approval of the FIBP would be taken. 13. Coal

While this has been reserved for the public sector, private and foreign investment is permitted in coal for capative consumption only (generation of power) and for washeries, etc.

14. Venture Capital Fund:

An offshore venture capital company may contribute 100 per cent of the capital of a domestic venture capital fund and may also set up domestic asset management company to manage the fund. VCFs and VCCs are permitted upto 40% of the paid up corpus of the domestic VCF/VCCs

145

CHAPTER - I EXHIBIT NO.61 PRESS NOTE NO.4L (1997 Series) GUIDELINES FOR NON-BANKING FINANCIAL SERVICES

The Government have announced a set of Guidelines for consideration of foreign direct investment proposals by the Foreign Investment Promotion Board vide Press Note No.3 (1997 Series). The Government in consultation with the RBI & SEBI, have made certain changes in respect of guidelines prescribed for Non-Banking Financial Services viz., item No.2 of the Annexure specifying guidelines for Foreign Direct Investment in some specific sectors of the said press note. The following are the norms for FDI in the non-banking financial sector: 1)

All proposals for foreign equity investment in NBFCs shall be considered by FIPB.

2)

Foreign investment in non-banking financial services to be permitted in

I)

Merchant Banking,

II)

Underwriting,

III)

Portfolio Management Services

IV)

Investment Advisory Services,

V)

Financial Consultancy,

VI)

Stock Broking,

VII) Asset Management, VIII) Venture Capital, IX)

Custodial Services,

X)

Factoring,

XI)

Credit Reference Agencies,

XII) Credit Rating Agencies XIII) Leasing and Finance and XIV) Housing Finance. F. No.10(32)/97-IP

3)

Minimum Capitalization norms :

a)

Where the foreign equity is less than 51% or equal to 51%=US $ 0.5 million

b)

Where tlie foreign equity is more than 51% but is less than equal to 75%=US $ 5 million

c)

Where the foreign equity is more than 75%= US $ 50 million

d)

100% foreign owned NBFCs would act as a holding company and specific activities would be undertaken by stepdown subsidiaries with minimum 25% domestic eauity.

4)

Scheduling of capitalisation:

I)

For foreign equity holding upto 75%: The minimum capitalisation according to the norms indicated in para 3 above to be brought upfront.

II) For foreign equity holding above 75% and upto 100%: US $ 7.5 million to be brought upfront and the balance in over 24 months. 5)

Domestic equity in the step-down subsidiaries of 100% foreign owned holding companies may be scheduled by bringing 10% domestic equity upfront and the balance domestic equity over a period of 24 months.

Press Note No.3 (1997 Series) issued by Government on 17-1-97 may be deemed to have been amended to the above extent. New Delhi, the 30th April, 1997

Forwarded to Press Information Bureau for wide publicity to the contents of the above Press Note. Sd/(Dhiraj Mathur) Deputy Secretary to the Govt. of India Press Information Officer Press Information Bureau, New Delhi. Note:

L Press Note No.4(1997 Series) has been amended by Press Note No.13(1997 Series)

146

Industrial Policy Highlights EXHIBIT NO.62 PRESS NOTE NO.5 (1997 Series) DELEGATION OF POWERS FOR AUTOMATIC & POST APPROVAL AMENDMENTS FOR EHTP & STP

Subject: Electronics Hardware Technology Park (EHTP) Scheme and Software Technology Park (STP) Scheme Delegation of powers for automatic approvals and post-approval amendments. The entrepreneurs are aware that two schemes called Electronics Hardware Technology Park (EHTP) scheme and Software Technology Parl (STP) scheme are in existence for the manufacture of electronics hardware and development of computer software, for 100% exports. The proposals for setting up units under these schemes are considered by an InterMinisterial Standing Committee (IMSC), chaired by the Secretary, Department of Electronics. 2. Keeping in view the needs of electronics sector, which is growing at a fast pace, Government have decided to simplify the procedure for granting approvals under these schemes, as well as for postapproval amendments. Automatic Approval 3. Applications, which fulfil the following conditions, shall receive approvals, within 15 days, from the Directors of concerned STPS in respect of STP proposals; and the Designated officers in respect of EHTP proposals:i)

The project is not included in Schedule I or II ofNotification No.477(E) dated 25.27.1991 issued under the lndustries(Development & Regulation) Act, 1951;

ii)

The location of the project conforms to the locational policy, announced by Department of Industrial Policy & Promotion;

iii)

The export obligation laid down in the respective EHTP scheme or STP scheme is fulfilled;

iv)

The GIF value of the imported capital goods required for the project does not exceed Rs. 10.00 crores.

v)

Foreign technology proposals envisaged, if any, do not involve Lumpsum knowhow fee exceeding USD 2(Two) million, net of taxes, and 8% royalty on exports and 5% royalty on DTA sales, net of taxes, over a period of 5 years from the date of commencement of commercial production.

vi)

The exports shall be made to GCA/HCA countries;

vii) The unit is amenable to bonding by the Customs, and all the manufacturing operations are carried out in the same premises and the proposal does not envisage sending out of the bonded area any RM or inter-mediate products for any other manufacturing or processing activity. viii) Proposals do not envisage foreign equity/ NRI quity. CONVERSION of DTA UNITS : Application for conversion of existing DTA units into EOUs, where there is no outstanding export obligation under EPCG Scheme or Advanced Licensing Scheme, will be allowed, if such DTA unit satisfies the parameters for automatic approval as mentioned above. 4. The applications, which fulfil the above criteria, should be submitted in the prescribed form, to the Directors ofSTPs or the Designated Officers, as the case may be. All other proposals should be submitted to the Secretariat for Industrial Assistance in the Department of Industrial Policy & Promotion, Udyog Bhavan, New Delhi. The application form shall be submitted in 10 copies. The application will be accompanied by Crossed Demand Draft for RS.1OOO/- drawn in favour of Pay & Accounts Officer, Department of Industrial Policy and Promotion, Ministry of Industry, payable at the State Bank of India, Nirman Bhavan Branch, New Delhi. POST-APPROVAL AMENDMENTS 5. Government is conscious of the fact that the project parameters need revision during implementation of the project, necessitating amendments in the approval letters. For expeditious disposal of such cases, powers are being delegated to the Directors of STPs/ the Designated Officers, as the case may be, for following types of proposals:i)

Additional Import of Capital Goods : To allow enhancement in the total value of imported CG, to the extent of 50% of value approved originally (whether under automatic route or by IMSC), subject to a maximum limit of Rs. 10.00 crore. One or more requests can be entertained in this regard.

147

CHAPTER - I EXHIBIT NO.62(Contd.) PRESS NOTE NO.5L (1997 Series) DELEGATION OF POWERS FOR AUTOMATIC & POST APPROVAL AMENDMENTS FOR EHTP & STP

ii)

Attestation of list of imported CG: To attest the list of imported CG required for the project, within the value approved.

iii)

Broad-banding: In case of EHTP proposals, the applicants may be allowed to manufacture items, other than those specified in the approval letters, subject to the condition that other items fall in the category of electronics hardware; the design and production facilities ar e common and have similar manufacturing process; import of additional capital; goods is within the limits mentioned under (i) above; and the E.O. under EHTP scheme is fulfilled.

iv)

Change of location: To permit change of location from the place mentioned in the approval letter to another, provided:a)

there is no other change in terms & conditions of the approval;

b)

the new location is within the territorial jurisdiction of the Director STP/ Designated Officers;

c)

the new location can be customs-bonded;

d)

the new location also conforms to the locational policy announced by Department of Industrial Policy & Promotion;

F. No.10(58)/92-IP

v)

Extension of validity of Letters of Permission/Intent: To extend the validity of Letter of Intent/Permission by one year, to enable the applicant to implement the project.

vi)

Disposal of Obsolete capital goods: To allow disposal of obsolete capital goods, on payment of applicable duties. It shall be ensured that the machinery being allowed for disposal has been used for a period of 5 years.

vii) Import of office equipment: To import of office equipment, up to 20% of the total CGvalue approved, subjectto amaximum of Rs.25.00 lakh. Member-Secretary, IMSCS shall also exercise these powers concurrently, in case of necessity. 6. The summary of all cases approved under automatic route in terms of para 3 above by the Directors of STPs/the Designated Officers, as well as post-approval amendments carried out by them under delegated powers, shall be submitted to IMSC regularly for ratification in its next meeting. 7. The jurisdiction of Directors of STPs and the Designated Officers of EHTP is annexed at Annexure I and II of this Press Note.

New Delhi, the 21st May, 1997

Forwarded to Press Information Bureau for wide publicity to the contents of the above Press Note. Sd/(Dhiraj Mathur) Deputy Secretary to the Govt. of India Press Information Officer Press Information Bureau, New Delhi. Note:

L Press Note No.5(1997 Series) has been amended by Press Note No.9(1997 Series)

148

Industrial Policy Highlights EXHIBIT NO.62(Contd.) PRESS NOTE NO.5 (1997 Series) DELEGATION OF POWERS FOR AUTOMATIC & POST APPROVAL AMENDMENTS FOR EHTP & STP

ANNEXURE-I JURISDICTION OF THE DESIGNATED OFFICERS UNDER EHTP SCHEME STATE/DESIGNATED OFFICERS: 1.

Andaman & Nicobar i.

2.

Andhra Pradesh i.

3.

i.

Director, Software Technology Park, Priyadarshini Mkt, 2nd Floor, CRP Square, Nayapalli, Bhubaneshwar-751 012. Director, Software Technology Park, 2nd Floor, Block IV, Ganga Shopping Complex, Sector 29, Noida-201 303. Director, Software Technology Park, A/78/7/2 Ground Floor, Flatted Factory Shed, Electronics Estate GIDC, Gandhinagar-382 004.

i.

Director, Software Technology Park, 3 LK Society, Opp. Gurukul Drive-in-Road, Ahmedabad-380 052

11. Haryana i.

Director, Software Technology Park, 2nd Floor, Block IV, Ganga Shopping Complex, Sector 29, Noida-201 303.

12. Himachal Pradesh i.

Director, Software Technology Park, 2nd Floor, Block IV, Ganga Shopping Complex, Sector-29, Noida-201 301.

i.

Director, Software Technology Park, 2nd Floor, Block IV Ganga Shopping Complex, Sector 29, Noida-201 303.

14. Kamataka i.

Director, Software Technology Park, Multi Storied Complex, Block III, Keonics Electronics City, Hosur Road, Bangalore-561 229

15. Kerala i.

Director, Software Technology Park, JV Centre, Bakery Jn. P.B. No.5517, Thiruvananthapuram-695 034

16. Madhya Pradesh

Delhi i.

Director, Software Technology Park, UNIT No.35 & 38, Electronics Sadan, NO.II, MIDC Bhosari Block, Pune-411 026.

10. Gujarat

Daman Diu, Dadra Nagar Haveli i.

8.

Goa

13. Jammu & Kashmir

Chandigarh i.

7.

Director, Software Technology Park, Priyadarshini Mkt, 2nd Floor, CRP Square, Nayapalli, Bhubaneshwar-751 012.

Bihar i.

6.

Director, Software Technology Park, Priyadarshini Mkt, 2nd Floor, CRP Square, Nayapalli, Bhubaneshwar-751 012.

Assam i.

5.

Director, Software Technology Park, 407, Maitri Vanam Complex, Sanjeeva Reddy Nagar Post, Hyderabad-500 038.

Arunachal Pradesh i.

4.

Director, Software Technology Park, Multi Storied Complex, Block III, Keonics Electronics City, Hosur Road, Bangalore-562158

9.

Director, Software Technology Park, 2nd Floor, Block IV, Ganga Shopping Complex, Sector-29, Noida-201 303.

i.

Director, Software Technology Park, 2nd Floor, Block IV, Ganga Shopping Complex, Sector-29, Noida-201 303.

149

CHAPTER - I EXHIBIT NO.62(Contd.) PRESS NOTE NO.5 (1997 Series) DELEGATION OF POWERS FOR AUTOMATIC & POST APPROVAL AMENDMENTS FOR EHTP & STP

17. Maharashtra i.

Director, Software Technology Park, Unit No.35 & 38, Electronics Sadan NO.II, MIDC Bhosari Block, Pune-411 026

18. Manipur i.

Director, Software Technology Park, Priyadarshani Mkt, 2nd Floor, CRP Square, Nayapalli, Bhubaneshwar-751012.

Multi Storied Complex, Block III, Keonics Electronics City, Hosur Road, Bangalore-561 229 25. Tripura i.

Director, Software Technology Park, Priyadarshani Mkt, 2nd Floor, CRP Square; Nayapalli, Bhubaneshwar-751 012. 26. Uttar Pradesh i.

19. Orissa i.

Director, Software Technology Park, Priyadarshani Mkt, 2nd Floor, CRP Square, Nayapalli, Bhubaneshwar-751 012.

27. West Bengal i.

20. Punjab i.

Director, Software Technology Park, 2nd Floor, Block IV, Ganga Shopping Complex, Sector-29, Noida-201 303.

21. Pondicherry i.

Director, Software Technology Park, Multi Storied Complex, Block III, Keonics Electronics City, Hosur Road, Bangalore-561 229. Director, Software Technology Park, 2nd Floor, Block IV, Ganga Shopping Complex, Sector-29, Noida-201 303.

29. Meghalaya i.

Director, Software Technology Park, Priyadarshani Mkt, 2nd Floor, CRP Square, Nayapalli, Bhubaneshwar-751 012.

24. Tamil Nadu i

Director, Software Technology Park,

Director, Software Technology Park, Priyadarshani Mkt, 2nd Floor, CRP Square, Nayapalli, Bhubaneshwar-751 012.

30. Mizoram i.

23. Sikkim i

Director, Software Technology Park, Priyadarshani Mkt, 2nd Floor, CRP Square, Nayapalli, Bhubaneshwar-751 012.

28. Lakshadweep i. Director, Software Technology Park, JV Centre, Bakery Jn. P.B. No.5517, Thiruvananthapuram-695 034.

22. Rajasthan i.

Director, Software Technology Park, 2nd Floor, Block IV, Ganga Shopping Complex, Sector-29, Noida-201 303.

Director, Software Technology Park, Priyadarshani Mkt, 2nd Floor, CRP Square, Nayapalli, Bhubaneshwar-751 012.

31. Nagaland i.

Director, Software Technology Park, Priyadarshani Mkt, 2nd Floor, CRP Square, Nayapalli, Bhubaneshwar-751 012.

150

Industrial Policy Highlights EXHIBIT NO.62(Contd.) PRESS NOTE NO.5 (1997 Series) DELEGATION OF POWERS FOR AUTOMATIC & POST APPROVAL AMENDMENTS FOR EHTP & STP

ANNEXURE-II JURISDICTION OF DIRECTORS OF STP'S SI. No.

Designation and Address

Area/ Jurisdiction

1.

Director-in-Charge STP-Pune Electronics Sadan, No.ll, MIDC Bhosari Block, Pune - 411026 Tel.No.(212) 792000 792481 Fax No.(212) 792483

Maharashtra & Goa

2.

Director STP-Noida, Sector-29, Block-IV, 2nd Floor, Ganga Shopping Complex, Noida. Tel.No.(011) 8922538, 8922483 Fax No.(OII) 8922538

Uttar Pradesh, Delhi, Haryana Himachal Pradesh, Punjab, Madhya Pradesh, Jammu & Kashmir & Chandigarh

3.

Director, STP-Bangalore, Block III, Multi Storied Complex, Keonics Electronics City, Hosur Road, Bangalore - 561 229 Tel No.(080) 8520633, 8520444 Fax No.(080) 8520958

Kamataka, Tamil Nadu, Pondicherry & Andaman and Nicobar

4.

Director, STP-Hyderabad, 407, Maitri Vanam Complex, Sanjeeva Reddy Nagar Post, Hyderabad - 500 018 Tel.No.(040) 291477, 290817 Fax No.(040) 290652

Andhra Pradesh

5.

Director-in-Charge STP-Bhubaneswar, Priyadarshini Market, (2nd Floor), CRP Square, Nayapalli, Bhubaneswar - 751 012 Tel No.(0674) 407260, 207269 Fax No.(0674) 403669

Bihar & Orissa

6.

Chief Executive Officer, STP-Gandhinagar 3, L.K. Society, Opp-Gurukul Drive-in-Road, Ahmedabad-380052 Tel.No.(079)450976 Fax No.(079) 450976

Gujarat, Daman, Diu, Dadar Nagar Haveli

151

CHAPTER - I EXHIBIT NO.62(Contd.) PRESS NOTE NO.5 (1997 Series) DELEGATION OF POWERS FOR AUTOMATIC & POST APPROVAL AMENDMENTS FOR EHTP & STP

SI. No.

Designation and Address

Area/ Jurisdiction

7.

Director, STP-Thiruvananthapuram, P.B.No.5517, J.V. Centre Bakery Jn. Thiruvananthapuram - 695034 Tel.No.(0471) 64621, 67371, 61224 Fax No.(0471) 330037

Kerala & Lakshadweep

8.

Executive Incharge, STP-Calcutta, Salt Lake Electronics Complex, Block-GP, Sector-V, Bidhannagar, Calcutta - 700 091 Tel No.(033) 3219668, 495997 Fax No.(033) 3219664.

West Bengal, Assam, Meghalaya, Nagaland, Manipur, Tripura, Arunachal Pradesh, Mizoram and Sikkim

9.

Director, STP-Jaipur, 2, Kanakpura Industrial Area, Sirsi Road, Jaipur - 302012 Tel.No.(0141) 351981, 352926 Fax No.(0141) 312701

Rajasthan

Head Quarters 10. Director, Software Technology Park of India, Department of Electronics, Electronics Niketan, 6, CGO Complex, Lodhi Road, New Delhi - 110 003. Tel No.(O11) 4362811, 4363596 Fax No.(O11) 4364336

152

Industrial Policy Highlights EXHIBIT NO.63 PRESS NOTE NO.6L (1997 Series) LOI GRANTED FOR NEW UNITS OF SUGAR

Subject: Letters of Intent Granted for New units of Sugar - Validity Period - Regarding. For all industries retained under compulsory licensing, the applications filed for industrial license are considered in the Approval Committee concerned, and as per approval of the Government, letters of intent (LOI) are issued in the first instance. The LOI specifies the conditions which need to be fulfilled before the LOI is converted into an industrial license. In terms of Press Note No-15 of 1988 dated 10.6.88, the LOI is valid for three years. Extension of validity beyond three years needs to be considered in the Approval Committee concerned. 2. The guidelines for consideration of applications for industrial licenses for sugar factories were revised vide Press Note No. I of 1997 dated 10.1.97. Inter alia, the guidelines provide for maintaining a minimum distance criteria of 15 KM among sugar factories. It is seen that many of the letters of intent issued for sugar factories do not fructify and remain approvals on paper for the entire initial validity period of three years. The location mentioned in such Letters of Intent remains unavailable for other applicants and other locations less than 15 KM away from the location mentioned in a valid LOI also cannot be considered. If the entrepreneur is not serious, the farmers in the zone allocated to the proposed unit suffer for no fault of their own. Consumer interests too would be adversely affected.

F. No.10(15)/92-IP

3. In order to safeguard interests of farmers, industry and consumers, it is necessary that the licensed capacity is created to the intended time schedule. Accordingly, it has been now decided that the initial validity period of the LOIs granted for setting up new units of sugar should be reduced to one year and to prescribe some milestones, the fulfillment of which would be a precondition for further extension of the period of validity of LOI. The following are considered as important milestones : (a)

Acquisition of land for location of sugar mill.

(b) Commencement of civil works. (c) Placement of order for plant and machinery. (d) Filing of application for term loan (if required). The applicant should fulfil conditions 1 and 2, and one of the remaining two conditions and provide documentary evidence to that effect to the Administrative Ministry and the Approval Committee to qualify for further extensions of validity beyond one year. 4. Requests for change of location, if any, would have to be filed within 3 months from the date of issue of the LOI. 5. In terms of this Press Note, the LOIs already issued would be valid for a period of one year from the date of issue of this Press Note, or the present date of validity of the LOI, whichever is earlier.

New Delhi, the 28th May, 1997

Forwarded to Press Information Bureau for wide publicity to the contents of the above Press Note. Sd/(Ashok Kumar) Joint Secretary to the Govt. of India Press Information Officer Press Information Bureau, New Delhi. Note:

L Press Note No.6(1997 Series) has been amended by Press Note No.3(1997 Series)

153

CHAPTER - I EXHIBIT NO.64 PRESS NOTE NO.7 (1997 Series) REMOVAL OF STIPULATION RELATING TO MINIMUM EQUITY STAKE OF SIDC

Subject: Removal of stipulation relating to Minimum Equity Stake of SIDC in Joint Venture and Assited Units.

State Government Agencies in the joint venture by way of waiver, on the basis of specific request of concerned bodies for the approvals issued in the past.

As per the existing policy relating to the pattern of share holding in the joint sector, the State Industrial Development Corporation (SIDC) and other State Government Agencies are required to hold atleast 26% equity in the paid up capital of the company promoted by them in joint venture. The Government has issued Press Note No-3/1996 series to do away with the stipulations relating to minimum equity stake of State Industrial Development Corporation or other

It is hereby further clarified that in line with the liberalised policy, in future when SIDCs submit application for industrial licence for setting up of new units in joint sector, they will not be required to hold 26% equity stake in the proposed joint venture. While applying for the industrial licence, the State Government Agency may indicate the extent of equity holding proposed to be held by it in the proposed joint venture, which would be taken note of while processing the application itself.

F. No.10(18)/96-IP

New Delhi, the 1st July, 1997

Forwarded to Press Information Bureau for wide publicity to the contents of the above Press Note. Sd/(Ashok Kumar) Joint Secretary to the Govt. of India Press Information Officer Press Information Bureau New Delhi.

154

Industrial Policy Highlights EXHIBIT NO.65 PRESS NOTE NO.8L (1997 Series) POLICY & PROCEDURE GOVERNING APPROVAL UNDER SCHEMES FOR 100% EOUs & EPZ

Subject: Policy & Procedure governing approval under the schemes for 100% Export Oriented units (EOUs)and Export Processing Zone (EPZ) units - regarding. At present approvals are granted within 15 days for setting up 100% Export Oriented Units and the units in the Export Processing Zones, provided the proposals conform to the parameters laid down in Press Note No.3(1995 Series) dated 19.4.1995. One of the conditions to be fulfilled for automatic approval is that the entire manufacturing operations should be carried out in the same premises and the proposal should not envisage 'sub-contracting' by sending any Raw Materials/intermediate products for further manufacturing/processing activity outside the bonded premises. In addition, proposals for setting up "private bonded warehouses in the Export Processing

F. No.10(53)/92-IP

Zones', were also excluded from the purview of automatic approvals. With a view to further liberalise the procedure, Govt. have now decided that proposals envisaging 'sub-contracting' shall also qualify for automatic approval, provided other parameters, as laid down in Press Note No.3(95) are met. However, the 'subcontracting' shall be allowed as per the customs guidelines. Similarly, the proposals for setting up 'private bonded warehouses in the Export Processing Zones' shall also receive automatic approval from the Development Commissioner of the concerned EPZ, if such proposals fulfill the other criteria for automatic approval as laid down in Press Note No.3(95).

New Delhi, the 7th July, 1997

Forwarded to Press Information Bureau for wide publicity to the contents of the above Press Note. Sd/(Dhiraj Mathur) Director Press Information Officer Press Information Bureau, New Delhi. Note:

L Press Note No.8(1997 Series) has been amended by Press Note No.14(1997 Series)

155

CHAPTER - I EXHIBIT NO.66 PRESS NOTE NO.9 (1997 Series) DELEGATION OF POWERS FOR POST APPROVAL AMENDMENTS FOR EHTP & STP

Subject: Electronics Hardware Technology Park (EHTP) scheme and SoftwareTechnology Park (STP) scheme - Delegation of powers for post-approval amendments.

b.

he is a subscriber to the Articles and Memorandum of Association of the Company;

c.

he subscribes to the tune of at least 10% of the issued equity capital of the new Company, and;

Government (vide Press Note No.5(1997) dated 21.5.1997) had delegated certain powers to the Directors of STPs and the Designated officers of EHTPs, to approve projects under STP/EHTP schemes, as well as post-approval amendments.

d.

the individual is a Director of the new Company.

B.

For change from a Company to another Company provided:

a.

The transferee Company is a fully-owned subsidiary of the Company holding the Letter of Intent or Permission Letter or vice-versa;

2. The Directors of DTPs and the Designated officers have now been vested with powers to permit additional import of Capital Goods up to Rs.lO.OO crore, without any I imitation of imported CG approved earlier, as mentioned earlier in Para 5(i) of the Press Note. 3. In addition to the powers delegated vide Press Note No.5(1997), the Directors of STPs and the Designated officers of EHTPs shall also exercise following powers :(i)

Change in the name of implementing agency:

The change in the name of the implementing agency can be approved subject to the following conditions :A.

For change from an individual to a Company provided:

a.

the new Company is promoted by the applicant;

F. No.10(58)/92-IP

or b.

A new Company has been promoted for the purpose of implementing the Scheme after the grant of Letter of Intent or Letter of Approval, with at least 10% of the issued equity held by the existing Company; and

The change of name would be permitted only if the new unit undertakes to take over the assets and liabilities of the existing unit. (ii) Enhancement in value of imported CG due to Exchange rate fluctuations: Enhancement in the value of imported CG, due to exchange rate fluctuations, can be approved without any upper limit. The changes as given above, are brought to the notice of the entrepreneurs for their information and guidance.

New Delhi, the 7th July, 1997

Forwarded to Press Information Bureau for wide publicity to the contents of the above Press Note. Sd/(Dhiraj Mathur) Director Press Information Officer Press Information Bureau New Delhi.

156

Industrial Policy Highlights EXHIBIT NO.67 PRESS NOTE NO.10 (1997 Series) LICENSING OF INDUSTRIAL EXPLOSIVES

'Industrial Explosives' is one of the industries requiring compulsory licensing as per the Industrial Policy, 1991. The Government has reviewed the Policy for this sector taking into consideration the emerging technologies, safety and security of use, and user preferences. It haa been decided that in considering cases for creation of additional capacity,

F. No.10(18)/97-IP

preference would be given to Site-Mixed Slurry Explosives, and fresh capacity of expansion of capacity for Nitro Glycerine based explosives would not be encouraged. The above decision is brought to the notice of all entrepreneurs.

New Delhi, the 14th July, 1997

Forwarded to Press Information Bureau for wide publicity to the contents of the above Press Note. Sd/(Ashok Kumar) Joint Secretary to Govt. of India Press Information Officer Press Information Bureau New Delhi.

157

CHAPTER - I EXHIBIT NO.68 PRESS NOTE NO.11 (1997 Series) DELETION OF CERTAIN INDUSTRIES FROM LIST OF INDUSTRIES UNDER COMPULSORY LICENSING

Subject: Deletion of Certain Industries from the List of Industries under Compulsory Licensing Subsequent to the announcement of New Industrial Policy in July 1991, the number of industries under compulsory licensing has been reduced from 18 to 14, with the deletion of 4 items requiring compulsory licensing, namely motor cars, entertainment electronics, white goods and leather. 2. To further liberalise the provisions in this regard, taking due note of the emerging technologies on the one side and the available statutory provisions Government have decided to further do away with the licensing provisions in respect of 5 categories of industries. It is expected that the present delicensing move shall contribute to greater industrial growth and will give further impetus to the liberalisation of industrial development by providing greater freedom to the entrepreneurs to take investment and technology decisions in these sectors. 3. The following is the list of industries which Government have decided to remove from the list of industries requiring compulsory licensing :(i)

Animal fats and oils;

(ii)

Tanned or dressed fur skins, chamois leather;

(iii) Asbestos and asbestos-based products; (iv) Plywood, veneers of all types and other wood based products such as particle board, medium density fibre board/block board; and (v) Paper and newsprint except, bagase based units.

F. No.10(3)/97-IP

4. The dclicensing of these industries will, however, be subject, to locational conditions as given in Press Note dated 2nd August, 1991 and relevant statutes/statutory/policy notifications such as The Vegetable Oil Products (Standards of Quality) Order, 1975, Wild Life Protection Act, 1972, National Forest Policy and Directions and decisions of the Hon'ble Supreme Court. The delicensing of the aforesaid industries shall also not extend to items exclusively reserved for manufacture in the small scale sector. Items reserved for small scale sector shall continue to attract the licensing provisions under the Industries (Development and Regulation) Act, 1951. 5. The entrepreneurs who wish to avail of the liberalised facility of delicensing for the above mentioned industry are requested to follow the same procedure as laid down in the aforementioned Press Note dated 2nd August, 1991 as amended from time to time. 6. The entrepreneurs who have been issued Letter(s) of Intent for mamifacture of items now falling under exempted category, need not file an initial memorandum. In such cases the LOI holder shall only file Part B of the memorandum at the time of commencement of commercial production against the LOI issued to them. It is however open to entrepreneurs to file an initial memorandum (in lieu of the LOI/ IL held by them) if they so desire, whenever any variation from the conditions stipulated in the Letter of Intent/Industrial Licence is contemplated.

New Delhi, the 17th July, 1997

Forwarded to Press Information Bureau for wide publicity to the contents of the above Press Note. Sd/(Ashok Kumar) Joint Secretary to Govt. of India Press Information Officer Press Information Bureau New Delhi.

158

Industrial Policy Highlights EXHIBIT NO.69 PRESS NOTE NO.12 (1997 Series) PROCEDURE RELATING TO APPROVALS FOR 100% EOUs FOR PETROLEUM REFINERIES

The Government have reviewed the procedure relating to approvals for 100% Export Oriented Units (EOUs) for petroleum Refineries. In view of slow progress in implementation of approved projects, it has been considered appropriate that some conditionalities be introduced as part of the approval process so as to ensure speedy implementation. It has, therefore, been decided that in future, approval for 100% EOUs for Petroleum Refineries would be given in two stages. In the first stage an 'inprinciple' approval will be given which will be valid for one

F. No.8(1)/97-FC(1)

year. At the end of one year and on fulfillment of milestones, which would include acquisition of land, mobilisation of subscription or sanction letter from Mutual Funds/Financial Institutions, evidence of efforts initiated to secure institutional loans and tie up for export of products, conversion of the 'inprinciple' approval to a final approval would be considered. In the event of nonfulfillment of the aforesaid milestones within one year, the 'in-principle' approval would automatically lapse. 2.

This is for general information of investors.

New Delhi, the 3rd September, 1997

Forwarded to Press Information Bureau for wide publicity to the contents of the above Press Note. Sd/(Ashok Kumar) Joint Secretary to Govt. of India Press Information Officer Press Information Bureau New Delhi.

159

CHAPTER - I EXHIBIT NO.70 PRESS NOTE NO.13 (1997 Series) PROCEDURE FOR "FOREX BROKING"

In the Press Note No.4/1997 Series issued by this Department on 30th April, 1997, Foreign Direct Investment was permitted in the 14 Non-Banking Financial Services. It has since been decided to include "Forex Broking" in the list of activities opened to foreign investors. The guidelines applicable for considering proposals for foreign equity participation in Non/Banking Financial Companies would equally be applicable for foreign equity participation in the

F. No.10(32)/97-IP

"Forex Broking". However, the Minimum Capitalisation norms would also be equally applicable in the "Forex Broking" for foreign equity participation. Press Note Nos.3(1997 Series) and 4 (1997 Series) issued by Government on 17th Jan., 1997 and 30th April, 1997 may be deemed to have been amended to the above extent.

New Delhi, the 5th September, 1997

Forwarded to Press Information Bureau for wide publicity to the contents of the above Press Note. Sd/(Ashok Kumar) Joint Secretary to Govt. of India Press Information Officer Press Information Bureau New Delhi.

160

Industrial Policy Highlights

EXHIBIT NO.71 PRESS NOTE NO.14 (1997 Series) REVISED CONSOLIDATED LIST FOR AUTOMATIC APPROVAL FOR FOREIGN EQUITY UP TO 50%/51%/74%

Subject: Revised consolidated list ofindustries/ items for automatic approval for foreign equity up to 50%/51%/74%

activities for which automatic approval is available for foreign equity upto 50% Part 'B' for foreign equity upto 51% and Part 'C' for foreign equity up to 74%.

Under the liberalised policies and procedures covering foreign technology agreements and foreign direct investment, the list of 35 industries eligible for automatic approval by Reserve Bank of lndia(RBI) for foreign equity upto 51% was published as Annex-III to the Statement on Industrial Policy, 1991. The list was detailed based on ITC(HS) Coding System and was published as Annex-III in this Ministry's Press Note No. 10(1992 Series) dated 24th June, 1992. Subsequently, on review of policy on foreign direct investment, the Annex-III was expanded to include industries/items eligible for automatic approval by RBI for foreign equity upto 50%, 51% and 74%. The list of additional industries items, which was based on National Industrial Classification(NIC) of all Economic Activities, 1987 was published as Annex-III to this Ministry's Press Note No.2(1997 Series) dated 17th January, 1997.

3. The list at Annex-III is in this Press Note supersedes the lists published earlier vide this Ministry's Press Note No.l0(1992 Series) and Press Note No.2(1997 Series). The entrepreneurs/investors are advised to give description of their activities for NIC, 1987 classification system while submitting their applications to the Government/Reserve Bank of India for various industrial approvals.

2. The description of the 35 industries (AnnexIII) included in the Press Note No. 10(1992 Series) dated 24.6.1992 has also been re-cast on the basis of National Industries Classification(NIC), 1987. Further, with a view to avoid reference to two separate lists, a consolidated list has been drawn and is appended as Annex-III to this Press Note. This revised list is in three parts. Part'A' lists industries/ F. No.10(31)/97-IP

4. Items for which approval for foreign investment is not covered by automatic approval are:(i)

Items reserved for small scale sector;

(ii)

Items which require industrial licence under the existing policy

(iii) All items for aerospace and defence equipment whether specifically mentioned or not; and (iv) All items related to production or use of automatic energy including carrying out of any process, preparatory or ancillary to such production or use, under Automatic Energy Act, 1962. 5. The existing conditions for automatic approval of foreign technology agreements, remain unchanged. New Delhi, the 8th October, 1997

Forwarded to Press Information Bureau for wide publicity to the contents of the above Press Note. Sd/(Dhiraj Mathur) Director to Govt. of India Press Information Officer, Press Information Bureau, New Delhi. Copy to:1. NIC to put this on the SIA Website on the Internet 2. PRO Cell 3. PPS to Secretary(IPP)/PPS to Secretary (ID)/PPS to Secretary (SSI & ARI)/PPS to Secretary(HI) for information and persual of Secretary. 4. AS&FA 5. JS(PK)/JS(AK) 6. All Directors/Deputy Secretaries in the Department of Industrial Policy & Promotion-for information and necessary action. Sd/(Dhiraj Mathur) Director to Govt. of India

161

CHAPTER - I

EXHIBIT NO.71(Contd.) PRESS NOTE NO.14 (1997 Series) REVISED CONSOLIDATED LIST FOR AUTOMATIC APPROVAL FOR FOREIGN EQUITY UP TO 50%/51%/74%

Annex-III LIST OF INDUSTRIES/ITEMS FOR AUTOMATIC APPROVAL FOR FOREIGN EQUITY UPTO 50%/51%/74% NOTES: Note 1: This is based on NIC Code, 1987 Note 2: Wherever the description in the attached list varies from the description against its assigned NIC Code, the description as given in the list shall be treated as authentic and ahall prevail over the standard description for the given NIC Code. Where the description relates to a group of articles, all sub-classifications under this Group shall be taken as inclusive unless specifically mentioned otherwise.

162

Industrial Policy Highlights

EXHIBIT NO.71(Contd.) PRESS NOTE NO.14 (1997 Series) REVISED CONSOLIDATED LIST FOR AUTOMATIC APPROVAL FOR FOREIGN EQUITY UP TO 50%/51%/74%

PART 'A' LIST OF INDUSTRIES/ITEMS FOR AUTOMATIC APPROVAL FOR FOREIGN EQUITY UPTO 50% SI.

NIC CODE

NO.

Division

A-1

12

Group

A-3

Class MINING OF IRON ORE

120 A-2

Description

13

Mining of Iron Ore MINING OF IRON ORES OTHER THAN IRON ORE (Mining or Uranium Group Ores is not covered)

130

Mining of Manganese ore

131

Chromite

132

Bauxite

134

Copper Ore

135

Mining of Lead and Zinc Ores.

15

MINING OF NON-METALLIC MINERALS NOT ELSEWHERE CLASSIFIED(n.e.c) 150

Mining and quarrying of rock aggregates, sand and clays.

151

Mining/quarrying of minerals for construction other than rock aggregates, sand and clays.

152

Mining of fertilizers and chemical minerals.

153

Mining of ceramic, refractory and glass minerals.

154

Salt mining and quarrying including crushing, screening and evaporating in pans.

155

Mining of mica.

159

Mining of other non-metallic minerals.

163

CHAPTER - I

EXHIBIT NO.71(Contd.) PRESS NOTE NO.14 (1997 Series) REVISED CONSOLIDATED LIST FOR AUTOMATIC APPROVAL FOR FOREIGN EQUITY UP TO 50%/51%/74%

ANNEXURE-III (Contd..) PART 'B' LIST OF INDUSTRIES/ITEMS FOR AUTOMATIC APPROVAL FOR FOREIGN EQUITY UPTO 51% SI.

NIC CODE

NO.

Division

B-1

00

Group

Description Class AGRICULTURAL PRODUCTION

009

Agricultural Production n.e.c. 009.9

B-2

01

PLANTATIONS 019

Plantations n.e.c. 019.9

B-3

Certified high yielding hybrid seeds and synthetic seeds.

20/21

Certified high yielding plantations developed through plant tissue culture. MANUFACTURE OF FOOD PRODUCTS

200

Preparation and preservation of meat. 200.5

Preservation of meat except by canning.

200.6

Processing and canning of meat.

201

Manufacture of dairy products. 201.1

Manufacture of milk powder, ice-cream powder and condensed milk except baby milk foods.

201.2

Manufacture of baby milk foods.

201.3

Manufacture of butter, cream, ghee, cheese and khoya, etc.

201.4

Manufacture of Pasteurised milk whether or not in bottles/ polythene packs etc.(Plain or flavored).

201.9

Manufacture of other diary products n.e.c.

202

Canning and preservation of fruits and vegetables. 202.1

Sun-drying of fruits and vegetables.

202.2

Artificial dehydration of fruits and vegetables.

202.3

Radiation preservation of fruits and vegetables.

202.4

Manufacture of fruit/vegetable juices and their concentrates, squashes and powders.

202.5

Manufacture of sauces, jams, jellies and marmalades etc.

202.7

Canning of fruits and vegetables.

202.9

Fruit and vegetable preservation n.e.c.

203

Processing, canning and preserving of fish, crustacean and similar foods.

204

Grain milling

164

Industrial Policy Highlights

EXHIBIT NO.71(Contd.) PRESS NOTE NO.14 (1997 Series) REVISED CONSOLIDATED LIST FOR AUTOMATIC APPROVAL FOR FOREIGN EQUITY UP TO 50%/51%/74%

SI. NO.

NIC CODE Division

Group

Description Class 204.1

Flour milling by power machine.

204.9

Other grain milling and processing activities n.e.c.

208

Production of common salt.

209

Manufacture of cocoa products and sugar confectionery (including sweet meats). 209.1

218

Manufacture of starch and its derivatives.

219

Manufacture of food products n.e.c. 219.9

B-4

23

B-6

MANUFACTURE OF WOOL, SILK & MANMADE FIBRE TEXTILES 242

Wool Spinning, weaving & processing in integrated mills.

245

Spinning, weaving and processing of silk (textiles) in integrated mills.

247

Spinning, weaving and processing of man-made textiles fibres in integrated mills.

26

247.1

Spinning of staple fibres in mills.

247.2

Spinning of Staple fibres and weaving of artitificial/synthetic textile fabrics in mills.

247.3

Weaving and processing(bleaching, dyening and printing) of artificial/ synthetic textile fabrics in mills.

247.4

Composite artificial textile fibre mills (spinning, weaving and processing) MANUFACTURE OF TEXTILE PRODUCTS

28

Manufacture of water-proof textile fabrics. MANUFACTURE OF PAPER AND PAPER PRODUCTS AND PRINTING PUBLISHING AND ALLIED INDUSTRIES.

280 B-8

Cotton spinning integrated mills.

24

268 B-7

Soya texture proteins, soya protein isolates, soya protein concentrates, other specified products of soya bean, winterised and deodorised refined soyabean oil. MANUFACTURE OF COTTON TEXTILES

235 B-5

Manufacture of cocoa products.

30

Manufacture of pulp, paper and paper board including manufacture of newsprint. MANUFACTURE OF BASIC CHEMICALS & CHEMICAL PRODUCTS(EXCEPT PRODUCTS OF PETROLEUM & COAL)

300

Manufacture of industrial organics and inorganic chemicals

CHAPTER - I

165

EXHIBIT NO.71(Contd.) PRESS NOTE NO.14 (1997 Series) REVISED CONSOLIDATED LIST FOR AUTOMATIC APPROVAL FOR FOREIGN EQUITY UP TO 50%/51%/74%

SI. NO.

B-9

B-10

NIC CODE Division

Group

Description Class

301

Manufacture of fertilizers and pesticides.

302

Manufacture of plastics in primary forms, manufacture of synthetic rubber.

303

Manufacture of paints, varnishes and related products, artists' colours and ink.

304

Manuacture of drugs, medicines and allied products.

306

Manufacture of man-made fibres.

309

Manufacture of chemical products n.e.c.

31

MANUFACTURE OF RUBBER, PLASTIC, PETRO. LEUM AND COAL PRODUCTS 310

Tyre and Tube Industries

312

Manufacture of rubber products n.e.c.

313

Manufacture of plastic products n.e.c.

318

Manufacture of coke oven products.

319

Manufacture of other coal products and coal-tar products n.e.c.

32

MANUFACTURE OF NON-METALLIC MINERAL PRODUCTS 320.7

Manufacture of non-refractory ceramic pipes, conduits, guttering and pipe fittings.

320.8

Manufacture of non-refractory flooring blocks, support or filler tiles and roofing tiles.

321

Manufacture of glass and glass products 321.1

Manufacture of glass in primary or semi-manufactured forms(such as sheet and plate glass) including mirror sheets.

321.3

Manufacture of glass fibre(including glass wool) and product therefrom.

321.9

Manufacture of glass shells for television picture tube.

323

Manufacture of non-structural ceramic ware. 323.3

324

Manufacture of cement, lime and plaster 324.2

329

Manufacture of ceramic insulators and insulating fittings for electrical machines, appliances and equipment.

Manufacture of portland cement, aluminuous cement, slag cement and similar hydraulic cements, except in the form of clinkers. Manufacture of miscellaneous non-metallic mineral products n.e.c.

166

Industrial Policy Highlights

EXHIBIT NO.71(Contd.) PRESS NOTE NO.14 (1997 Series) REVISED CONSOLIDATED LIST FOR AUTOMATIC APPROVAL FOR FOREIGN EQUITY UP TO 50%/51%/74%

SI. NO.

B-11

NIC CODE Division

Group

Description Class 329.3

Manufacture of hume pipes and other pre-fabricated structural components of cement.

329.4

Manufacture of gypsum board.

329.7

Midget carbon electrodes, graphite electrodes and anodes and impervious graphite blocks and sheets.

329.9

Manufacture of industrial synthetic diamonds.

34

MANUFACTURE OF METAL PRODUCTS AND PARTS, EXCEPT MACHINERY AND EQUIPMENT. 341

Manufacture of fabricated metal products. 341.1

Manufacture of railway and ship containers used in container traffic.

341.2

Manufacture of gas-cylinders(industrial or house-hold)

341.3

Manufacture of tanks, reservoirs and containers of metals n.e.c.

341.4

Manufacture of reinforced safes, vaults, strongroom doors and gates and the likes (manufacture of almirahs and filing Cabinets etc. is classified in Group 32)

341.5

Manufacture of steel trunks.

341.6

Manufacture of sanitary and plumbing fixtures and fittings of metals.

341.9

Manufacture of other fabricated metal products n.e.c.

344

Forgings, pressings, stampings and roll-forming of metal, powder metallurgy.

349

Manufacture of metal products(except machinery and equipment) n.e.c. 349.9

B-12

35/36

Iron and steel pipes/tubes and fittings, welding electrodes other than those for welding mild steel. MANUFACTURE OF MACHINERY AND EQUIPMENT OTHER THAN TRANSPORT EQUIPMENT

350

Manufacture of agricultural machinery and equipment and parts thereof.

351

Manufacture of machinery and equipment used by construction and mining industries.

352

Manufacture of prime movers, boilers.

353

Manufacture of industrial machinery for food and textile industries (including bottling and filling machinery).

354

Manufacture of industrial machinery for other than food and textile industries.

CHAPTER - I

167

EXHIBIT NO.71(Contd.) PRESS NOTE NO.14 (1997 Series) REVISED CONSOLIDATED LIST FOR AUTOMATIC APPROVAL FOR FOREIGN EQUITY UP TO 50%/51%/74%

SI. NO.

NIC CODE Division

Group

Description Class

355

Manufacture of refrigerators, air-conditioners and fire-fighting equipment and their and accessories.

356

Manufacture of general purpose non-electrical machinery equipment, their components and accessories, n.e.c.

357

Manufacture of machine tools, their parts and accessories including toolings and production aids.

358

Manufacture of office, computing and accounting machinery and parts.

359

Manufacture of special purpose machinery/equipment; their components and accessories n.e.c. 359.1

Manufacture of sewing and knitting machines.

359.2

Manufacture of weighing machinery.

359.3

Manufacture of washing and laundering machine (including centrifugal clothes driers).

359.5

Manufacture of filtering and purifying machinery for liquids and gases.

359.6

Manufacture of distilling and rectifying plants (including heat exchangers).

359.8

Manufacture of parts and accessories n.e.c.

359.9

Manufacture of other special purpose non-electrical machinery/ equipment n.e.c.

360

Manufacture of electrical industrial machinery apparatus and parts thereof.

361

Manufacture of insulated wires and cables, including manufacture of optical fibre cables.

362

Manufacture of accumulators primary cells and primary battries.

363

Manufacture of electric lamps. 363.2

Manufacture of ultra-violet or infra-red lamps.

363.3

Manufacture of discharge lamps, florescent, hot-cathode or other discharge lamps.

363.4

Manufacture of arc lamps.

363.5

Manufacture of flash bulbs used in photography.

368

Manufacture of electronic valves and tubes and other electronic components n.e.c.

369

Manufacture of radiographic X-ray apparatus, X-ray tubes and parts and manufacture of electrical equipment n.e.c.

168

Industrial Policy Highlights

EXHIBIT NO.71(Contd.) PRESS NOTE NO.14 (1997 Series) REVISED CONSOLIDATED LIST FOR AUTOMATIC APPROVAL FOR FOREIGN EQUITY UP TO 50%/51%/74%

SI.

NIC CODE

NO.

Division

B-13

37

Group

Description Class MANUFACTURE OF TRANSPORT EQUIPMENT AND PARTS.

370

Ship and boat building. 370.1

Making of ships and other vessels drawn by power upto 10,000 DWT.

370.8

Manufacture of parts and accessories n.e.c. for ships and boats.

371

Manufacture of industrial locomotives and parts. 371.1

Manufacture of industrial diesel locomotives.

371.8

Manufacture of parts and accessories n.e.c. for locomotives.

372

Manufacture of railway or tramway wagons and coaches and other railroad equipment n.e.c. 372.2

Manufacture of railway or tramway passenger coaches.

372.3

Manufacture of railway or tramway rolling stock, not selfpropelled, other than passenger coaches.

372.4

Manufacture of railway or tramway fixtures and fittings.

372.5

Manufacture of mechanical and electro-mechanical signalling, safety or traffic control equipment for railways, tramways, etc.

372.8

Manufacture of parts of railway rolling stock.

373

Manufacture of heavy motor vehicles, coach work.

374

Manufacture of motor cars and other more vehicles principally designed for the transport of less than 10 persons. 374.2

Manufacture of jeeps and station wagons.

374.8

Manufacture of internal combustion piston engines and other parts and accessories n.e.c. for motor vehicles classified in this group excluding for 374.1.

375

B-14

69

375.1

Manufacture of motor-cycles.

375.2

Manufacture of scooters and scooterttes.

375.3

Manufacture of three-wheelers.

375.8

Manufacture of internal combustion piston engines and other parts and accessories n.e.c. for motor cycles, scooters and three-wheelers. RESTAURANTS AND HOTELS

691 B-15

Manufacture of motor-cycles and scooters and parts (including three wheelers).

70

Hotels, rooming houses, camps and other lodging places. LAND TRANSPORT (SUPPORT SERVICES)

708

Supporting services to land transport, like operation of highway bridges, roll roads, vehicular tunnels.

CHAPTER - I

169

EXHIBIT NO.71(Contd.) PRESS NOTE NO.14 (1997 Series) REVISED CONSOLIDATED LIST FOR AUTOMATIC APPROVAL FOR FOREIGN EQUITY UP TO 50%/51%/74%

SI.

NIC CODE

NO.

Division

B16

71

Group

Description Class WATER TRANSPORT (SUPPORT SERVICES).

712 B-17

B-18

Support services to water-transport like operation and maintenance of peirs, loading and discharging of vessels.

73

SERVICES INCIDENTAL TO TRANSPORT N.E.C. 730

Cargo handling incidental to land transport.

731

Cargo handling incidental to water transport.

732

Cargo handling incidental to air transport.

733

Renting and leasing (except financial leasing) of motor vehicles, without operator, for passenger transport.

734

Renting and leasing (except financial leasing) of motor vehicles, without operator, for freight transport.

739

Renting and leasing of refrigerated/cold transport.

85

RENTING AND LEASING N.E.C. 850

Renting of transport equipment without operator. 850.9

B-19

Renting of other transport equipment n.e.c.

852

Renting of office accounting and computing machinery and equipment, without operator.

853

Renting of other industrial machinery and equipment.

89

BUSINESS SERVICES N.E.C. 892

Data processing, software development and computer consultancy services. 892.2

893

Software supply services. Business and management consultancy activities.

893.2

Market Research Services.

895

Technical testing and analysis services.

899

Research and Development Services (excluding basic research and setting up of R & D/academic institutions which would award degrees/ diplomas/certificates).

B-20

93

HEALTH AND MEDICAL SERVICES.

B-21

99

SERVICES NOT ELSEWHERE CLASSIFIED. 990

Tourism related industry.

170

Industrial Policy Highlights

EXHIBIT NO.71(Contd.) PRESS NOTE NO.14 (1997 Series) REVISED CONSOLIDATED LIST FOR AUTOMATIC APPROVAL FOR FOREIGN EQUITY UP TO 50%/51%/74%

ANNEXURE-III (Contd.) PART 'C' LIST OF INDUSTRIES/ITEMS FOR AUTOMATIC APPROVAL FOR FOREIGN EQUITY UPTO 74% SI. NO. C-l

C-2

C-3

NIC CODE Division

Group

Description Class

19

MINING SERVICES 190

Oil and Gas field services, except exploration and production services.

191

Services incidental to mining viz. Drilling, shafting, reclamation of mines, surveys/mapping-excluding services related to gold, silver and precious/ semi-precious stones.

33

BASIC METALS AND ALLOYS INDUSTRIES 330

Manufacture of iron ore pellets, pig iron, sponge iron and steel in primary/semi-finished/f imshed forms.

331

Manufacture of semi-finished iron and steel products in rerolling mills, cold-rolling mills and wire drawing mills.

332

Manufacture of ferro-alloys

333

Copper manufacturing.

334

Brass manufacturing.

335

Aluminium manufacturing.

336

Zinc manufacturing.

337

Casting of metal.

339

Other non-ferrous metal industries, excluding Gold, Silver and Platinum.

38

OTHER MANUFACTURING INDUSTRIES. 380

Manufacture of medical, surgical, scientific and measuring equipment except optical equipment. 380.1

Manufacture of medical/surgical equipment and orthopaedic appliances (manufacture of apparatus based on the use of X-Ray or other radiators is classified in Class 369.1).

380.2

Manufacture of industrial process control equipment (this class includes manufacture of apparatus used for continuous measurement and control or variable such as temperature, pressure, viscosity etc. of materials and products as they are being manufactured or otherwise processed.)

CHAPTER - I

171

EXHIBIT NO.71(Contd.) PRESS NOTE NO.14 (1997 Series) REVISED CONSOLIDATED LIST FOR AUTOMATIC APPROVAL FOR FOREIGN EQUITY UP TO 50%/51%/74%

SI. NO.

C-4

NIC CODE Division

Group

Description Class 380.5

Manufarture of sensitive balance and mathematical calculating instruments.

380.6

Manufacture of laboratory and scientific instruments n.e.c. (including manufacture of non-optical microscopes, diffraction equipments; apparatus for measuring or checking electrical quantities, e.g. oscilloscopes, spectrum analysers, volt meters, with or without recording devices; apparatus for measuring non-electrical quantities e.g. radiation detectors, and counters, cross-talk meters and other instruments specially designed for telecommunications; apparatus for testing the physical properties of materials, e.g. apparatus for testing hardness and other properties of metals, for testing the ear and tear and other properties of textiles and for testing the physical properties of paper, linoleum, plastic, rubber, wood concrete and of forth; apparatus for carrying out physical or chemical analysis, e.g. polarimeters, refractormers, calorimeters, Orsob's apparatus, Phmeters, viscometers, surface tension instruments and so forth and instruments and apparatus for measuring or checking the flow, level, pressure or other variables of liquids or gases, e.g. flow meter, level gauges, manometers, heat-meters, and so forth, except industrial process control equipment).

380.8

Manufacture of parts and accessories n.e.c. for instruments and apparatus included in this group.

380.9

Manufacture of other medical surgical, scientific and measuring equipment n.e.c. (Includes manufacture of hydrometers, thermometers, pedometer, tachometers, balancing machines, test benches, comparators (include optical comparators and other optical type measuring and checking appliances and instruinents); instruments for checking watches or watch parts and so forth).

381

Manufacture of' photographic. cinematographic and optical goods and equipment (excluding photochemicals, sensitised paper and film).

388

Manufacture of items based on solar energy like solar cells, cookers, air and water heating systems and other related items.

40

ELECTRIC GENERATION AND TRANSMISSION 400

Generation and transmission of electric energy. 400.1

Generation and transmission of electric energy produced in hydroelectric power plants.

400.2

Generation and transmission of electric energy produced in coal/lignite based thermal power plants.

400.3

Generation and transmission of electric energy produced in oil based thermal power plants.

172

Industrial Policy Highlights

EXHIBIT NO.71(Contd.) PRESS NOTE NO.14 (1997 Series) REVISED CONSOLIDATED LIST FOR AUTOMATIC APPROVAL FOR FOREIGN EQUITY UP TO 50%/51%/74%

SI. NO.

NIC CODE Division

Group

Description Class 400.4

Generation and transmission of electric energy produced in gas based thermal power plants.

C-5

43

NONCONVENTIONAL ENERGY GENERATION AND DISTRIBUTION.

C-6

50

CONSTRUCTION.

C-7

501

Construction & maintenance of roads, railbeds, bridges, tunnels, pipelines, ropeways, ports, harbors and runways.

503

Construction & maintenance of waterways and water reservoirs.

504

Construction and maintenance of hydroelectric projects.

505

Construction and maintenance of power plants.

506

Construction, and maintenance of industrial plants.

70

LAND TRANSPORT 707

C-8

C-9

71

Pipeline transport excluding Crude Oil, petroleum products and natural gas pipelines. WATER TRANSPORT

710

Ocean and water transport

711

Inland water transport.

74

STORAGE AND WAREHOUSING SERVICES. 741

Warehousing of agricultural products with refrigeration (cold storages).

173

CHAPTER - I EXHIBIT NO.72 PRESS NOTE NO.15 (1997 Series) DELEGATION OF POWERS FOR EOU & EPZ UNITS

Subject: Delegation of powers for Export Oriented Units and EPZ Units. Government had delegated certain powers to the Development Commissioners of Export Processing Zones in respect of Export Oriented Units (EOUs) and the EPZ units, vide Press Note No.4(1995 Series) dated 19.4.1995. These powers inter-alia cover extension in the validity period of Letters of Intent/Letter of Permission/Letters of Approval by a period of one year and also to permit disposal of obsolete capital goods (more than 5 years old), in DTA, on payment of applicable duties. 2. In line with the economic reforms, Government have decided to delegate further powers to the Development Commissioners of Export Processing Zones as follows:(i)

Extension of the validity period of LOI/ LOP/LOA To extend the validity oeriod of Letter of Intent/ Letter of Permission/Letter of Approval, in the

F. No.10(53)/91-IP

case of EOUs and EPZ units, by three years, beyond the initial validity period of the Letter of Intent/Letter of Permission/Letter of Approval (except in case where there is a restriction on initial period of approval, like setting up oil refinery projects). (ii)

Disposal of Obsolete Capital Goods To allow disposal of capital goods, in DTA, on payment of applicable duties, however, disposal of capital goods (used for less than 5 years), in DTA, will be allowed upto a maximum limit of Rs.lO lakh in each financial year for an EOU/ EPZ unit.

While permitting disposal of capital goods in DTA, the Development Commissioners will give due consideration to the fact whether or not there will be replacements for obsolete machinery and that the Export Obligation will be achieved after disposal of machinery.

New Delhi, the 10th November, 1997

Forwarded to Press Information Bureau for wide publicity to the contents of the above Press Note. Sd/(Dhiraj Mathur) Director Press Information Officer Press Information Bureau New Delhi.

174

Industrial Policy Highlights EXHIBIT NO.73 PRESS NOTE NO.16 (1997 Series) SETTING UP OF 100% EOUs FOR ACQUCULTURE & FISH/PRAWN PROCESSING UNITS

In pursuance of the directions of the Hon'ble Supreme Court, Government have constituted an Aquaculture Authority at Chennai. All aquaculture projects including fish/prawn processing units (new or existing) are now required to necessarily obtain clearance from the Aquaculture Authority as per the prescribed procedure.

for 100% Exoort Oriented Units (EOUs) (with or without foreign collaboration) would need to follow a uniform procedure viz. applications may be submitted to the Secretariat for Industrial Assistance (SIA) and the Fisheries Department of the concerned State simultaneously. All applicants should also submit a Declaration that their proposed project falls outside 500 meters of the CRZ Area. The proposals for setting up such 100% EOUs will be considered by the FIPB/Board of Approvals for 100% EOUs and thereafter by Government, only on receipt of the clearance of the project by the Aquaculture Authority.

2. Keeping in view the aforesaid decision of Government, it has been decided that applications

3. This is for general information of applicants for such projects.

Subject: Setting up of 100% EOUs for Aquaculture and Fish/Prawn Processing Units-prior clearance from the Aquaculture Authority, Chennai.

F. No.10(42)/97-IP

New Delhi, the 1st December, 1997

Forwarded to Press Information Bureau for wide publicity to the contents of the above Press Note. Sd/(Dhiraj Mathur) Director Press Information Officer Press Information Bureau New Delhi.

175

CHAPTER - I EXHIBIT NO.74 PRESS NOTE NO.17 (1997 Series) FILING OF INDUSTRIAL ENTREPRENEURS MEMORANDUM

Subject: Filing of Industrial Entrepreneurs Memorandum - reg. Under the present Industrial Policy, entrepreneurs are required to submit an Industrial Entrepreneurs Memorandum (IEM) in the prescribed form with five spare copies alongwith a Demand Draft for Rs.l000/- to the Secretariat for Industrial Assistance (SIA) in the Department of Industrial Policy and Promotion, Ministry of Industry. On filing the memorandum, entrepreneurs are given an acknowledgement by the Entrepreneurial Assistance Unit (EAU) of the SIA, Ministry of Industry. Requirement of entrepreneurs having to file a memorandum is intended mainly to conduct a limited post-facto check to see whether the proposed manufacturing activity requires an industrial licence or not. 2. Acknowledgement of the IEM which is given on the spot on prima facie evidence of not attracting the provisions of licensing, cannot, therefore, be construed as a clearance or approval to carry on an industrial activity contemplated in the IEM unless the provisions of statutes/regulations/notifications

F. No.10(43)/97-IP

etc. issued by the Central or State Governments from time to time or any specific directions or Stay Orders issued by the Court/rompctc'nt authority relevant to such an activity, are also fully complied with, or in no way contravened, as the case may be. 3. It is therefore, clarified that it is the responsibility of the entrepreneur to ensure that the manufacturing activity, as specified in the lEMs, does not come into conflict with other legal provisions or directions or standing orders. In case of doubt, the entrepreneur may avail of the assistance of the Secretariat for Industrial Assistance to seek clarifications on whether the industrial activity contemplated in the IEM for which an acknowledgment was issued by the SIA would be repugnant to any statutes/regulations/notifications etc. issued by the Central Government or on the details of other legal provisions or directions they have to additionally comply with before such an activity is taken. 4. All concerned are requested to note these clarifications for compliance.

New Delhi, the 28th November, 1997

Forwarded to Press Information Bureau for wide publicity to the contents of the above Press Note. Sd/(Ashok Kumar) Joint Secretary to the Govt. of India Press Information Officer Press Information Bureau New Delhi.

176

Industrial Policy Highlights EXHIBIT NO.75 PRESS NOTE NO.18 (1997 Series) REVISION OF FORM FOR FOREIGN COLLABORATION AND INDUSTRIAL LICENCE-COMPOSITE FORM

Subject: Revision of Form for Foreign Collaboration and Industrial Licence Composite Form. At present two separate application forms are prescribed for obtaining approval for foreign investment and technology agreements and for grant of industrial licence. It is considered that a composite application would be more convenient for the entrepreneurs to apply for obtaining FC approvals/ grant of IL. Government have, therefore, decided to

F. No.10(41)/97-IP

prescribe a composite application forms as given in the Annexure to this Press Note. 2. The EOU form being a part of the EXIM Policy and Handbook of Procedure will remain separate. IEM form is being revised separately for entrepreneurs to file nominations about setting up their units. 3. Henceforth, all proposals for foreign collaboration and industrial licence will be accepted by the SIA in the composite form.

New Delhi, the 26th November, 1997

Forwarded to Press Information Bureau for wide publicity to the contents of the above Press Note. Sd/(Dhiraj Mathur) Director Press Information Officer Press Information Bureau New Delhi.

177

CHAPTER - I EXHIBIT NO.75(Contd.) PRESS NOTE NO.18 (1997 Series) REVISION OF FORM FOR FOREIGN COLLABORATION AND INDUSTRIAL LICENCE-COMPOSITE FORM

FORM - FC/IL SIA COMPOSITE FORM FOR FOREIGN COLLABORATION AND INDUSTRIAL LICENCE Please fill up the attached supplementary sheets Part A: For only FC/Part B: For only IL/Both Part A and Part B for FC+IL GENERAL INFORMATION 1. Type of Application (Please [!] the Appropriate Boxes) a) Foreign Collaboration(FC) For Foreign Investment b) Industrial Licence(IL)

For Foreign Technology Agreements

2.

(For Office Use Only) Applicant No. Application No.

3. Payment Details(For FC Application No Fee is Payable. For Industrial Licences 2500, *is Payable) Draft No. Amount(Rs) Draft Date Drawn on

____________________

Payable at

________________________________

1. Name and address of the Promoter/Industrial Undertaking (Indian/foreign) in full (BLOCK LETTERS) for Correspondence: Name of the Promoter/Indl. Undertaking Postal Address

Pin code

Telphone

Telex

Fax

Cable E-Mail II. Registrar of Companies Registration No. (If Registered)

Note: *

Demand Draft should be made in favour of Pay & Accounts Officer, Deptt. of Industrial Development, to be payable at State Bank of India, Nirman Bhawan, New Delhi.

178

Industrial Policy Highlights EXHIBIT NO.75(Contd.) PRESS NOTE NO.18 (1997 Series) REVISION OF FORM FOR FOREIGN COLLABORATION AND INDUSTRIAL LICENCE-COMPOSITE FORM

III. Status of the Promoter/Industrial Undertaking III(1) Status of the Promoter/Promoter Undertaking 1. Central Government Undertaking

5. Joint Sector Undertaking

2. State Government Undertaking

6. Private Sector Undertaking

3. State Industrial Government Corpn.

7. Individual Promoter

4. Co-operative Undertaking

8. Foreign/NRI/OCB Company 9. Foreign/NRI Individual

III(2) Indicate whether this proposal is for (Please [!] the Appropriate Box) 1. Establishment of New Undertaking/Setting up a New Company 2. Effecting Substantial Expansion 3. Manufacture of New Articles 4. Amendments in existing Foreign Collaboration Approval 5. Inducting Foreign/NRI equity in existing Indian Company IV(1) Location of the Factory/Proposed Activities Location & Address

District State Pin Code

Telephone

Fax E-Mail IV(2) Please indicate whether the proposed location is (Please [!] the Appropriate Box) a. Within 25 kms from the periphery of a city having population above one million according to 1991 census Yes

No

b. If Yes, then whether it is located in an Industrial area/Industrial Estate Designated/ set up prior to 25.7.91 Yes

No

V(A) EXISTING ACTIVITIES TO THE COMPANY (Here also specify Item codes as per National Industrial Classification of All Economic Activity, (NIC), 1987.

V(B) PROPOSED ACTIVITIES OF THE COMPANY (1) Items of manufacture(including By-product/Co-product) proposed to be undertaken (supplementary sheets may be used if necessary).

179

CHAPTER - I EXHIBIT NO.75(Contd.) PRESS NOTE NO.18 (1997 Series) REVISION OF FORM FOR FOREIGN COLLABORATION AND INDUSTRIAL LICENCE-COMPOSITE FORM

(a) Item code (NATIONAL CLASSIFICATION OF ALL ECONOMIC ACTIVITY(NIC), 1987)

(b) Item Description

(c) Proposed Annual Capacity (d) Existing Capacity

(If, applicable)* (e) Total Capacity after expansion (f) Unit of capacity (g) Description of Activities to be undertaken (if no manufacturing is envisaged) (2)

Whether the Item is covered in Schedule I (Reserved for Public Sector), Schedule II (Under Compulsory Licensing) or Schedule III (Reserved for manufacture in the Small Scale Sector) of the Notification No.477(E) dated 25th July, 1991 Schedule I

Schedule II

Schedule III

Yes

Yes

Yes

No

No

No

(3)

Briefly indicate process involved in manufacture of the item(s)

V(C)

Attach list of Industrial Licence/Registration/LOI/IEM acknowledgements already issued in favour of the applicant so far.

V(D)

Whether the Indian Promoter/Company has had a foreign collaboration earlier? If yes, please specify whether for the same or similar or different products/activity. Please also indicate the Approving Authority and date & No. of the Approval Letter.

V(E)

Whether the foreign/NRI/OCB collaborations with any other Individual/Company in India for the same or similar or different products/activities? If so, please furnish details.

*

Particulars of approval/Industrial Licence under which existing capacity is indicated may be annexed.

VI CAPITAL STRUCTURE (I)

Capital Structure of Existing Indian Company(Amount in Rupees) & proposed capital structure (if revision sought) Equity (a) Authorised (b) Subscribe (c) Paid-up

Preference

180

Industrial Policy Highlights EXHIBIT NO.75(Contd.) PRESS NOTE NO.18 (1997 Series) REVISION OF FORM FOR FOREIGN COLLABORATION AND INDUSTRIAL LICENCE-COMPOSITE FORM

(III)

Pattern of share holding in Paid-up Capital (Amount in Rupees) Existing Equity

%

Proposed Equity

%

(a) Foreign Holding Preference Share

Percentage

(b) Non resident Indian Individual Holding/OCB holding Equity

%

Equity

%

(i) Repatriable Preference Share

Equity

Percentage

%

Equity

%

(i) Non-Repatriable Preference Share

Equity

Percentage

%

Equity

(i) Resident Holding Preference Share

(d) Total II [a+b(i+ii)+c] Equity Preference VII.

Proposed Borrowings(in Rupees)

(1) Public Financial Institution (2) Public Borrowings (3) Other Sources (4) ECB (5) Promoter Contribution Total Borrowings

Percentage

%

181

CHAPTER - I EXHIBIT NO.75(Contd.) PRESS NOTE NO.18 (1997 Series) REVISION OF FORM FOR FOREIGN COLLABORATION AND INDUSTRIAL LICENCE-COMPOSITE FORM

VIII.

Please indicate in brief:

(i) The background of the Indian Promoters/Company including Proprietors/Promotor/Directors(attach separate sheet, if necessary) (ii) The background of the Foreign/NRI/OCB Collaborator/Promoter(attach separate sheet, if necessary) IX.

Investment(in Rupees) Existing

Proposed

(A) Land (B) Building (C) Plant & Machinery (i) Indigenous (ii) Imported (a) CIF Value (b) Landed Cost (iii) Total [(i)+(ii)(b)] (D) Working Capital (E) Total Investment [A+B+C(iii)] X.

Export commitments/obligation which the applicant is prepared to undertake. Item Code

Year

(1)

Units(Tonnes/number /meters/any other) (2)

1st 2nd 3rd 4th 5th etc. Total Please indicate buy back arrangements, if any

Quantity

(3)

%age of Production

FOB Value in Rupees

(4)

(5)

182

Industrial Policy Highlights EXHIBIT NO.75(Contd.) PRESS NOTE NO.18 (1997 Series) REVISION OF FORM FOR FOREIGN COLLABORATION AND INDUSTRIAL LICENCE-COMPOSITE FORM

XI. Employment

(All Figures in Numbers) Existing (if applicable)

Proposed

Total

(a) Supervisory (b) Non-Supervisory XII.Expected date of commencement of commercial production Date

Month

Year

183

CHAPTER - I EXHIBIT NO.75(Contd.) PRESS NOTE NO.18 (1997 Series) REVISION OF FORM FOR FOREIGN COLLABORATION AND INDUSTRIAL LICENCE-COMPOSITE FORM

PART-A [For Foreign Collaboration] XIII.

Foreign Investment

(a) Foreign Collaborator Name

___________________________________________________

Address

___________________________________________________

Country

___________________________________________________

(b) Amount of Foreign Equity Investment Amount in Rupees

XIV.

Percentage of paid-up capital

Foreign Technology Agreement

(a) Technical Collaborator Name

___________________________________________________

Address

___________________________________________________ ___________________________________________________

Country

___________________________________________________

(b) Royalty on Sales Sales

Percentage of Sales

Period

Please tick [!] whichever is applicable

Domestic

Inclusive of taxes

Export

Net of taxes

(c) Nature and quantum of Lumpsum Payment Name of Foreign Currency

Amount of Foreign exchange required

No. of Instalment in which Payment will be made

Please tick whichever is applicable Inclusive of taxes Net of taxes

i)

Technical know-how fees

ii) Payment of design/drawing iii) Payment for engineering Services iv) Payment for use of patents, brand names trade marks and the like v) Any other Payments (Please specify the purpose)

184

Industrial Policy Highlights EXHIBIT NO.75(Contd.) PRESS NOTE NO.18 (1997 Series) REVISION OF FORM FOR FOREIGN COLLABORATION AND INDUSTRIAL LICENCE-COMPOSITE FORM

XV.

(I) Total foreign Exchange inflow during the period of proposed collaboration a) Equity b) Foreign Exchange earnings based on f.o.b. value of export obligation/ commitment

(II)

Total foreign Exchange outgo during the period of collaboration i)

Import of machinery & equipment

ii) Import of raw materials & Components iii) Import of Spare and Consumables iv) Dividends & Profits(net of taxes) v) Lumpsum Payment(net of taxes)

vi) Royalty payments(net of taxes) vii) Design & Drawing Fee viii) Payment of Foreign Technicians ix) Payment of training of Indian Technicians abroad x) Commission of Export etc. xi) Amount of interest to be paid on External commercial borrowing/deferred Payment credit(Specify details) xii) Any other payment(Specify details)

Total (i) to (xii) Net Foreign Exchange Position XVI.

If this application is for extension of collaboration agreement or renewal of the already expired collaboration agreement

185

CHAPTER - I EXHIBIT NO.75(Contd.) PRESS NOTE NO.18 (1997 Series) REVISION OF FORM FOR FOREIGN COLLABORATION AND INDUSTRIAL LICENCE-COMPOSITE FORM

(a) Please indicate the period for which the agreement has already run and attach the copy of the previous approval No. & date of Approval

Date

Month

Date of commencement agreement Date Month Year

Date of expiry of agreement Date Month Year

Year

(b) Justification for extension of the collaboration agreement with information about the status of absorption and development of the technology already achieved (i) Whether you have set up any R&D Cell to absorb the know-how and the progress achieved in this regard No Yes (ii) If yes, please indicate the number and date of communication under which recognised by Department of Science & Technology/Department of Scientific and Industrial research (iii) Expenditure on R&D Facility set up(in Rupees) Amount of Investment in fixed assets Annual Recurring expenditure

(d) Total payment made so far(Net of taxes)(in Rupees) a) Lumpsum b) Royalty c) Other Payments XVII. Please indicate (a) the Regional Office of the RBI to whom a copy of the approval is to be endorsed _____________________________ _____________________________ (b) the name of the Authorised Dealer of Foreign Exchange concerned through whom the remittance know-how fees and Royalty will be made Name: ____________________________________ Address:

____________________________________

DECLARATION I/We hereby certify that the above statement are true and correct to the best of my knowledge and belief. (Signature of Applicant)

_____________________________________

(Name in block letters)

_____________________________________

(Designation of the signatory)

_____________________________________

Place

_____________________________________

Date

Date

Month

Year

186

Industrial Policy Highlights EXHIBIT NO.75(Contd.) PRESS NOTE NO.18 (1997 Series) REVISION OF FORM FOR FOREIGN COLLABORATION AND INDUSTRIAL LICENCE-COMPOSITE FORM

Part: B (For IL Application Only) XVIII. Import Requirements a. Capital Goods for the Projects ____________________________________________________________________________ (In rupees)

(US $ Thousand)

____________________________________________________________________________ Imported Indigenous b. Raw Materials(including components, intermediates and packing materials) per annum ____________________________________________________________________________ (In rupees)

(US $ Thousand)

____________________________________________________________________________ Imported Indigenous ITEM NAME

QUANTITY

1. Unit

Value

Unit

Value

Unit

Value

2.

3.

c. Consumables & Spares for CG for the Project per annum Year Imported Indigenous

(in rupees)

(US $ Thousand)

CHAPTER - I EXHIBIT NO.75(Contd.) PRESS NOTE NO.18 (1997 Series) REVISION OF FORM FOR FOREIGN COLLABORATION AND INDUSTRIAL LICENCE-COMPOSITE FORM

DECLARATION I/We hereby certify that the above statements are true and correct to the best of my/our knowledge and belief. (Signature of Applicant)

___________________________________________________

(Name in Block letters)

___________________________________________________

(Designation of the Signatory)

___________________________________________________

Place

___________________________________________________

Date

___________________________________________________

187

188

Industrial Policy Highlights EXHIBIT NO.75(Contd.) PRESS NOTE NO.18 (1997 Series) REVISION OF FORM FOR FOREIGN COLLABORATION AND INDUSTRIAL LICENCE-COMPOSITE FORM

Note for Guidance of Entrepreneurs submitting applications for grant of Industrial Licence/approval for Foreign Investment and Technology Agreements. (This part contains information for the guidance of entrepreneurs and may be retained by them; it need not accompany the application) GENERAL 1.

Application is to be submitted to Secretariat for Industrial Assistance, Department of Industrial Policy & Promotion, Ministry of Industry, Udyog Bhawan, New Delhi with 9 copies of both the application and forwarding letter.

2.

Applicants are required to take care in filling up their application properly and completely.

3.

The application form should be duly signed and the designation/authority of the person signing the application should be clearly shown.

4.

Only the relevant part of the application form should be used. General information is to be furnished by all applicants. Part 'A' is to be filled by entrepreneurs/investors applying for grant of approval for foreign collaboration. Part 'B' is to be used for obtaining Letter of Intent/Industrial Licence. Part 'A' and Part 'B' are to be filled in case of composite proposals involving foreign collaboration and industrial licensing.

5.

Application involving grant of Industrial Licence shall be accompanied by a crossed Demand Draft for Rs.2500/- drawn on the State Bank of India, Nirman Bhawan, New Delhi in favour of the "Pay & Accounts Officer, Department of Industrial Development, Ministry of Industry, New Delhi".

I.

FOREIGN INVESTMENT

(i)

Approval will be given by the Reserve Bank of India for direct foreign investment upto 50/51/74 per cent foreign equity in high priority industries (Annex III, Annex III Part'A', Part 'B' and Part 'C'). There shall be no bottlenecks of any kind in this process.

(ii)

The import of components, raw materials and intermediate gods, and payment of know-how fees and royalties will be governed by the general policy applicable to other domestic units.

(iii) Other foreign equity proposals, including proposals involving 50/51/74 per cent foreign equity which do not meet the criteria under (I) above, will continue to need prior clearance. Foreign equity proposals need not necessarily be accompanied by foreign technology agreements. (iv) To provide access to international markets, majority foreign equity holding upto 51 per cent equity will be allowed for trading companies primarily engaged in export activities. While the thrust would be on export activities, such trading houses shall be at par with domestic trading and export house in accordance with the Import-Export Policy. (v) For increase/induction of foreign equity in the existing company, the request should be supported by a Board Resolution of the Indian Company. II) FOREIGN TECHNOLOGY AGREEMENTS (I)

Automatic permission will be given by the Regional Offices of the Reserve Bank of India for foreign technology agreements in high priority industries (Annex III, Annex III Part 'A', Part 'B' and Part 'C') upto a lumpsum payment of US $ 2 million, 5% royalty for domestic sales and 8% for exports, subject to total payment of 8% of sales over a 10 year period from date of agreement or 7 years from commencement of production. The prescribed royalty rates are net of taxes and will be calculated according to standard procedures.

(ii)

In respect of industries other than those in Annex III, Annex III Part 'A', Part 'B' and Part 'C', automatic permission will be given subject to the same guidelines as above.

CHAPTER - I EXHIBIT NO.75(Contd.) PRESS NOTE NO.18 (1997 Series) REVISION OF FORM FOR FOREIGN COLLABORATION AND INDUSTRIAL LICENCE-COMPOSITE FORM

(iii) All other proposals will need specific approvals under the general procedures in force. (iv) No permission will be necessary for hiring of foreign tecimicians, foreign testing of indigenously developed technologies. Payment may be made from blanket permits or in free foreign exchange according to RBI guidance. III. Standard Conditions Attached to Approvals for Foreign Collaborations:1.

The total non-resident shareholdings in the Indian company should not exceed the amount as well as the percentage specified in the approval letter. For any proposed increase in the amount, as also the percentage of the Non-Resident shareholding, prior approval of the Government shall be obtained.

2(a) The royalty will be calculated on the basis of the net ex-factory sale price of the product exclusive of excise duties minus the cost of the standard bought-out components and landed cost of imported components irrespective of the source of procurement, including oceanfreight, insurance, custom duties etc The payment of royalty will be restricted to the licensed capacity plus 25% in excess thereof for such items requiring industrial licensed. In case of production in excess of the quantum, prior approval of Government will have to be obtained regarding the terms of payment of royalty in respect of such excess production. 2(b) The royalty would not be payable beyond the period of the agreement, if the orders had not been executed during the period of agreement. However, where the order has been booked during the period of agreement, but executed after the period of agreement, royalty would be payable only after the Chartered Accountant Certifies that the orders in fact have been firmly booked and execution began during the period of agreement and the technical assistance was available on a continuing basis even after the period of agreement. 3.

The lumpsum shall; be paid in three instalments detailed below unless otherwise stipulated in the approval letter - First l/3rd after the agreement is filed with Reserve Bank of India, Authorised Foreign Exchange Dealer; Second l/3rd on delivery of technical documentation; Third and final l/3rd on commencement of commercial production of four years after the agreement is filed with RBI/Authorised Foreign Exchange Dealer, whichever is earlier. The lumpsum can be paid in more than three instalments subject to completion of the activities as specified above.

4.

In case the proposed activity is not exempted from the provision of Industrial (Development & Regulation) Act, 1951 and the Foreign Exchange Regulation Act, 1973 it will be your responsibility to obtain such clearances as may be required under the said Acts.

5.

The location of the industrial projects, will be subject to Central or State Environmental laws or regulations including local zoning and land use laws and regulations.

6.

Adequate steps shall be taken on the satisfaction of the Government to prevent air, water and soil pollution. Such anti-pollution measures to be installed should conform to the effluent and emission standards prescribed by the State Government in which the factory or the industrial undertaking is located.

7.

Items reserved for the Small Scale Sector shall not be manufactured without prior approval of the Government as per the prescribed policy and procedure.

8.

Since the maximum equity participation allowed for in Small Scale Units is 24%, their company's proposal for having, foreign equity of more than 24% would be subject to the condition that the company would get itself de-registered as a small scale unit and obtain industrial licence or would file Industrial Entrepreneur Memorandum with SIA as per the prescribed policy and procedure.

9.

For undertaking export obligation, if any, specified in the approval letter, the requisite guarantee, i.e., legal undertaking/bank guarantee, as may be required should be furnished according to the detailed instructions issued by the Director General of Foreign Trade (EO Cell), Ministry of Commerce, and the Administrative Ministry, who may be contacted in the matter.

189

190

Industrial Policy Highlights EXHIBIT NO.75(Contd.) PRESS NOTE NO.18 (1997 Series) REVISION OF FORM FOR FOREIGN COLLABORATION AND INDUSTRIAL LICENCE-COMPOSITE FORM

10. Import of capital equipments, components and raw materials will be allowed as per the import policy prevailing from time to time. 11. The approval is valid for a period of two years from the date of issue. Within this period, the collaboration agreement is requested to be file with the Reserve Bank of India/Authorised Foreign Exchange Dealer. 12. The FC agreement shall be subject to Indian Laws. 13. Foreign Investment Remittance Certificate (FIRC) is required to be sent to the Regional Office, Reserve Bank of India, immediately on receipt of foreign remittance. 14. All remittances to the foreign collaborator shall be made as per the exchange rates prevailing on the day of remittance. 15. A copy of the collaboration agreement, signed by both parties may be furnished to the following authorities:(A) Administrative Ministry/Department as mentioned in the Approval to be issued by SIA. (B) Secretariat for Industrial Assistance (Foreign Collaboration II Section) Department of Industrial Policy & Promotion, Udyog Bhavan, New Delhi - 110 011. (C) Department of Scientific and Industrial Research, Technology Bhavan, New Mehrauli Road, New Delhi. 16. * The outflow of foreign exchange on account of dividend payment will be balanced by export earnings on the following basis: a)

The balancing of the dividends would be over a period of 7 years from commencement of production. Balancing will not be required beyond this period.

b)

Remittance of dividends should be covered by earnings of the company from export of items covered by the foreign collaboration agreements. You are also permitted to cover remittance of dividends from earning through export of items not covered by the agreement provided they recovered in the list of Industries in Annexure III of Statement of Industrial Policy of 24th July 1991. The amount of dividend payments may be covered by export earnings of such items covered by export earnings of such items covered in years prior to the payment of dividends or in the year of payment of dividends.

(*Wherever applicable) IV. Hiring of Foreign Technicians No permission is necessary for hiring of foreign technicians and no application need be made to Government for this purpose irrespective of whether the hiring of foreign technicians is under an approved collaboration agreement or not. As regards release of foreign exchange either against blanket permits or in free foreign exchange, the Reserve Bank of lndia/ Authorised Dealers may be approached, as per RBI guidelines. V.

Deputation of Indian Personnel for Raining Abroad. For deputing Indian personnel for training and other purposes abroad, the entrepreneurs may approach only the RBI/Authorised Dealers an per RBI guidelines.

VI. Foreign. Testing of Indigenous Raw Materials and Products and Indigenously Development Technology. Entrepreneurs may approach RBI/Authorised Dealers for authorising payments either against blanket permits or in free foreign exchange, as per RBI guidelines.

191

CHAPTER - I EXHIBIT NO.76 PRESS NOTE NO.19 (1997 Series) EXPORT OF COTTON YARN BY EOUs/EPZ UNITS

100% EOUs for manufacturing and export of Counts of 40 and below.

SubJect: Export of Cotton Yarn by EOUs/EPZ Units Currently, the export of cotton yarn by domegtic units is regulated under Textiles (Development & Regulation) Order, 1993 with annual quantitative ceilings and hank yarn obligations whereas, the export of cotton yarn by EOUs/ EPZ Units is not subjected to such conditions. 2. The Government having taken into consideration compelling need to promote exports consistent with domestic supplies, have decided to lay down the following policy & procedures to enable 100% EOU to plan timely imports of cotton whenever necessary to meet the export obligations: i)

ii)

An empowered Committee consisting of the representatives of Ministry of Commerce, Ministry of Agriculture, Ministry of Textiles and the Department of Industrial Policy & Promotion (The Ministry of Industry) will be constituted to advise on the availability of cotton during the ensuing calendar year/season. This imposition of domestic cotton-use condition would be suitably incorporated in the letters of approval granted in future to new

F. No.10(48)/97-IP

iii)

This condition would be applicable to all future units as well as to existing approved units while requesting for expansion of capacity. However, units seeking revalidation, which have already taken effective steps as defined under the "Registration and Licensing of Industrial Undertakings Rules, 1952" and also renewal of bonding period of existing EOUs shall not be subjected to domestic cottonuse condition.

iv)

The Textile Ministry in the light of above advice by the Committee, would determine, during the year, extent of domestic cotton which new 100% EOUs, approved with specific condition as mentioned would be allowed to use for their production of yarn of Counts of 40 and below.

v)

The policy regarding use of imported cotton for manufacture of above mentioned counts shall remain unchanged.

3. All investors and entrepreneurs may please take of the aforesaid revision in policy and procedures.

New Delhi, the 26th December, 1997

Forwarded to Press Information Bureau for wide publicity to the contents of the above Press Note. Sd/(O. Ravi) Director Press Information Officer Press Information Bureau New Delhi.

192

Industrial Policy Highlights EXHIBIT NO.77 PRESS NOTE NO.1 (1998 Series) REVIEW OF INDUSTRIES COVERED UNDER INDUSTRIAL LICENSING

Subject: Review of Industries covered under Industrial Licensing In line with the policy of the Government to continue with reforms in industrial sector to create an investor friendly environment, the remaining handful of items requiring compulsory licensing have been further reviewed. As a result of the review and as already announced by the Finance Minister in his Budget Speech dated 1.6.98, it has been decided to remove the following entries from the list of industries reserved for Public Sector (annexure-I to the Press Note No.9 (1991 series) dated 2.8.91). i)

"Coal and Lignite"

ii)

"Petroleum (other than crude) and its distillation products (listed as "mineral oils" in the list of industries reserved for public sector)".

2. Government have also decided to remove the above mentioned items from the list of industries for compulsory licensing. (Annexure-ll to the Press Note No.9 (1991 Series), dated 2.8.91, as modified from time to time). However, the marketing of controlled petroleum products would continue to be regulated in

F. No.10(3)/97-IP

accordance with the present regime, until the Admistered Price Mechanism(APM) is fully dismantled and notified. 3. Delicensing of these items will, however, be subject to conditions as given in Press Note dated 2nd August 1991 and relevant statutes/statutory/ policy notifications and directions and decisions of Hon'ble Supreme Court. 4. Entrepreneurs who wish to avail of the liberalised facility of delicensing for the above mentioned sectors are requested to follow the same procedure as laid down in Press Note dated 2nd August 1991 as amended from time to time. 5. Entrepreneurs who have been issued Letter(s) of Intent for manufacture of items now falling under exempted category, need not file an initial memorandum. In such cases, the LOI holder shall only file "Part B" at the time of commencement of commercial production against the LOI issued to them. It is, however, open to entrepreneurs to file an initial memorandum (in lieu of the LOI/IL held by them) if they so desire, whenever any variation from the conditions stipulated in the Letter of Indent/ Industrial Licence is contemplated.

New Delhi, the 8th June, 1998

Forwarded to Press Information Bureau for wide publicity to the contents of the above Press Note. Sd/(Ashok Kumar) Joint Secretary to the Govt. of India Press Information Officer Press Information Bureau New Delhi.

193

CHAPTER - I EXHIBIT NO.78 PRESS NOTE NO.2 (1998 Series) LIST OF INDUSTRIES/ITEMS FOR AUTOMATIC APPROVAL FOR FOREIGN EQUITY UPTO 100%

Under the present policy, Indian companies undertaking generation and transmission of electric energy, produced in hydro-electric power plants, coal based power plants, oil based thermal power plants and gas based thermal power plants are eligible for automatic approval upto 74% foreign equity. 2. The Government has reviewed the existing guidelines for automatic approval for foreign equity for electric generation, transmission and distribution projects, and has decided to enlarge the provisions for automatic approval for such projects. Accordingly, projects for electric generation, transmission and distribution will be permitted foreign equity participation upto 100% on the automatic approval route provided the foreign equity in any such project does not exceed Rs.l500 crore. The categories which would qualify for such automatic approval are : (i)

Hydro-electric power plants.

(ii)

Coal/lignite based thermal power plants.

(iii) Oil based thermal power plants. (iv) Gas based thermal power plants.

F. No.10(31)/97-IP

3. It is clarified that the facility for automatic approval as enumerated in paragraph 2 above, does not include generation, transmission and distribution of electric energy produced in atomic reactor power plants and hence such proposals shall not qualify for automatic approval by RBI under this Press Note. 4. The provisions referred in para 2 above would be listed under the heading Part-'D' of Annexure-III as appended to this Press Note as a substitution of the existing entry No.C-4 in Part 'C' of Annexure-III. 5. The list appended to this Press Note is based on the National Industrial Classification of all Economic Activities (NIC), 1987. The entrepreneurs/ investors are advised to give the description of their activity under this classification system when submitting their applications to the RBI. 6. All other terms and conditions as notified under Press Note No.2 (1997 Series) dated the 17th January, 1997 and Press Note No.14(1997 Series) dated the 8th October, 1997 remain unchanged.

New Delhi, the 13th June, 1998

Forwarded to Press Information Bureau for wide publicity to the contents of the above Press Note. Sd/(Ashok Kumar) Joint Secretary to the Govt. of India Press Information Officer Press Information Bureau New Delhi.

194

Industrial Policy Highlights EXHIBIT NO.78(Contd.) PRESS NOTE NO.2 (1998 Series) LIST OF INDUSTRIES/ITEMS FOR AUTOMATIC APPROVAL FOR FOREIGN EQUITY UPTO 100%

ANNEXURE-III (Contd...) PART 'D' LIST OF INDUSTRIES/ITEMS FOR AUTOMATIC APPROVAL FOR FOREIGN EQUITY UP TO 100% SI.

NIC CODE

NO.

Division

D-1

40

Group

Description Class ELECTRICITY GENERATION, TRANSMISSION AND DISTRIBUTION

400

401

Generation and transmission of electric energy(only for hydroelectric power plants, coal/lignite based thermal power plants, oil based thermal power plants, and gas based thermal power plants, and not for atomicreactor power plants) 400.1

Generation and transmission of electric energy produced in hydroelectric power plants.

400.2

Generation and transmission of electric energy produced in coal/lignite based thermal power plants.

400.3

Generation and transmission of electric produced in oil based thermal power plants.

400.4

Generation and transmission of electric energy produced in gas-based thermal power plants. Distribution of electric energy to households, industrial, commercial and other users.

Sd/(Ashok Kumar) Joint Secretary to the Govt. of India

195

CHAPTER - I

EXHIBIT NO.79 PRESS NOTE NO.3 (1998 Series) GRANT OF EXTENSION IN VALIDITY PERIOD OF THE LOI GRANTED FOR SETTING UP OF NEW SUGAR UNITS

Subject: Grant of extension in validity period of the Letters of Intent granted for setting up new Sugar Units in Relaxation of the Existing Guidelines. The guidelines governing the extension in the validity period of Letters of Intent (LOI) granted for setting up new units for manufacture of sugar were notified vide Press Note No.6 dated 28.5.1997. According to the guidelines, the validity period of such LOIs was reduced to one year and certain milestones were prescribed to be fulfilled for further extension in the period of validity of LOI. 2. Instances have come to the notice of the Government where some of the LOI holders were

F. No.10(15)/97-IP

not able to reach the milestones prescribed in Press Note No.6 dated 28.5.97 for reasons beyond their control, such as pendency of matters before the court of law or, proposals filed by entrepreneurs for change of location of their projects on which a decision is required from Government etc. 3. Having regard to these circumstances, Government has decided that initial validity period of one year will be counted, in such cases, with effect from the date of the final order of the court/ the date of the order of the Government in cases where the entrepreneurs had applied for change of location of their sugar units.

New Delhi, the 15th June, 1998

Forwarded to Press Information Bureau for wide publicity to the contents of the above Press Note. Sd/(Aditi S. Ray) Director Press Information Officer Press Information Bureau New Delhi.

196

Industrial Policy Highlights EXHIBIT NO.80 PRESS NOTE NO.4 (1998 Series) REVISION OF FORM FOR INDUSTRIAL ENTREPRENEURS MEMORANDUM

Subject: Revision of form for Industrial Entrepreneurs Memorandum(IEM) In the Press Note No.18(1997 Series) dated 26.11.97, it was notified that henceforth all proposals for foreign collaboration and industrial licences would be accepted by the Secretariat for Industrial Assistance(SIA) in the Ministry of Industry in composite form. It was also clarified that Industrial Entrepreneurs Memorandum(IEM) form would be revised separately for entrepreneurs to file

F. No.10(14)/98-IP

their intentions in the revised format. Accordingly, a copy of the revised IEM form is enclosed as Aq4exure to this Press Note for the use of entrepreneurs. This will take effect from 1.7.98. 2. The procedures in the Press Note dated 2.8.91 for filing an IEM with the SIA in the Ministry of Industry and the clarifications notified subsequently vide Press Notes dated 24.12.91, 27.7.93, 28.11.97 will continue to remain in operation.

New Delhi, the 15th June, 1998

Forwarded to Press Information Bureau for wide publicity to the contents of the above Press Note. Sd/(Aditi S. Ray) Director Press Information Officer Press Information Bureau New Delhi.

197

CHAPTER - I EXHIBIT NO.80(Contd.) PRESS NOTE NO.4 (1998 Series) REVISION OF FORM FOR INDUSTRIAL ENTREPRENEURS MEMORANDUM

INDUSTRIAL ENTREPRENEURS MEMORANDUM 1. This format is to be used for submission to the Central Government in the Secretariat for Industrial Assistance, for the purpose of record, a memorandum under the lndustries(Development & Regulation), Act, 1951(65 of 1951) in respect of proposals covered by Notification No.477(E) dated 25th July, 1991 of the Department of Industrial Policy & Promotion, Ministry of Industry, Government of India, as amended from time to time. 2. The application should be submitted to the Secretariat for Industrial Assistance (SIA) Department of Industrial Policy & Promotion, Ministry of Industry, Udyog Bhavan. New Delhi - 110 011 in 6(Six) Copies alongwith a crossed Demand Draft for RS.1000/- drawn in favour of the "Pay & Accounts Officer, Department of Industrial Development, Ministry of Industry", payable at the State Bank of India, Nirman Bhawan, New Delhi. 3. Entrepreneurs may go through the "Note for Guidance for Entrepreneurs" carefully before filling up the details of IEM. The note contains relevant extracts of licensing provisions, a note of NIC Classification System and guidelines for filing up the Memorandum. For Official Use only Memorandum No. Date Date

Month

Year

I. Details of Demand Draft Amount Rs. Draft No.

_______________________________

Draft Date Drawn on

_______________________________ (Name of the Bank)

Payable at

_______________________________

II. Name and Address for Correspondence of the Promoter/Industrial Undertaking in full (BLOCK LETTERS) Name of the Undertaking/ Promoter Area Town Tehsil/Taluk District State Pin Cod Telephone Telex Fax Cable

198

Industrial Policy Highlights EXHIBIT NO.80 (Contd.) PRESS NOTE NO.4 (1998 Series) REVISION OF FORM FOR INDUSTRIAL ENTREPRENEURS MEMORANDUM

III. Registrar of Companies Registration No.(if Registered)

IV. Status of Promoter/Industrial Undertaking IV.(1) Status of Promoter/Industrial Undertaking (Please tick [!] the appropriate box)

IV(2)

Central Govt. Undertaking

Joint Sector Undertaking

State Government Undertaking

Private Sector Undertaking

Individual Promotor

Assited Sector Undertaking

State Industrial Devel. Corporation

Co-operative Undertaking

Indicate whether this proposal is for (Please tick [!] the appropriate box) Establishment of New Undertaking

Change of Location

Effecting Substantial Expansion

Change of Ownership/Name of Company

Manufacture of New Articles

Graduation to Medium Scale Others*

Note:

*

Please specify in separate sheet

(3)

whether the proposal is in lieu of any other IEM already acknowledged/Letter of Intent/Industrial Licence held Yes

No

(If Yes, indicate the previous Reference number and the date, attach the previous reference in original) Reference No. ___________________ Date

_______________________

V. Location V(1)

Location of the Undertaking

Place/Town Tehsil/Taluk District State Pin Code V(2)

Please indicate whether the proposed location is:

(a)

Whether 25 Kms from the periphery of a city having population above one million accor according to 1991 Yes

No

CHAPTER - I EXHIBIT NO.80(Contd.) PRESS NOTE NO.4 (1998 Series) REVISION OF FORM FOR INDUSTRIAL ENTREPRENEURS MEMORANDUM

(b) Located in an indusrrial area/industrial estate designated/set up prior to 25.7.1991 Yes

No

V(3)(a) Is the IEM being filed for electronics, computer software or printing industry Yes

No

(b) Is the IEM being filed by a small unit graduating to medium scale for the unit located within 25 Kms. from the periphery of a city with more than 1 million population Yes

No

(c) Is the IEM being filed by existing unit for new articles without additional investment Yes

No

VI.

Item(s) of Manufacture: In case of more than one item supplementary sheets may be used.(Specimen of supplementary sheet is enclosed). In case of proposals for Drugs and Pharmaceuticals, applicants should also fill up the Annexure.

VI(1)

Item of Manufacture*

(a) (NATIONAL INDUSTRIAL CLASSIFICATION OF ILL ECONOMIC ACTIVITY(NIC), 1987 NIC No. (b) Item Description

(c) Proposed annual capacity (d) Existing capacity, (if applicable) (e) Total Capacity after expansion (f) Unit of Capacity VI(2)

Description of Activities to be undertaken(if, no manufacturing envisaged) _______________________________________________________________________________ _______________________________________________________________________________ _______________________________________________________________________________ _______________________________________________________________________________ _______________________________________________________________________________

199

200

Industrial Policy Highlights EXHIBIT NO.80(Contd.) PRESS NOTE NO.4 (1998 Series) REVISION OF FORM FOR INDUSTRIAL ENTREPRENEURS MEMORANDUM

VI(3)

BY PRODUCT/CO-PRODUCT

VI(3)

NIC No.

Item Description

Proposed annual capacity Existing capacity, (if applicable) Total Capacity after expansion Unit of Capacity *

NOT TO BE FILLED IF NO MANUFACTURING IS ENVISAGED NIC No. Item Description

Proposed annual capacity Existing capacity, (if applicable) Total Capacity after expansion Unit of Capacity VI(4)

Raw Materials (including Components, intermediates and packing materials) per annum ITEM(s)

VII.

QUANTITY

UNIT

VALUE

Whether the item(s) of manufacture/by product/co-product is covered in Schedule: (Reserved for Public Sector), Schedule II (under compulsory Licensing) or Schedule III (Reserved for manufacture in Small Scale Sector) of Notification No. 477(E) dated 25th July, 1991/as amended from time to time. Schedule I

Schedule II

Schedule III

Yes

Yes

Yes

No

No

No

201

CHAPTER - I EXHIBIT NO.80(Contd.) PRESS NOTE NO.4 (1998 Series) REVISION OF FORM FOR INDUSTRIAL ENTREPRENEURS MEMORANDUM

VIII.

Investment

Existing (Amount in Rupees)

Proposed (Amount in Rupees)

Existing Amount (Amount in Rupees)

Proposed Amount (Amount in Rupees)

(a) Land (for rented Premises Capitalised value of the same to be indicated (b) Building (c) Plant & Machinery (i) Indigenous (ii) Imported (a) CIF Value (b) Landed cost (iii) Total [(i)+(ii)+(b)] (ii) Imported IX. FINANCING PATTERN Total Equity (1) Resident Indian (2) Non-Residant Indian (3) Foreign Total Borrowings (i) Public Fin. Institution (ii) Public Borrowings (iii) Other Sources Promoters Contribution

IX(1) Whether Foreign Technology agreements is envisaged: (Please tick [!] the appropriate box) Yes

No

IX(2) Whether Foreign Technology agreements is envisaged: (Please tick [!] the appropriate box) Yes

No

202

Industrial Policy Highlights EXHIBIT NO.80(Contd.) PRESS NOTE NO.4 (1998 Series) REVISION OF FORM FOR INDUSTRIAL ENTREPRENEURS MEMORANDUM

X. Employment (All figures in number) Existing

Proposed

(a) Supervisory (b) Non-Supervisory Total XI. Expected Date of Commencement of Commercial Production Date

Month

Year

Declarations 1. I/We hereby certify that this memorandum conforms to all the conditions stipulated in the Notification No.477(E) dated 25th July 1991 and amendments thereof regarding exemption from Industrial Approvals. 2. I/We hereby further declare that the above statements are true and correct to the best of my our knowledge. Signature of the Promoter(s) -----------------------------------_________________________ (Name in Block Letters) -----------------------------------Designation of Promoter Place

________________________________ Date

Month

Year

CHAPTER - I EXHIBIT NO.80(Contd.) PRESS NOTE NO.4 (1998 Series) REVISION OF FORM FOR INDUSTRIAL ENTREPRENEURS MEMORANDUM

SPECIMEN Supplementary Sheet referred in Column VI V. Item(s) of Manufacture: VI(1)

Item of Manufacture

(a) Item Code(NIC No.) (b) Item Description

(c) Proposed annual capacity (d) Existing capacity,(if applicable) (e) Total Capacity after expansion (f) Unit of Capacity VI(2)

BY PRODUCT/CO-PRODUCTS:

VI(3)

NIC No. Item Description

Proposed annual capacity Existing capacity,(if applicable) Total Capacity after expansion Unit of Capacity NIC No. Item Description

Proposed annual capacity Existing capacity,(if applicable) Total Capacity after expansion Unit of Capacity

203

204

Industrial Policy Highlights EXHIBIT NO.80(Contd.) PRESS NOTE NO.4 (1998 Series) REVISION OF FORM FOR INDUSTRIAL ENTREPRENEURS MEMORANDUM

NIC No. Item Description

Proposed annual capacity Existing capacity,(if applicable) Total Capacity after expansion Unit of Capacity VII.

Whether the item(s) of manufacture/by product/co-product is covered in Schedule I (Reserved for Public Sector), Schedule II (under compulsory Licensing) or Schedule III (Whether it is reserved for manufacture in Small Scale Sector) of Notification No. 477(E) dated 25th July, 1991/as amended from time to time. Schedule I

Schedule II

Schedule III

Yes

Yes

Yes

No

No

No Signature of the Promoter(s) -----------------------------------_________________________ (Name in Block Letters) -----------------------------------Designation of Promoter

Place

________________________________ Date

Month

Year

205

CHAPTER - I EXHIBIT NO.80(Contd.) PRESS NOTE NO.4 (1998 Series) REVISION OF FORM FOR INDUSTRIAL ENTREPRENEURS MEMORANDUM

PART - B To be submitted at the time of commencement of commercial production to the Secretariat for Industrial Assistance (SIA) Department of Industrial Policy & Promotion, Udyog Bhawan, New Delhi - 110 011 in six(6) copies. I

Reference Number

________________________________________

II Actual Date of Commencement VIII.

Actual Investment

Existing (Amount in Rupees)

Proposed (Amount in Rupees)

(a) Land (for rented Premises Capitalised value of the same to be indicated (b) Building (c) Plant & Machinery (i) Indigenous (ii) Imported (a) CIF Value (b) Landed cost (iii) Total [(i)+(ii)+(b)] VI. Item(s) of Manufacture : In case of more than One item supplementary sheets may be attached. VI(3)

NIC No.

VI(3)

ITC Code

Proposed annual capacity Existing capacity,(if applicable) Total Capacity after expansion Unit of Capacity Proposed

Actual

(a) Supervisory (b) Non-Supervisory Signature of the Promoter(s) -----------------------------------_________________________ (Name in Block Letters) -----------------------------------Designation of Promoter Place

________________________________ Date

Month

Year

TO BE FILLED WHEREEVER APPLICABLE

206

Industrial Policy Highlights EXHIBIT NO.80(Contd.) PRESS NOTE NO.4 (1998 Series) REVISION OF FORM FOR INDUSTRIAL ENTREPRENEURS MEMORANDUM

Note for guidance of Entrepreneurs for submitting lEMs (This part contains information for guidance of entrepreneurs and may be retained by them, it need not accompany the application. 1. Under the notification No.477(E) dt.25.7.91 Industrial undertakings have been exempted from the operation of Sections 10, 11, 11A and 13 of the I(D&R) Act, 1951 subject to fulfillment of certain conditions. Section 10 refers to the requirement of registration of existing industrial units. Section 11 refers to the requirement of licensing of new industrial undertakings. Section 11A deals with licenses for the production of new articles. Section 13, refers, inter-alia to the requirement of licensing for effecting substantial expansion. Extracts from notification No.477(E) dated 25th July, 1991 Para 1 of Notification No.477(E) dated 25.7.91 as amended from time to time. "EXEMPTION FROM INDUSTRIAL LICENSING The Central Government hereby exempts from the operation of the provisions of Section 10, 11, 11A, 13 ofthe I(D&R) Act, 1951, industrial undertakings exempted licensing are specified as below: I.

Small Scale and ancillary industrial undertakings covered by Notification No.S.0.232(E), dated the 2nd April, 1991(as amended by S.O. 857(E), dated 10.1.2.97) subject to the conditions that the article(s) of manufacture is: (i) (ii)

II.

Not included in Schedule I or Schedule II to this notification or included in Schedule III to this notification.

Industrial undertakings not covered by this Ministry's Notification No.S.0.232(E) dated 2nd April, 1991(as amended by S.O. 857(E), dated 10.12.97) subject to the provisions contained in A and B below: A.(i) The article(s) of manufacture shall not be an article(s) included in Schedule I, Schedule II or Schedule III to the Notification; and (ii)

The proposed project shall not be located within 2.5 Kms. from the periphery of the standard urban area limits of cities having population of more than 10 lakhs according to the 1991 census.

This condition shall not apply to:(a)

electronics, computer softv/are) and printing industries and oilier non-polluting industries that may be notified from time to time.

(b) Other industries provided they are located within industrial areas designated by the State Government's) before July 24, 1991. (c) The Small Scale unit of ancillary industrial undertakings on their exceeding the investment limits prescribed for such industrial undertakings in the notification ofthe Government of India in the Ministry of lndustry(Department of Industrial Development) No.232(E) dated 2nd April, 1991(as amended by S.O. 857(E), dated 10.12.97) B.

Section 11A ofthe said Act subject to the condition that new article shall not be an article included in Schedule I, Schedule II or Schedule III to this notification and shall not involve any additional investment in plant and machinery.

III. Industrial undertakings, other than the small scale and ancillary industrial undertakings covered by Notification No.S.0.232(E) dated the April 2, 1991(as amended by S.O.857(E), dated 10.12.97) availing of the exemption under Notification shall file with the Department of Industrial Development (Secretariat for Industrial Assistance), Memoranda as may be prescribed in this behalf by the Central Government".

CHAPTER - I EXHIBIT NO.80(Contd.) PRESS NOTE NO.4 (1998 Series) REVISION OF FORM FOR INDUSTRIAL ENTREPRENEURS MEMORANDUM

2.

Subsequent to the above notification, vide which only 18 industries were exempted from licensing, now only 9 industries remain under compulsory licensing for which IEM can not be filed.

3.

In the case of proposals for Drugs and Pharmaceuticals the applicants shall also fill up Annexure in prescribed Form. Part A is also to be filled for Bulk Drugs/ Intermediates and Part-B is to be filled for formulations. One IEM application should not contain more than 10 items of manufacture. Please read the instructions carefully before filling the IEM application form.

4.

Definition of a Small Scale Industrial Undertaking.

a)

An industrial undertaking in which the investment in fixed assets in plant and machinery whether held on ownership terms or on lease or by hire-purchase does not exceed rupees Three Crores and equity holding by other industrial undertakings in it does not exceed 24% of its total equity. The list of items reserved for exclusive production in the Small Scale Sector has been notified alongwith Gazette Notification no.477(E) date 25.7.91 as modified through Gazette Notification No.398(E) dated 3.4.97.

5.

Location While designated estates located within 25 Kms of Standard Urban Area limit of 23 major cities are generally exempted from locational restriction for filing IEM, entrepreneurs should ensure that the industries proposed to be located in such designated industrial estates/areas are according to land use and zonal policies of the respective State Governments.

6.

Classsification System Entrepreneurs may note that the description of article(s) to be manufactured should be stated according to the National Industrial Classification of all Economic Activity.(NIC 1987) Copies of the National Industrial Classification of all Economic Activity, 1987 can be obtained on payment from the Controller of Publication, I Civil Lines, Delhi - 110 054 or from any agents authorised to sell Government of India Publications. It has to be in conformity with the item(s) of manufacture.

7.

GENERAL INSTRUCTIONS (a)

For each item of manufacture, separate supplementary prescribed sheet,(including Annexure for drugs and Pharmaceuticals) be added

(b) In a single IEM not more than 10 items be indicated if IEM is required for more than 10 items, an additional fee of Rs.250/- for each additional ten items should be paid. (c) Item(s) of manufacture falling under different Administrative Ministries require filing of separate IEM, alongwith a Separate Demand Draft. (d) While submitting intimation of commencement of production return, (Form B) it may be ensured that NIC No. given in the Return should be in conformity with the NIC No. given in the IEM. (e)

Separate applications may be filed for Ayurvedic(including Herbal preparations, Unani medicines and other related medicines) and Allopathic medicines.

(f)

It may be ensured that the IEM is complete in all respect.

207

208

Industrial Policy Highlights EXHIBIT NO.80(Contd.) PRESS NOTE NO.4 (1998 Series) REVISION OF FORM FOR INDUSTRIAL ENTREPRENEURS MEMORANDUM

ANNEXURE ADDENDUM TO THE MEMORANDUM TO BE FILED BY THE ENTREPRENEURS IN RESPECT OF PROPOSALS FOR DRUGS AND PHARMACEUTICALS COVERED UNDER NOTIFICATION REGARDING EXEMPTION FROM INDUSTRIAL APPROVALS. Information to be furnished for each item of manufacture separately A.

PROPOSALS FOR BULK DRUGS/DRUG INTERMEDIAES/FORMULATIONS*

1.

Name of the proposed item of Manufacture:

2.

Approval under the Drugs and Cosmetics Act. 1940 and Rules made thereunder (Please indicate date and reference number of the approval, for use in the country, of the proposed Bulk Drug or of the Bulk Drug for which the proposed Drug Intermediates will be used, as the case may be, and enclose a copy thereof).

3.

Proposed Annual Capacity a)

Quantity(Unit)

b)

Ex-factory Value of Production(Rs.in Lakhs)

c)

CIF Value of:

(i)

Imported raw materials required per Kg. ofproduct(Rs.)

(ii)

Product(if imported) (Rs. Per Kg.) *(The name of the item of manufacture should comply with British Approved Name(BAN), United State Adopted Name(USAN) or International Non-Proprietary Names)

4.

Description of proposed products (Please furnish schematic diagram of chemical reaction sequences by giving chemical structures of reactants and products at each step)

5.

Source of Technology a.

Developed through own R&D (Please give details of work done)

b.

Produced from indigenous sources(*)

c.

Involves foreign Collaboration(*) (*Please furnish name and address of the source and terms of payment)

6.

Raw Materials requirement for the proposed annual capacity

SI. No.

Name of Raw Material

(1)

(2)

B. SI. No.

Unit

Quantity

(3)

Rs. in Lakhs CIF Value Cost at if imported Factory

(4)

(6)

(5)

PROPOSALS FOR FORMULATIONS Name of the formulation & Dosage Form

Capacity

Composition Bulk Drug Name Strength

Total Qty

Value Rs. in lakhs

DCI/SDC Approval No. and Date

(7)

(8)

Kg/lit (1)

(2)

(3)

(4)

(5)

(6)

209

CHAPTER - I EXHIBIT NO.81 PRESS NOTE NO.5 (1998 Series) CHANGE OF JURISDICTION FOR THE EHTP/STP PROJECTS LOCATED IN THE STATE OF TAMIL NADU

Subject: Electronics Hardware Technology Park(EHTP) Scheme and Software Technology Park(STP) Scheme Change of Jurisdiction for the EHTP/ STP projects located in the State of Tamil Nadu. Government vide Press Note No.5(1997 Series) dated 21.5.97 and Press Note No.9(1997 Series) dated 7.7.97 had delegated certain powers to the Directors of STPs and the designated officers of EHTPs to approve projects under EHTP/STP scheme and also for post approval amendments. While delegating these powers, the original jurisdiction for the EHTP/STP projects located in the State of Tamil Nadu was vested with Director, STP, Bangalore.

F. No.10(58)/92-IP

It has now been decided that in modification of these orders, the jurisdiction of Director, STP, Hyderabad would extend to the EHTP/STP projects located in the State of Tamil Nadu, with immediate effect. The full address of the Director, STP, Hyderabad is as follows: Director, Software Technology Park, 407, Maitri Vanam Complex. Sanjeeva Reddy Nagar Post, Hyderabad - 500 038 The change above is brought to the notice of the entrepreneurs for their information and guidance.

New Delhi, the 19th June, 1998

Forwarded to Press Information Bureau for wide publicity to the contents of the above Press Note. Sd/(Aditi S. Ray) Director Press Information Officer Press Information Bureau New Delhi.

210

Industrial Policy Highlights EXHIBIT NO.82 PRESS NOTE NO.6 (1998 Series) REVISED PROCEDURES GOVERNING APPROVAL UNDER THE SCHEME FOR EOU & EPZ UNITS

Subject: Revised Procedures governing under the scheme for Export Oriented Units - Regarding. Government has announced a scheme of granting automatic approvals to set up Export Oriented Units and units in Export Processing Zones vide Press Note No. 13(1991 Series) dated 9.10.1991. Subsequently, further liberalisation in the scheme were announced vide Press Notes No.3, (1995 Series) dated 19.4.1995; No.8(1997 Series) dated 7.7.1997 and No. 15 (1997 Series) dated 10.11.1997. Government has now decided to further streamline the procedure for submission of applications in this regard. Accordingly, it has been decided that henceforth, following procedure will be followed:(i)

The applications for setting up Export Oriented Units/units in Export Processing Zones shall

F. No.10(53)/97-IP

be submitted to the Development Commissioner of the Export Processing Zone concerned, in the application form, in the requisite number of copies, alongwith the prescribed fee, as mentioned in the Handbook of procedures. (ii)

Wherever, the proposals meet the criteria for automatic approval, notified earlier, the Development Commissioner of Export Processing Zones shall issue approval letters within 15 days. All other proposals shall be forwarded by Development Commissioners to the Board of Approvals for consideration.

(iii) If the proposals envisages foreign/NRI investment or enhancement in foreign.NRI investment, the applicants should seek approval for foreign. NRI investment from RBI/SIA as foreign investment policy announced by Government.

New Delhi, the 10th July, 1998

Forwarded to Press Information Bureau for wide publicity to the contents of the above Press Note. Sd/(Aditi S. Ray) Director Press Information Officer Press Information Bureau New Delhi.

PRESS NOTE NO.7 (1998 Series) AMENDMENT TO THE INDUSTRIAL ENTREPRENEURS MEMORANDUM Subject: Amendments to the Industrial Entrepreneurs Memorandum. In terms of Press Note Number 22(1991Series) dated 24th December, 1991, no amendments/modifications can be made in the Industrial Entrepreneurs Memorandum(IEM) already filed and acknowledged in the Secretariat of Industrial Assistance(SIA), except for clerical errors in the acknowledgment. Whenever any correction or amendment is sought to be made in the IEM, the entrepreneur is required to submit a fresh memorandum for issue of fresh acknowledgment. In terms of Press Note No.6(1993 Series) dated 29th July, 1993, an IEM is deleted from the records of SIA, if on scrutiny, it is found that the proposal contained in any IEM is not exempted from licensing. 2. Many entrepreneurs have represented that since an IEM once filed is not serviced for any amendment/modifications thereafter, they face hardship in cases where after initial filing of IEM, any of the project parameters like the location, the name of the company,the items and capacities proposed to be manufactured etc. undergo change, as a result of which for the same investment proposal, they have to file multiple lEMs. 3. The matter has been considered in the Government. It has now been decided that lEMs filed in the new form made effective from 1st July, 1998, and notified through Press Note No.4(1998 Series) dated 15.6.98, would be amended/modified as per the request of the entrepreneurs. The amendments would be subject to the terms and conditions spelt out in Press Note No.17(1997 Series) dated 27th November, 1997 with reference to the Statutes/regulations/ notifications issued by the Central and State Governments issued from time to time.

Sd/(Ashok Kumar) Joint Secretary to the Govt. of India

F. No.10(14)/98-IP New Delhi, the 20th July, 1998

PRESS NOTE NO. 8 (1998 SERIES)

SUBJECT : Amendment to the Industrial Entrepreneurs Memorandum In the Press Note No. 13 (1997 Series) issued by this Department on 5th September, 1997 "Forex Broking" was included in the list of activities where Foreign Direct Investment is permissible under Non-Banking Financial Services. It has since been decided to further expand the list by the inclusion of "Credit Card Business" and "Money Changing Business" in the list of activities opened in this sector to foreign investors. The permitted activities on the "credit Card Business" would include issuance, sales, marketing and design of various payment products such as credit cards, charge cards, debit cards, stored value cards, smart cards, value added cards etc. The normal guidelines applicable for foreign investment in Non-Banking Financial Companies, as have been stipulated from time to time, including the Minimum Capatilization Norms as also any guidelines/norms prescribed by the competent authority for opening the business, shall be applicable to foreign equity participation in the "Credit Card Business" and "Money Changing Business". Press Note No. 4 (1997 Series) issued by this Department on 5th September 1997 may be deemed to have been amended to the above extent. (ASHOK KUMAR) Joint Secretary to the Government of India

PRESS NOTE NO. 9 (1998 SERIES)

F. No. 10(37)/98-IP Government of India Ministry of Industry Department of Industrial Policy & Promotion Udyog Bhawan,

New Delhi The 27th August 1998 Subject:- Grant of Industrial Licences/Foreign Collaboration approvals/Project Import Certification etc. for wood based items- prior clearance from the Ministry of Environment & Forests - regarding. Plywood, veneer of all types and other wood based products such as particle board, medium density fibre board/ block board have been delicensed vide this Department Press Note No.11 (1997 series) dated the 17th July, 1997 subject to locational conditions and relevant statutes/statutory/policy notifications such as the National Forest Policy and directions and decisions of the Hon’ble Supreme Court. However, in respect of wood based items reserved for the small scale sector where the unit is being set up in the organised sector, or where locational angle is involved, compulsory licensing under the Industries(Development &Regulation) Act, 1951 is still attracted. Similarly, for setting up 100% EOUs, foreign collaboration and project import certification etc., approval of the Government is required. Such cases pertaining to wood based items, where approval of the Government is needed, are necessarily considered in consultation with the Ministry of Environment & Forests. It has, therefore, been decided that henceforth entrepreneurs who wish to obtain approval from the Government for setting up any wood based project should obtain prior clearance from the Ministry of Environment & Forests before submitting the application to the Administrative Ministry/SIA and enclose a copy of "in principle" approval given by the Ministry of Environment & Forests. (ASHOK KUMAR) Joint Secretary to the Government of India

PRESS NOTE NO. 10 (1998 SERIES)

Government of India Ministry of Industry Department of Industrial Policy & Promotion Udyog Bhawan,

Subject: Adoption of pollution control measures-manufacture of new products and by products recovered through application of pollution control processes. 1. It is the policy of the Government that the industrial undertakings desiring to use the wastes and effluents for manufacture of new products should be encouraged to do so.

2. Many of the chemicals recovered from pollution control processes and recycling of waste products are reserved for exclusive manufacture in the small scale. As per current industrial policy, the non-small scale units require to obtain industrial licence with 50% export obligation for manufacturing any of the products reserved for the small scale sector. In this background, it was felt that if the chemicals are recovered through installation of pollution control processes which are in the larger interest of sustainable industrial development, capacity of such recoverable chemicals, even if reserved for the small scale, should be permitted without the mandatory export obligation.

3. The Government have now decided that in order to encourage adoption of pollution control processes by the industrial undertakings which have the potential to utilise the waste products and effluents for manufacture of new items, they may be allowed to do so by suitable endorsement in the existing Industrial Licences or issued new Industrial Licences for such recoverable items which may be reserved for the small scale sector, without necessarily stipulating the mandatory export obligation. 4. The industrial undertakings will submit application in Form IL, to the Secretariat for Industrial Assistance, Ministry of Industry, Udyog Bhawan, New Delhi. Such applications will be considered on merits and wherever Government agrees to allow industrial undertakings to recycle their wastes and effluents, necessary endorsement of capacity for the items allowed would be made on industrial licences, without necessarily stipulating the conditions for export of such new items. However, before taking a decision in the matter, the Secretariat for Industrial Assistance will obtain the prior written comments/views of the Development Commissioner (SSI) in each case. 5. It is hoped that adoption of this positive policy would encourage the industrial units to install pollution control processes and be a positive incentive to utilise the waste products and effluents. 6. Entrepreneurs desirous of availing of this facility shall have to submit applications

in the prescribed form for Industrial Licences (Form FC/IL) to the Secretariat for Industrial Assistance (SIA), Department of Industrial Policy & Promotion, Ministry of Industry, Udyog Bhavan, New Delhi-110011, giving reference to this Press Note, with full details of the pollution control processes proposed to be adopted, and new items with capacities which would be recovered from the same. (ASHOK KUMAR) Joint Secretary to the Government of India F.No.10(39)/98-LP, New Delhi, the 26th August, 1998

PRESS NOTE NO. 11 (1998 SERIES)

Government of India Ministry of Industry Department of Industrial Policy & Promotion Udyog Bhawan,

1. Under the present policy, manufacture of cigarettes requires compulsory licencing under the IDR Act. For induction of foreign direct investment (FDI) for this activity each proposal is considered by FIPB/Government as per the prescribed parameters and requirements under the policy.

2. The Government have reviewed the existing provisions and have decided to consider proposals for manufacture of cigarettes with FDI upto 100%. Such approvals shall be subject to the provisions relating to compulsory licencing under the Industries (Development and Regulation) Act, 1951.

3. This Press Note shall be a part of the FIPB guidelines notified vide Press Note No.3 (1997 series) dated 17.01.1997. (ASHOK KUMAR) Joint Secretary to the Government of India F.No.10(43)/98-LP, New Delhi, the 27th August, 1998

PRESS NOTE NO. 12 (1998 SERIES)

Government of India Ministry of Industry Department of Industrial Policy & Promotion Udyog Bhawan,

Subject: De-licensing of Sugar Industry 1. The Government has further reviewed the list of industries retained under compulsory licensing, and has decided to delete sugar industry from the list of industries requiring compulsory licensing under the provisions of the Industries (Development and Regulation) Act, 1951. However, in order to avoid unhealthy competition among sugar factories to procure sugarcane, a minimum distance of 15 KM would continue to be observed between an existing sugar mill and a new mill by exercise of powers under the Sugarcane Control Order, 1966. 2. The entrepreneurs who wish to avail themselves of the de-licensing of sugar industry would be required to file an Industrial Entrepreneur Memoranda (IEM) with the Secretariat of Industrial Assistance in the Ministry of Industry as laid down for all de-licensed industries in terms of the Press Note dated 2nd August, 1991, as amended from time to time.

3. Entrepreneurs who have been issued Letter(s) of Intent (LOI) for manufacture of sugar need not file an initial IEM. In such cases, the LOI holder shall only file Part "B" of the IEM at the time of commencement of commercial production against the LOI issued to them. It is however open to entrepreneurs to file an initial IEM (in lieu of the LOI/ Industrial Licence held by them) if they so desire, whenever any variation from the conditions and parameters stipulated in the LOI/ Industrial License is contemplated. (ASHOK KUMAR) Joint Secretary to the Government of India New Delhi, the 31st August, 1998

PRESS NOTE NO. 13 (1998 SERIES)

Government of India Ministry of Industry Department of Industrial Policy & Promotion Udyog Bhawan,

Under the existing policy, foreign direct investment in Private Sector banks up to 20% by Foreign banking companies or finance companies, including multilateral financial institutions as technical collaborators or co-promoters is permissible. Under this policy, NRI are also allowed equity participation in private sector banks up to 40%, which would be inclusive of equity participation by other foreign investors as indicated above. With a view to attracting foreign direct investment up to the permissible limit of 40% in private sector banks, in case of shortfall in NRI contributions, multilateral financial institutions would be allowed to contribute foreign equity to the extend of the shortfall in NRI contributions within the overall limit of 40 percent. (ASHOK KUMAR) Joint Secretary to the Government of India New Delhi, the 1st September, 1998

PRESS NOTE NO. 14 (1998 SERIES)

SUBJECT : Delegation of Powers for the Export Oriented Units and EPZ Units Government had delegated certain powers to the Development Commissioners of EPZs for making post-approval amendments in respect of Export Oriented Units and EPZ units vide Press Note No. 4 (1995 Series) dated 19-4-1995, and No. 15 (1997 Series) dated 10-11-1997 Vide Press Note dated 10-7-1998 the procedure for submission of applications had been streamlined. 2. In tune with the ongoing economic reforms, Government have deicded to delegate further powers to the Development Commissioners of EPZs as follows: i.

ii.

Enhancement in the value of Imported Capital Goods required for the project:- To allow enhancement in the value of imported Capital Goods upto 75% of the value approved initially, subject to the maximum of Rs. 10.00 Crores. The enhancement in value of imported Capital Goods can be on account of additional items of import or on account of increase in prices of permitted items. Additional location for the EOU project:- Sometimes, the entrepreneurs need some more space to run their EOU projects and as such details of additional premises are required to be incorporated in the approval letters. The Development Commissioners of EPZs have been given powers to approve additional location(s) for an EOU project, provided the additional location(s) falls within the jurisdiction of the same Commissioner of Central Excise and Customs and all the premises are custom-bonded, as per rules.

iii.

Revision in Export Obligation:- Development Commissioners shall have powers to revise prospectively the export obligation stipulated in the approval letters (both upward and downward) provided the revised export obligation is not below the level of minimum export obligation prescribed in the EIM Policy/general or sector specific FDI guidelines.

(ADITI S RAY) DIRECTOR New Delhi the 16th October

PRESS NOTE NO. 15 (1998 SERIES)

Government of India Ministry of Industry Department of Industrial Policy & Promotion Udyog Bhawan,

Global Mobile Personal Communications by Satellite (GMPCS) is an emerging technology in the field of mobile telephony. The Government have decided to permit Foreign Direct Investment in licence companies operating GMPCS services upto 49% of the total equity subject to, inter-alia, obtaining licence for GMPCS from the Telecom Authority on the recommendations of an Inter-Ministerial Licencing Committee. (ASHOK KUMAR) Joint Secretary to the Government of India New Delhi, the 15th October, 1998

PRESS NOTE NO. 16 (1998 SERIES)

Government of India Ministry of Industry Department of Industrial Policy & Promotion Udyog Bhawan,

In the Press Note No.4(1997 Series) issued by this Department on 30th April, 1997, guidelines for FDI in the Non-Banking Financial Companies (NBFCs) including norms for the minimum capitalisation were announced. The question of minimum capitalisation requirement has been reviewed by the Government and it has been decided that foreign investment proposals for purely financial consultancy services that are non-fund based, would not be subjected to the minimum capitalisation norms subject to the following condition:"It would not be permissible for such a company to set up any subsidiary for any other activity, nor any equity it may contribute in an NBFC holding/operating company would be reckoned as domestic equity". NBFCs undertaking fund based activities shall, however, continue to attract minimum capitalisation norms. (ADITI S RAY) DIRECTOR New Delhi the 3rd November 1998

PRESS NOTE NO. 17 (1998 SERIES)

Government of India Ministry of Industry Department of Industrial Policy & Promotion Udyog Bhawan,

SUBJECT : Export of Cotton Yarn by EOU/EPZ Units The Export Oriented Units/EPZ units in the cotton yarn sector are currently allowed to manufacture and export cotton yarn with domestic cotton use restrictions as stipulated in Press Note No.19 (1997 series) dated 26.12.97. 2. There have been representations from the 100% EOUs producing cotton yarn seeking greater operational flexibility so that they are better equipped to deal with the adverse market conditions prevailing in the international market. At the same time, there is an urgent need for promoting downstream investments by cotton yarn EOUs in the interest of higher value added export of fabrics. 3. With a view to encouraging investments towards setting up of integrated units and thus achieving value additions, as well as to address the current difficulties of the cotton yarn EOUs, Government have decided to allow the flexibility to the 100% EOUs to export cotton yarn without any count restriction/sourcing of domestic cotton conditions in a manner and to the extent as set out hereinunder :(i) Those 100% EOUs that are manufacturing cotton yarn and are subject to count restrictions may be permitted to export cotton yarn without any count/domestic cotton use restriction upto 31st December, 1998 subject to the condition that such exports are within the overall quantitative ceiling on cotton yarn exports of counts 1-40 (which is 175 million Kgs for the calendar year 1998 as of date). For such exports, the EOUs will have to apply to the Cotton Textile Export Promotion Council (TEXPROCIL) for allocation of ceiling. (ii) The composite units manufacturing cotton yarn as well as fabrics both existing and new - as may be provided in the Letter of Permission (LOP) under the 100% EOU sector, would be allowed the flexibility to export cotton yarn also, without any count restriction/sourcing of domestic cotton condition. This dispensation would be contingent upon the following conditions:(a) Special eligibility would accrue only after the weaving capacity has been fully installed, certified as balanced unit of spinning and weaving capacity by Textile Commissioner, and its commercial production has started.

(b) The export of yarn at any time would not be more than exports effected in the form of fabric in value terms and will be overall governed by the Letter of Undertaking (LUT) regarding export obligation. 4. All investors and entrepreneurs may please take note of the aforesaid revision in the Policy. (ADITI S RAY) DIRECTOR New Delhi the 13th November 1998

PRESS NOTE NO. 18 (1998 SERIES)

Government of India Ministry of Industry Department of Industrial Policy & Promotion Udyog Bhawan,

SUBJECT: Guidelines pertaining to approval of foreign/technical collaborations under the automatic route with previous ventures/tie-up in India. 1. The Government have reviewed the present Guidelines relating to approval of foreign/technical collaborations under the automatic route and after careful consideration it has been decided that foreign financial/technical collaborators with previous ventures/tie-up in India would be subjected to the following guidelines: I.

II.

III.

Automatic route for FDI and/or technology collaboration would not be available to those who have or had any previous joint venture or technology transfer/trade-mark agreement in the same or allied field in India. RBI, therefore, have to stipulate necessary declaration before applications for the automatic route are taken on record. Investors of Technology to the suppliers of the above category therefore will have to necessarily seek the FIPB/PAB approval route for joint ventures or the technology transfer agreements (including trade-mark) giving detailed circumstances in which they find it necessary to set-up a new joint venture/enter into new technology transfer (including trade-mark).

The onus is clearly on such investors/technology suppliers to provide the requisite justification as also proof to the satisfaction of FIPB/PAB that the new proposal would not in any way jeopardize the interests of the existing joint venture or technology/trade-mark partner or other stakeholders. It will be at the sole discretion of FIPB/PAB to either approve the application with or without conditions or reject in toto duly recording the reasons for doing so.

2. The above procedure will form part of the approval procedures contained in the "Manual on Industrial Policy & Procedures in India" published by SIA, Ministry of Industries, Government of India, which shall stand clarified accordingly in respect of foreign/technical collaborators with previous joint ventures/tie-up in India.

Sd/(I. SRINIVAS) DIRECTOR New Delhi, dated the 14th December,1998

PRESS NOTE NO. 19 (1998 SERIES)

Government of India Ministry of Industry Department of Industrial Policy & Promotion Udyog Bhawan,

SUBJECT: Policy and Procedure governing automatic approval under the scheme for 100% Export Oriented Units (EOUs) and Export Processing Zone (EPZ) units – Liberalization - Regarding.

The policy and procedure governing automatic approvals under the scheme for EOUs and EPZ units were laid down in Press Note No. 13 (1991) dated 9.10.1991, which were further liberalised through Press Note No. 3 (1995) dated 19.4.1995, No. 8 (1997) dated 7.7.1997 and No. 6 (1998) dated 10.7.1998. It has been laid down that for automatic approvals, the proposals should inter-alia meet the following criteria :1. The payments for foreign technology agreements, if any, should not exceed lump sum fee of Rs. 1.00 crore or 8% royalty (net of taxes) over a period of 5 years from the date of commencement of commercial production; and 2. The activity envisaged in the proposal must be a manufacturing activity, as covered within the ambit of Section 3 of the Central Excise & Salt Act, 1944. With a view to liberalise the procedure further, Government have now decided that the proposals envisaging foreign technology agreements with a lump sum fee of US $ two million and royalty payments upto 8% on exports and 5% on DTA sales (net of taxes) over a period of 5 years from the date of commencement of commercial production, will be approved under the automatic route. Similarly, the proposals, other than the manufacturing activities within the ambit of Section 3 of the Central Excise Act, will also be allowed automatic approvals, provided the proposed activity is included in Para 9.1 of the EXIM Policy. Other criteria for granting automatic approvals shall continue to be in force. Sd(ADITI S. RAY) DIRECTOR New Delhi, dated the 15th December,1998

PRESS NOTE NO. 20 (1998 SERIES)

Government of India Ministry of Industry Department of Industrial Policy & Promotion Udyog Bhawan,

SUBJECT: Delegation of power for post approval amendments for the Export Oriented Units (EOUs) and Export Processing Zone (EPZ) Units.

Government had delegated certain powers to the Development Commissioners of EPZs for making post approval amendments in respect of Export Oriented Units and EPZ units vide Press Note No. 4 (1995 Series) dated 19.4.95, No. 15 (1997 Series) dated 10.11.97 and No. 14 (1998 Series) dated 16.10.1998. In tune with the ongoing economic reforms, Government have decided to delegate further powers to the Development Commissioners of EPZs as follows:i) Disposal of obsolete capital goods- The Development Commissioners of EPZs have been given powers to permit disposal of obsolete capital goods (used for less than 5 years), in Domestic Tariff Area (DTA), on payment of applicable duties, upto a maximum limit of Rs. 10 Lakh in each financial year for an EOU/EPZ unit. Government have now decided that Development Commissioners of EPZs can permit disposal of obsolete capital goods, in DTA, on payment of applicable duties, without any restrictions. However, disposal of obsolete machinery must not adversely affect the contracted export obligation/Net Foreign Exchange Earning. ii) Import of office equipment- The Development Commissioners of EPZs have been given powers to permit import of office equipments, not exceeding 20% of the total capital goods value, subject to a maximum of Rs. 25.00 lakh. Government have now decided that Development Commissioners of EPZs can permit import of office equipment in accordance with EXIM Policy and Hand Book of Procedures. iii) Merger of two or more EOU/EPZ units - Sometimes, an entrepreneur sets up two or more EOU projects/EPZ units, having separate identity and accounts; separate E.O.; and separate bond licence. Subsequently, the applicant desires to merge two or more units into one unit. Government have now decided that the Development Commissioners of EPZs can permit the merger of two or more EOUs/EPZ units into one EOU/one EPZ unit, provided the units fall within the jurisdiction of the same Development Commissioner and the same Commissioner of Central Excise and Customs.

Sd/(ADITI S. RAY) DIRECTOR New Delhi, the 15th December,1998

PRESS NOTE NO.1 (1999 SERIES) Government of India Ministry of Industry Department of Industrial Policy & Promotion Udyog Bhawan, PRESS NOTE NO.1 (1999 SERIES) Under the present policy, Indian companies undertaking construction and maintenance of roads, highways, vehicular bridges, toll roads, vehicular tunnels, ports and harbours are eligible for automatic approval upto 74% foreign equity. 2. The Government have reviewed the existing guidelines for automatic approval for foreign equity for construction and maintenance of roads, highways, vehicular bridges, toll roads, vehicular tunnels, ports and harbours and has decided to enlarge the provisions for automatic approval for such projects. Accordingly, projects for "construction and maintenance of roads, highways, vehicular bridges, toll roads, vehicular tunnels, ports and harbours" will be permitted foreign equity participation upto 100% on the automatic approval route, provided the total foreign equity in any such project does not exceed Rs.1500 crore. 3. The provisions referred to in Para 2 above would be listed as a fresh entry D-2 under the heading Part "D" of Annexure III as appended to this Press Note. The existing entry No.C-6 in Part "C" of Annexure III shall stand modified to this extent and read as under:

"Construction and maintenance of rail beds, non-vehicular bridges, non-vehicular tunnels, ropeways and runways." 4. The list appended to this Press Note is based on the National Industrial classification of all economic activities (NIC), 1987. The entrepreneurs / investors are advised to give the description of the activities under this classification system when submitting the application to the RBI. 5. All other terms and conditions as notified under Press Note No.2(1997 series) dated the 17thJanuary, 1997 and Press Note No.14 (1997 series) dated 8th October, 1997 remain unchanged.

Sd/(Ashok Kumar) Joint Secretary to the Government of India.

New Delhi, the 4th January,1999

ANNEXURE - III (Contd .....) PART-'D' LIST OF INDUSTRIES/ITEMS FOR AUTOMATIC APPROVAL FOR FOREIGN EQUITY UP TO 100% SL NO

NIC Code

Div D-1

Group

Description

Class

40

ELECTRICITY GENERATION, TRANSMISSION AND DISTRIBUTION 400

401

Generation and transmission of electric energy (only for hydroelectric power plants, coal/lignite based thermal power plants, oil based thermal power plants and gas based thermal power plants, and not for atomic-reactor power plants) 400.1

Generation and transmission of electric energy produced in hydro-electric power plants

400.2

Generation and transmission of electric energy produced in coal/lignite based thermal power plants

400.3

Generation and transmission of electric energy produced in oil based thermal power plants

400.4

Generation and transmission of electric energy produced in gas based thermal power plants Distribution of electric energy to households, industrial, commercial and other users

D-2

50

CONSTRUCTION 501

Construction and maintenance of roads, highways, vehicular bridges, toll roads, vehicular tunnels, ports & harbours

Sd/(Ashok Kumar) Joint Secretary to the Government of India.

PRESS NOTE NO.2 (1999 SERIES) Government of India Ministry of Industry Department of Industrial Policy & Promotion Udyog Bhawan, SUBJECT : Export of cotton yarn by EOU/EPZ units.

The Export Oriented Units/EPZ units in the cotton yarn sector are allowed to manufacture and export cotton yarn subject to the condition of use of domestic cotton for counts 1-40s, as stipulated in Press Note No. 19(1997 Series) dated 26.12.97. 2. With a view to addressing the difficulties of the cotton yarn EOUs, Government had, vide Press Note No. 17 (1998 Series), notified on 13th November, 1998 certain flexibilities to the 100% EOUs to export cotton yarn without any restriction pertaining to count / sourcing of domestic cotton. 3. Taking into account all relevant factors , including domestic cotton availability and with a view to further encouraging the exports of cotton yarn, it has been decided to extend the relaxations upto 31st December, 1999. At the same time, the overall quantitative ceiling on cotton yarn exports of count 1-40s, has been raised to 200 Million Kgs for the calendar year 1999. 4. All the other provisions in the aforesaid Press Note dated 26.12.97 as modified by Press Note dated 13.11.98 would continue to operate. 5. All investors and entrepreneurs may please take note of the aforesaid revision in the policy.

Sd/(Aditi S. Ray) DIRECTOR New Delhi, the 18th January,1999.

PRESS NOTE NO.3 (1999 SERIES) Government of India Ministry of Industry Department of Industrial Policy & Promotion Udyog Bhawan, SUBJECT: De-licensing of five bulk drugs. *** Modified policy for drugs and pharmaceutical industry (Drug Policy) inter-alia provides that industrial licensing for all bulk drugs and their formulations and for intermediates stands abolished except for the five bulk drugs (reserved for the Public Sector under the Drug Policy) and products produced by re-combinant DNA technology. This had been given wide publicity vide Press Note No.4(1994 Series) dated 25.10.94 issued by the Ministry of Industry. As an ongoing process of industrial reforms, Government have been considering for sometime the necessity of retaining the bulk drugs reserved for manufacture by the Public Sector under industrial licensing. The Government have recently decided to exempt the five bulk drugs from reservation for the Public Sector under the Drug Policy. The need for licensing these bulk drugs arose out of the need for reserving manufacture by the public sector. In the interest of the consuming public, therefore, it does not seem necessary to retain the five bulk drugs under licensing under the Industries (Development and Regulation) Act. 2. Accordingly, Government have decided to de-license the manufacture of the following five bulk drugs: 1. 2. 3. 4. 5.

Vitamin B1 Vitamin B2 Tetracycline Oxytetracycline Folic Acid.

3. However bulk drugs produced by the use of re-combinant DNA technology and bulk drugs requiring in vivo use of nucleic acid as the active principles (items not classified under Harmonised System) and formulations based on use of specific cell or tissue targeted formulations (item not classified under Harmonised System) shall continue to remain under compulsory licensing.

4. The entrepreneurs who wish to avail themselves of the de-licensing of the five bulk drugs as at para 2 above would be required to file an Industrial Entrepreneurs' Memorandum (IEM) with the Secretariat for Industrial Assistance in the Ministry of Industry as laid down for all de-licensed industries in terms of the Press Note dated 2nd August, 1991, as amended from time to time.

5. Entrepreneurs who have been issued Letter(s) of Intent (LOI) for manufacture of any or all of the five bulk drugs (now de-licensed) need not file an initial IEM. In such cases the LOI holder shall only file Part "B" of the IEM at the time of commencement of commercial production against the LOI issued to them. It is, however, open to entrepreneurs to file an initial IEM (in lieu of the LOI issued to them) if they so desire, whenever any variation from the conditions and parameters stipulated in the LOI/Industrial Licence is contemplated.

Sd/(ASHOK KUMAR) Joint Secretary to the Government of India New Delhi, the 26th February,1999.

GOVERNMENT OF INDIA MINISTRY OF INDUSTRY DEPARTMENT OF INDUSTRIAL POLICY & PROMOTION

PRESS NOTE NO. 4 (1999 SERIES)

Subject: Delegation of powers to the Development Commissioners of Export Processing Zones for post approval amendments - consolidated instructions. ****

Government had delegated powers to the Development Commissioners of the Export Processing Zones (EPZs), vide Press Note No. 4 (1995 Series) dated 19th April, 1995. More powers were further delegated vide Press Notes No. 15 (1997 Series) dated 10.11.97, No.14 (1998 series) dated 16.10.98 and No. 20 (1998 Series) dated 15.12.98. In supersession of these Press Notes, it has been decided to consolidate the instructions on delegation of powers to DCs for the purpose of convenience to the entrepreneurs.

2. The delegation of powers authorises the Development Commissioners of Export Processing Zones to exercise the following powers in respect of units under EPZ/EOU scheme within their respective jurisdiction:2(1) Additional Import of capital goods (CG): To allow enhancement in the value of imported Capital Goods upto 75% of the value approved initially, subject to the maximum of Rs. 10.00 Crores. The enhancement in value of imported Capital Goods can be on account of additional items of import or on account of increase in prices of permitted items. 2(2) Currency fluctuations: To allow increase in the value of Capital Goods imports in terms of Rupees, owing to foreign exchange rate fluctuations vis-a-vis foreign currencies. 2(3) Attestation of list of imported capital goods: To attest list of imported capital goods, both new and second-hand, within the approved value, including additional value permitted in (1) above. 2(4) Capacity enhancement: To permit capacity enhancement of EOUs/EPZ units, without any limit in respect of de-licensed industries only, provided the requirement of additional imported Capital Goods does not exceed 50% of approved value subject to a maximum of Rs. 10.00 crores. 2(5) Broad Banding To permit broad-banding subject to the condition that it does not result in procurement of additional capital goods imports beyond 50% of approved value subject to a maximum of Rs.10.00 crores. Broad-banding will be allowed in respect of only those industries, the design and production facilities of which are common and have similar manufacturing process and where physical exports are envisaged. 2(6) Change in name: To authorise the change in name of the company or the implementing agency subject to the following conditions: (1) For change from an individual to a Company provided: a. the new company is promoted by the applicant; b. he is a subscriber to the Articles and Memorandum of Association of the new company; c. he subscribes to the tune of at least 10% of the issued equity capital of the new company and;

d. the individual is a Director of the new Company. (2) For change from a company to another company provided: a. the transferee company is a fully-owned subsidiary of the company holding the letter of intent or permission letter or vice-versa; or b. a new company has been promoted for the purpose of implementing the Scheme after the grant of Letter of Intent or Letter of Approval, with at least 10% of the issued equity held by the existing company; and c. change of name would be permitted only if the new unit undertakes to take over the assets and liabilities of the existing unit. 2(7) Change of location: To permit change of location from the place mentioned in the Letter of Approval/ Letter of Intent to another, provided:a. no change in other terms and conditions of the approval is envisaged; b. the new location is within the territorial jurisdiction of the DCs; c. the new location is at a warehousing station declared by the Custom Authorities; and d. other locational, zoning, land-use or environmental conditions are also complied with. 2(8) Additional location for the EOU Project: To approve additional location(s) for an EOU project requiring more space to run the project, provided the additional location (s) falls within the jurisdiction of the same Commissioner of Central Excise and Customs and all the premises are custom-bonded, as per rules. 2(9) Extension of validity of Letters of Intent/Letters of Approval: To extend the validity period of Letter of Intent/Letter of Permission/Letter of Approval, in the case of EOUs and EPZ units, by three years, beyond the initial validity period of the Letter of Intent/Letter of Permission/Letter of Approval (except in case where there is a restriction on initial period of approval, like setting up of oil refinery projects). 2(10) Change in Value Addition: To revise the Value Addition upward or downward upto the minimum Value Addition percentage as prescribed for the item of manufacture under the Policy. 2(11) Disposal of Obsolete Capital Goods: To permit disposal of obsolete capital goods, in DTA, on payment of applicable duties, without any restrictions. However, disposal of obsolete machinery must not adversely affect the contracted export obligation/Net

Foreign Exchange Earning. 2(12) Import of Office Equipment: To permit import of office equipment in accordance with EXIM Policy and Handbook of Procedures. 2(13) Revision in Export Obligation: To revise prospectively the export obligation stipulated in the approval letters (both upward and downward) provided the revised export obligation is not below the level of minimum export obligation prescribed in the EXIM Policy/general or sector specific FDI guidelines. 2(14) Merger of two or more EOUs: To permit merger of two or more EOUs/EPZ units into one EOU/one EPZ unit, provided the units fall within the jurisdiction of the same Development Commissioner and the same Commissioner of Central Excise and Customs.

3. Member Secretary of Board of Approvals for 100% EOUs shall also exercise the powers delegated above in respect of EOUs. 4. All cases of units originally approved under Automatic Approval Scheme shall be brought to the Board of Approvals when the revised parameters do not conform to the conditions laid-down under this scheme. 5. The Secretariat for Industrial Assistance, Department of Industrial Policy & Promotion, Ministry of Industry and the Development Commissioners concerned shall place before Board of Approvals in its next meeting summary of each order issued by them under the powers delegated to them for ratification.

Sd/(ASHOK KUMAR) JOINT SECRETARY TO THE GOVERNMENT OF INDIA F. No. 10(53)/91-IP New Delhi, the 5th March,1999. Forwarded to the Press Information Bureau for giving wide publicity to the contents of the above Press Note. Information Officer,Press Information Bureau,New Delhi.

PRESS NOTE NO.5 (1999 SERIES) Government of India Ministry of Industry Department of Industrial Policy & Promotion Udyog Bhawan, *** New Delhi, the 19th March,1999. As per guideline No.2 of the Guidelines for the consideration of Foreign Direct Investment (FDI) proposals by the Foreign Investment Promotion Board (FIPB) as notified vide Press Note No.3 (1997 series), proposals for FDI should be considered by the Board keeping in view the time-frame of six weeks for communicating government decision (i.e., approval of IM or CCFI or rejection as the case may be). With a view to expediting disposal of FDI proposals, Government have decided to reduce the time frame for consideration of such proposals to thirty (30) days from six weeks. Accordingly, guideline No.2 as contained in Press Note No. 3 (1997 series) shall stand modified as under: "Proposals should be considered by the Board keeping in view the time-frame of thirty (30) days for communicating Government decision (i.e., approval of IM/CCFI or rejection as the case may be)." This is for general information of investors. Sd/- . (ASHOK KUMAR) Joint Secretary to the Government of India

F. No. 7(9)/99-IP Government of India Ministry of Industry Department of Industrial Policy & Promotion PRESS NOTE NO. 6 (1999 series) Attention is invited to Press Note No. 12 (1992 series) withdrawing the condition of dividend balancing on all foreign investment approvals except for 22 specified industries in the consumer goods sector. The Government have further reviewed the applicability of dividend balancing and have decided that where dividend balancing was not applied in the first instance as per the then prevalent policy, it would be applicable in the case of subsequent infusion of foreign equity only to the extent of the incremental foreign equity in cases where dividend balancing is subsequently applicable as per existing policy. This would also apply in the case of secondary market acquisition as also preferential allotment / transfer of shares to the extent of foreign equity infused in the first instance in case the activity attracts the condition of dividend balancing as per existing policy. The applicable date will be the date of commencement of commercial production in the case of new ventures and the date of allotment of shares in the case of existing ventures. This is for general information of investors.

Sd/(ASHOK KUMAR) Joint Secretary to the Government of India F.No.7(9)/99-IPdated1stApril,1999 Copy forwarded to the Press Information Officer, Press Information Bureau, for giving wide publicity to the above Press Note.

F. No. 7(10)/99-IP Government of India Ministry of Industry Department of Industrial Policy & Promotion

PRESS NOTE NO.7(1999 series)

As per existing provision, the foreign collaboration approvals are subject to the condition that the total non resident shareholding including foreign holding in the Indian company should not exceed the amount as well as the percentage specified in the approval letter. For any proposed increase in the amount as also the percentage of non resident shareholding, prior approval of the Government is necessary. Proposals are received by the Government for financial restructuring in the following manner : a.

In the case of joint venture companies, proposals for increase in the amount of non resident equity within the approved percentage of non resident equity and b. In case of wholly owned subsidiaries or holding companies of foreign companies in India, proposals relating to enhancement of paid up capital.

Government, keeping in view the desirability of infusion of additional funds as equity by the foreign company, leading to increased investment inflows, have reviewed the existing provision for obtaining prior approval of the Government for increase in the amount of foreign equity without change in the percentage of equity in the above type of cases and decided that henceforth there would be no need for obtaining prior approval of FIPB / Government for increase in the amount of foreign equity within the percentage of foreign equity already approved in all cases in which the original project cost was up to Rs. 600 crore. Any company can henceforth infuse additional funds by way of foreign equity as a result of financial restructuring (provided there is no change in the percentage of foreign equity) and notify the same to the Secretariat of Industrial Assistance (SIA) within thirty days of receipt of funds as also allotment of shares to non resident shareholders. The above procedure will, however, not apply in cases of increase in the percentage of foreign equity as also where initial approval was granted by CCFI. Such cases shall require prior approval of the FIPB / Government as per the existing procedure. This is for general information of investors.

Sd/(ASHOK KUMAR) Joint Secretary to the Government of India F. No. 7(9)/99-IP dated 1st April, 1999 Copy forwarded to the Press Information Officer, Press Information Bureau, for giving wide publicity to the above Press Note.

Government of India Ministry of Industry Department of Industrial Policy and Promotion ***** PRESS NOTE NO.8 (1999 SERIES) Subject:- Scheme to avail of fiscal concession under Section 80 IA of the Income Tax Act, 1961 for setting up industrial model towns/industrial parks. ****** The Government have been considering for sometime in the past ways and means for encouraging private investment in setting up industrial parks in different regions of the country. With this aim in view, the Finance Act of 1997-98 made provisions for tax exemptions under Section 80 IA of the Income Tax Act, 1961 for setting up industrial parks. 2. The Government have now formulated a scheme for providing the tax exemptions for setting up indutrial parks for the period beginning on the 1st day of April, 1997 and ending on the 31st day of March, 2002. The details of the scheme have recently been published in Gazette of India (extra ordinary) bearing No.193(E) on 30.3.99. The scheme, inter-alia, aims at setting up industrial model towns/industrial parks for development of industrial infrastructure facilities for carrying out integrated manufacturing activities including common facilities such as roads, power, water, drainage and telecommunications within its precincts and research and development. 3.The notified scheme provides for two routes for applications for setting up industrial model towns/industrial parks - the automatic approval route under which applications filed shall be disposed and the decision communicated within 15 days of making an application in the prescribed form with the requisite fee. All applications not eligible for automatic approval shall be placed before an Empowered Committee specifically constituted for this purpose in the Ministry of Industry, under the chairmanship of Secretary, Industrial Policy and Promotion. 4.The Secretariat for Industrial Assistance (SIA) would be the Secretariat for this Scheme and applications can be filed either in person or by post in the Entrepreneurial Assistance Unit (EAU) of the SIA located in Udyog Bhavan, New Delhi-110011, which will issue an acknowledgement for the receipt of the application alongwith a SIA No. for further reference. A copy of the prescribed form for making the application is part of the above mentioned Gazette Notification dated the 30th March, 1999. 5. The Government hopes that entrepreneurs will avail of the aforesaid scheme to set up industrial model towns/industrial parks. Sd/(Ashok Kumar) Joint Secretary to the Govt. of India. __________________________________________________________________

F.No. 7(11)/99-IP

New Delhi, the 7th April, 1999.

Forwarded to the Principal Information Officer, Press Information Bureau for giving wide publicity to the contents of the above Press Note.

Press Information Officer, Press Information Bureau, New Delhi.

GOVERNMENT OF INDIA MINISTRY OF INDUSTRY DEPARTMENT OF INDUSTRIAL POLICY AND PROMOTION *** PRESS NOTE NO. 9 (1999 SERIES)

SUBJECT: Policy relating to the standard conditions applicable to foreign owned Indian holding companies requiring prior and specific approval of FIPB/Government for downstream investment in Annexure III activities, which qualify for Automatic Approval. 1. The Government have reviewed the existing policy relating to the standard conditions applicable to foreign owned Indian holding companies requiring prior and specific approval of FIPB/Government for downstream investment. On careful consideration of the matter and with a view to further simplifying the investment procedures for downstream investment, it has been decided to permit foreign owned Indian holding companies to make downstream investment in Annexure III activities, which qualify for Automatic Approval subject to the following conditions:a. downstream investments may be made within foreign equity levels permitted for different activities under the automatic route; b. proposed/existing activities for the joint venture company being fully confined to Annexure III activities; c. increase in equity level resulting out of expansion of equity base of the existing/fresh equity of the new joint venture company; d. the downstream investment involving setting up of an EOU/STP/EHTP project or items involving compulsory licensing; SSI reserved items; acquisition of existing stake in an Indian company by way of transfer/ as also buyback shall not be eligible for automatic approval and shall require prior approval of FIPB/Government; e. the holding company to notify SIA of its downstream investment within 30 days of such investment even if shares have not been allotted alongwith the modality of investment in new/existing ventures (with/without expansion programme); f. proposals for downstream investment by way of induction of foreign equity in an existing Indian Company to be duly supported by a resolution of the Board of Directors supporting the said induction as also a shareholders=Agreement and consent letter of the Foreign Collaborator; g. issue/transfer/pricing/valuation of shares shall be in accordance with SEBI/RBI guidelines; h. foreign owned holding companies would have to bring in requisite funds from abroad and not leverage funds from domestic market for such investments. This would, however, not preclude downstream operating companies to raise debt in the domestic market.

2. The above procedure will form part of the FIPB Guidelines and paragraph 11 (a) of the AGuidelines for the consideration of Foreign Direct Investment (FDI) proposals by the Foreign Investment Promotion Board (FIPB)@ notified vide Press Note NO. 3(1997 Series) shall stand modified accordingly in respect of down stream investment by foreign owned Indian holding companies. 3. All investors and entrepreneurs may please take note of the aforesaid revision in the policy.

Sd/(ASHOK KUMAR) JOINT SECRETARY

F.No. 7(13)/99-IP New Delhi, the 12th April, 1999 Forwarded to the Press Information Bureau for giving wide publicity to the contents of the above Press Note. Press information Officer, Press Information Bureau, New Delhi.

Government of India Ministry of Industry Department of Industrial Policy & Promotion PRESS NOTE NO..10 (1999 series)

Subject: Guidelines pertaining to approval of foreign /technical collaborations under the automatic route with previous ventures / tie-ups in India.

Attention is invited to Press Note No. 18 (1998 series) and subsequent press release dated 14.1.99 on the above mentioned subject. It is further clarified that the definition of "same" and "allied" fields for the purpose of applicability of this Press Note shall be as under. (i) "Same field"

Four digit NIC 1987 code

(ii) "Allied field"

Three digit NIC 1987 code

2. It is, therefore, clarified that only proposals for foreign collaboration falling under four digit and three digit classifications in terms of their past or existing joint venture in India shall attract the aforesaid Press Note. This is for general information of investors.

(ASHOK KUMAR) Joint Secretary to the Government of India

F. No. 10 (32 )97/IP

dated 12th April 1999

Government of India Ministry of Industry Department of Industrial Policy & Promotion PRESS NOTE No. 11 (1999 SERIES)

Under the guidelines for foreign equity investment in Non-Banking Financial Companies (NBFC) issued vide Press Note No. 4 (1997 series) as amended from time to time, 100% foreign owned NBFCs would act as a holding company and specific activities would be undertaken by step-down subsidiaries with minimum 25% domestic equity.

There have been cases where foreign owned holding companies, who had earlier been permitted to undertake specific activities on their own prior to the issue of guidelines and which, through restructuring, undertake such specific activities with domestic participation through downstream subsidiaries have sought permission to charge fees by the holding company for providing services for the step down subsidiaries.

The matter has been reviewed and it has been decided as under :

(i) Foreign held companies which had FIPB approval for undertaking specific activities on their own prior to issue of NBFC guidelines, and which through restructuring dilute their holdings through JVs with domestic participation in downstream subsidiaries, may be allowed to undertake such "specific activities" confined to rendering of support and facilities to only its downstream subsidiaries / JVs on an "arms length basis" with the option of charging fees for the same.

(ii) The above would further be subject to a formal agreement being entered into by the Holding Company with the downstream subsidiaries (JVs) concerned.

(ASHOK KUMAR) Joint Secretary to the Government of India F. No. 10(32)/97-IP Government of India Ministry of Industry Department of Industrial Policy & Promotion

dated 1st July 1999

PRESS NOTE No. 12 (1999 SERIES) The Government, vide Press Note No. 4 (1997 series), had announced the

norms for FDI in Non Banking Financial Sector. It was further clarified vide Press Note No. 16 (1998 series) that foreign investment proposals for purely financial consultancy services that are non-fund based, would not be subjected to the minimum capitalisation norms as applicable to the NBFCs subject to certain conditions.

The matter has been reviewed and it has since been decided as under : 1. The guidelines for foreign equity investment in Non Banking Financial Services sector would be amended to provide for a minimum capitalisation norm of US$ 0.5 million, for the activities which are not fund based and only advisory or consultancy in nature, irrespective of the foreign equity participation level.

2. The provision of (1) above would be applicable in the following permitted NBFC activities for foreign equity investment : i. Investment advisory services ii. Financial consultancy iii. Credit Reference Agencies iv. Credit Rating Agencies v. Forex broking vi. Money changing business The other provisions of the guidelines of Press Note No. 4 (1997 series) and Press Note No. 16 (1998 series) would, however, continue to be applicable in the above cases. (ASHOK KUMAR) Joint Secretary to the Government of India

F. No. 10(32)/97-IP 1999

dated 1st July

Government of India Ministry of Commerce & Industry Department of Industrial Policy & Promotion SIA (IP Division)

PRESS NOTE NO. 14 (1999 SERIES)

The Government vide Press Note No. 4 (1997 series) had announced the norms for FDI in NBFC sector. It was further clarified vide Press Note No. 16 (1998 series) that foreign investment proposals for purely financial consultancy services that are not fund based would not be subjected to the minimum capitalisation norms as applicable to the NBFCs subject to certain conditions. Further clarifications were issued vide Press Note No. 12 (1999 series) that the minimum capitalisation norm of US$ 0.5 million shall be applicable to certain activities which are non fund based and only advisory or consultancy in nature, irrespective of foreign equity participation level. The matter has been reviewed and it is clarified that the minimum capitalisation norm of US$ 0.5 million shall be applicable in respect of all permitted non fund based NBFCs with foreign investment. The other provisions of the guidelines as contained in earlier Press Notes referred to above, would however, continue to be applicable.

Sd/(ASHOK KUMAR) Joint Secretary to the Government of India

F.No. 10(32)/97-IP

Government of India Ministry of Commerce and Industry Department of Industrial Policy and Promotion *****

PRESS NOTE NO.15 (1999 SERIES)

Subject:- Investment limit for small scale/ancillary industrial undertakings. ******

Government had earlier notified its decision to increase the investment limit on plant and machinery in respect of small scale/ancillary industrial undertakings upto Rs.300 lakh by an order in the extra ordinary issue of the Gazette of India dated 10.12.97. Subsequently, there have been requests from individual SSI units and SSI associations to reduce the investment limit on plant and machinery in respect of SSI/ancillary industrial undertakings. These requests have been under consideration of the Government for some time. It has now been decided to reduce the investment on plant and machinery in respect of small scale/ancillary industrial undertakings from Rs.3 crore to Rs.1crore. The investment limit for tiny units would, however, continue to be at the level of Rs.25 lakh.

2. The decision of the Government to stipulate the investment limit in fixed assets in plant and machinery in respect of small scale/ancillary industrial undertakings, whether held on ownership terms or on lease or on hire purchase, at the level of Rs.1 crore has been notified in the extra ordinary issue of the Gazette of India dated 24th December, 1999.

( Ashok Kumar ) Joint Secretary to the Govt. of India. ________________________________________________________________ F.No.10(6)/97-IP(Vol.III) New Delhi, the 24th December, 1999.

PRESS NOTE NO.1 (2000 SERIES) Subject: Export of Cotton Yarn by EOU/EPZ units for the year 2000. Export Oriented Units (EOUs)/EPZ units in the cotton yarn sector are allowed to manufacture and export cotton yarn subject to the condition of use of domestic cotton for counts 1-40s, as stipulated in Press Note No.19(1997 Series) dated 26.12.1997. 2. With a view to addressing the difficulties of the cotton yarn EOUs Government had, vide Press Note No.17(1998 Series), notified on 13th November, 1998 certain flexibilities to the 100% EOUs to export cotton yarn without any restriction pertaining to count/sourcing of domestic cotton. 3. Taking into account all relevant factors, including domestic cotton availability and with a view to further encouraging the exports of cotton yarn, these relaxations are extended up to 31st December, 2000 and the overall quantitative ceiling on cotton yarn export of count 1-40s, is fixed at 500 (Five Hundred) Million kgs for the calendar year 2000. However, 100% EOUs, which are manufacturing cotton yarn subject to count restrictions would be permitted to export cotton yarn without any count/domestic cotton use restriction up to 31st December, 2000, provided that such exports are within the overall quantitative ceiling of 500 (Five Hundred) Million kgs. 4. All other provisions in the aforesaid Press Note dated 26.12.1997, as amended from time to time, would continue to operate. 5. All investors and entrepreneurs may please take note of the aforesaid policy for the year 2000. Sd/(ASHOK KUMAR) JOINT SECRETARY F.No.10(48)/97-IP New Delhi, the 14th January 2000

Government of India Ministry of Commerce & Industry Department of Industrial Policy & Promotion SIA (FC Division) Press Note No.2 (2000 Series) Subject : Expansion of list of industries/activities eligible for automatic route for Foreign Direct Investment (FDI), Non Resident Indian (NRI) and Overseas Corporate Body (OCB) investment. In pursuance of Government’s commitment to early implementation of the second phase of the economic reforms and with a view to further liberalising the FDI regime, Government, on review of the policy on FDI, has decided to place all items / activities under the automatic route for FDI/NRI and OCB investment except the following : i.

ii.

iii. iv.

All proposals that require an Industrial Licence which includes (i) the item requiring an Industrial Licence under the Industries (Development and Regulation) Act, 1951; (ii) foreign investment being more than 24% in the equity capital of units manufacturing items reserved for small scale industries; and (iii) all items which require an Industrial Licence in terms of the locational policy notified by Government under the New Industrial Policy of 1991. All proposals in which the foreign collaborator has a previous venture/tieup in India. The modalities prescribed in Press Note No. 18 dated 14.12.98 of 1998 series, shall apply in such cases. All proposals relating to acquisition of shares in an existing Indian company in favour of a foreign/NRI/OCB investor. All proposals falling outside notified sectoral policy/caps or under sectors in which FDI is not permitted and/or whenever any investor chooses to make an application to the FIPB and not to avail of the automatic route.

2. All proposals for investment in public sector units as also for EOU/EPZ/ EHTP/STP units would qualify for automatic route subject to the above parameters. 3. The modalities and procedures for automatic route would remain the same and RBI would continue to be the concerned agency for monitoring/reporting as per existing procedure. The National Industrial Classification of all Economic Activities (NIC), 1987, shall remain applicable for description of activities and classification for all matters relating to FDI/NRI/OCB investment. 4. FDI/NRI/OCB investment under the automatic route shall continue to be governed by the notified sectoral policy and equity caps and RBI shall ensure compliance with the same. 5. Areas/sectors/activities hitherto not open to FDI/NRI/OCB investment shall continue to be so unless otherwise decided and notified by Government. 6. Henceforth, any change in sectoral policy/sectoral equity cap shall be notified by the Secretariat for Industrial Assistance (SIA) in the Department of Industrial Policy & Promotion.

7. Press Note No. 2 (1997 Series), Press Note No. 14 (1997 Series), Press Note No. 2 (1998 Series) and Press Note No. 1 (1999 Series) stand superseded to the extent as aforesaid.

( A S H O K K U M A R ) Joint Secretary to the Government of India No.7(4)/2000-IP dated 11th February 2000

SECTOR SPECIFIC GUIDELINES FOR FOREIGN DIRECT INVESTMENT Sl.No.

Sector

Guidelines

1.

Banking

NRI holding may be upto 40%, inclusive of equity participation by other foreign investors. Foreign investment of upto 20% is permitted by foreign banking companies or finance companies including multilateral financial institutions. Multilateral institutions are allowed to invest within the overall foreign direct investment cap of 40% in case of shortfall in foreign direct investment contribution by NRIs.

Non-Banking Financial Companies (NBFC)

The automatic route is not available. a. FDI/NRI/OCB investments allowed in the following 17 NBFC activities shall be as per levels indicated below:

i. ii.

Merchant banking

Underwriting

iii.

Portfolio Management Services

iv.

Investment Advisory Services

v.

Financial Consultancy

vi.

Stock Broking vii.

Asset Management viii. Venture Capital

ix. Custodial Services x. Factoring xi. Credit Reference Agencies xii. Credit rating Agencies xiii. Leasing & Finance xiv. Housing Finance xv. Forex Broking xvi. Credit card business xvii. Money changing Business

b. Minimum Capitalisation Norms for fund based NBFCs:

For FDI upto 51% - US$ 0.5 million to be brought upfront For FDI above 51% and upto 75% - US $ 5 million to be brought upfront For FDI above 75% and upto 100% - US $ 50 million out of which US $ 7.5 million to be brought upfront and the balance in 24 months 100% NBFC with a minimum capital of US $ 50 million allowed to set up 100% downstream subsidiary to undertake specific NBFC activities. Such a subsidiary, however, would be required to dis-invest

its equity to the minimum extent of 25%, through a public offering only, within a period of 3 years.

c. Minimum capitalisation norms for non-fund based activities: Minimum capitalisation norm of US $ 0.5 million is applicable in respect of all permitted non-fund based NBFCs with foreign investment. The automatic route is not available. 2.

Civil Aviation (detailed guidelines have been issued by Ministry of Civil Aviation)

In the domestic Airlines sector: i. FDI upto 40% permitted subject to no direct or indirect equity participation by foreign airlines is allowed. ii. 100% investment by NRIs/OCBs. iii. The automatic route is not available.

3.

Telecommunication

i. In basic, Cellular Mobile, paging and Value Added service, and Global Mobile Personal Communications by Satellite, FDI is limited to 49% subject to grant of licence from Department of Telecommunications and adherence by the companies (who are investing and the companies in which investment is being made) to the licence conditions for foreign equity cap and lock in period for transfer and addition of equity and other licence provisions. ii. No equity cap is applicable to manufacturing activities.

4.

Information Technology

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 five 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, inter alia, implying that existing restrictions on FDI in domestic trading would be applicable to e-commerce as well.

5.

Petroleum

a. Under the exploration policy, FDI utpo 100% is allowed for small fields through competitive bidding; upto 60% for unincorporated JV; and upto 51% for incorporated JV with a No Objection Certificate for medium size fields.

(other than Refining)

b. For petroleum products and pipeline sector, FDI is permitted upto 51%. c. FDI is permitted upto 74% in infrastructure related to marketing and marketing of petroleum products. d. 100% wholly owned subsidiary(WOS) is permitted for the purpose of market study and formulation. e. 100% wholly owned subsidiary is permitted for investment/Financing. f. For actual trading and marketing, minimum 26% Indian equity is required over 5 years. The automatic route is not available. a. FDI as permitted upto 26% in case of Public Sector Units. PSUs will hold 26% and balance 48% by public. Automatic route is not available. b. In case of private Indian companies, FDI is permitted upto 100% under automatic route.

Petroleum Refining 6.

Housing & Real Estate

No foreign investment is permitted in this sector. NRIs/OCBs are allowed to invest. The scheme specific to NRIs and OCBs covers the following: a. Development of serviced plots and construction of built up residential premises b. Investment in real state covering construction of residential and commercial premises including business centres and offices c. Development of townships d. City and regional level urban infrastructure facilities, including both roads and bridges e. Investment in manufacture of building materials f. Investment in participatory ventures in (a) to (e) above g. Investment in housing finance institutions

7.

Coal and Lignite

i. Private Indian companies setting up or operating power projects as well as coal or lignite mines for captive consumption are allowed FDI upto 100%. ii. 100% FDI is allowed for setting up coal processing plants subject to the condition that the company shall not do coal mining and shall not sell washed coal or sized coal from its coal processing plants in the open market and shall supply the washed or sized coal to those parties who are supplying raw coal to coal processing plants for washing or sizing. iii. FDI upto 74% is allowed for exploration or mining of coal or lignite for captive consumption. iv. In all the above cases, FDI is allowed upto 50% under the automatic route subject to the condition that such investment shall not exceed 49% of the equity of a PSU.

8.

Venture Capital Fund(VCF) and Venture Capital Company(VCC)

An offshore venture capital company may contrinute upto 100% of the capital of a domestic venture capital fund and may also set up a domestic asset management company to manage the fund. VCFs and VCCs are permitted upto 40% of the paid up corpus of the domestic unlisted companies. This ceiling would be subject to relevant equity investment limit in force in relation to areas reserved for SSI. Investment in a single company by a VCF/VCC shall not exceed 5% of the paid-up corpus of a domestic VCF/VCC. The automatic route is not available.

9.

Trading

Trading is permitted under automatic route with FDI upto 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 export/exbonded 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 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 no 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 hi-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. 10.

Investing companies in infrastructure/ service sector

In respect of the companies in infrastructure/service sector, where there is a prescribed cap for foreign investment, only the direct investment will be considered for the prescribed cap and foreign investment in an investing company will not be set off against this cap provided the foreign direct investment in such investing company does not exceed 49% and the management of the investing company is with the Indian owners. The automatic route is not available.

11.

Atomic energy

The following three activities are permitted to receive FDI/NRI/OCB investments through FIPB (as per

detailed guidelines issued by Department of Atomic Energy vide Resolution No.8/1(1)/97-PSU/1422 dated 6.10.98): a. Mining and mineral separation b. Value addition per se to the products of (a) above c. Integrated activities (comprising of both (a) and (b) above. The following FDI participation is permitted: i. Upto 74% in both pure value addition and integrated projects. ii. For pure value addition projects as well as integrated projects with value addition upto any intermediate stage, FDI is permitted upto 74% through joint venture companies with Central/State PSUs in which equity holding of at least one PSU is not less than 26%. iii. In exceptional cases, FDI beyond 74% will be permitted subject to clearance of the Atomic Energy Commission before FIPB approval.

12.

Defence and strategic industries

No FDI/NRI/OCB investment is permitted

13.

Agriculture (including plantation)

No FDI/NRI/OCB investment is permitted

14.

Print media

No FDI/NRI/OCB investment is permitted

15.

Broadcasting

No FDI/NRI/OCB investment is permitted

16.

Power

Upto 100% FDI allowed

17.

Drugs & Pharmaceuticals

i. FDI upto 74% in the case of bulk drugs, their intermediates and f formulations (except those produced by the use of recombinant DNA technology) would be covered under automatic route.

ii. FDI above 74% for manufacture of bulk drugs will be considered by the Government on case to case basis for manufacture of bulk drugs from basic stages and their intermediates and bulk drugs produced by the use of recombinant DNA technology as well as the specific cell/tissue targeted formulations provided it involves manufacturing from basic stage. 18.

Roads & Highways, Ports and Harbours.

FDI upto 100% under automatic route is permitted in projects for construction and maintenance of roads, highways, vehicular bridges, toll roads, vehicular tunnels, ports and harbours.

19.

Hotels & Tourism

100% FDI is permissible in the sector. The term hotels include restaurants, beach resorts, and other tourist complexes providing accommodation and/or catering and food facilities to tourists. Tourism related industry includes travel agencies, tour operating agencies and tourist transport operating agencies, units providing facilities for cultural, adventure and wild life experience to tourists, surface, air and water transport facilities to tourists, leisure, entertainment, amusement, sports, and health units for tourists and Convention/Seminar units and organisation. Automatic route is also available upto 51% subject to the following parameters. For foreign technology agreements, automatic approval is granted if i. upto 3% of the capital cost of the project is proposed to be paid for technical and consultancy services including fees for architecture, design, supervision, etc. ii. upto 3% of the net turnover is payable for franchising and marketing/publicity support fee, and iii. upto 10% of gross operating profit is payable for management fee, including incentive fee.

20.

Mining.

i. For exploration and mining of diamonds and precious stones FDI is allowed upto 74% under automatic route. ii. For exploration and mining of gold and silver and minerals other than diamonds and precious stones, metallurgy and processing FDI is allowed upto 100% under automatic route.

iii. Press Note No. 18 (1998 series) dated 14.12.98 would not be applicable for setting up 100% owned subsidiaries in so far as the mining sector is concerned, subject to a declaration from the applicant that he has no existing joint venture for the same area and / or the particular mineral. 21.

Postal services

Couriers carrying packages, parcels and other items which do not come within the ambit of Indian Post Office Act 1998 shall not be permitted.

22.

Pollution Control and management

FDI upto 100% in both manufacture of pollution control equipment and consultancy for integration of pollution control systems is permitted under automatic route.

23.

Advertising and films

Automatic approval is available for the following: Upto 74% FDI in advertising sector Upto 100% FDI in film industry (i.e. film financing, production, distribution, exhibition, marketing and associated activities relating to film industry) subject to the following: i. Companies with an established track record in films, TV, music, finance and insurance would be permitted. ii. The company should have a minimum paid up capital of US $ 10 million if it is the single largest equity shareholder and at least US $ 5 million in other cases. iii. Minimum level of foreign equity investment would be US $ 2.5 million for the single largest equity shareholder and US $ 1 million in other cases. iv. Debt equity ratio of not more than 1:1, i.e., domestic borrowings shall not exceed equity.

PRESS NOTE No.3 (2000 SERIES) Subject:- Reduction in the investment limit on SSI/ancillary undertakings clarification of - regarding. In fulfilment of the aspirations of individual SSI units and SSI associations, Government have decided to reduce the investment limit on plant and machinery in respect of SSI/ancillary industrial undertakings from Rs.3 crore to Rs.1 crore. This decision has been notified vide Order No.S.O.1288(E), dated 24th December, 1999. 2. Subsequently, there have been many queries from the individual entrepreneurs, SSI units, State Governments etc. seeking clarifications on the status of SSI units set up prior to the issue of order dated the 24th December, 1999. The matter has been carefully considered and the position is clarified as under:(i) units that have obtained permanent registration based on the order dated 10th December, 1997 would continue to remain as SSI units, in spite of the order dated 24th December, 1999, reducing the investment limit to Rs.1 crore; (ii) units which had switched over to the SSI status based on the order dated 10th December, 1997 would continue to remain as SSI units, in spite of the order dated 24th December, 1999; and (iii) units which have got provisional registration with the State authorities for their SSI status would continue to remain as SSI units, in spite of the order dated 24th December, 1999, provided the provisional registration had taken place within the period of limitation of 180 days specified in the order dated 10th December, 1997. 3. This is for information of all concerned. ( N. Ganapathi ) Deputy Secretary to the Govt. of India F.No.10(6)/97-IP(Vol.III) New Delhi, the 14th March, 2000.

PRESS NOTE NO. 4 (2000 SERIES) Subject:- Reduction in the investment limit on SSI/ancillary undertakings - clarification of - regarding. ********** The new investment limit in fixed assets in plant and machinery in respect of small scale/ancillary industrial undertakings has been notified vide Order No.S.O.1288(E), dated 24th December, 1999. Subsequently, doubts raised by the individual entrepreneurs, SSI units, State Governments etc. have been clarified vide Press Note dated 14th March, 2000. 2. Still, a doubt has been raised as to whether the time limit of 180 days mentioned in para 2(iii) of the Press Note dated the 14th March, 2000 is applicable to the new units which have got provisional registration with the State authorities for their SSI status, based on the notification dated 10.12.97. 3. It is now clarified that the units that have obtained provisional registration on the basis of the notification dated 10th December, 1997 and have taken concrete steps for implementing the project such as preparation of project report, sanction of loan, purchase of land, civil construction, placement of orders for plant and machinery, etc. prior to 24th December, 1999 would continue to enjoy the SSI status so long as the investment in plant and machinery does not exceed Rs.300 lakh, notwithstanding the revised investment limit of Rs.100 lakh notified on 24th December, 1999.

( N. Ganapathi ) Deputy Secretary to the Govt. of India

PRESS NOTE NO. 5 (2000 Series) Subject : Export Obligation for EOU/EPZ Units

As per existing policy, a medium or large scale EOU/EPZ unit set up for manufacturing items reserved for small scale sector is required to obtain an industrial license. Such a license is granted with the obligation to export at least 50% of the production. However, EOU/EPZ units are in any case under an obligation to export 66% of their production. In view of this, Government has decided that henceforth there will be no need for an EOU/EPZ unit to obtain an industrial license if it is to manufacture SSI reserved items, even if it has foreign investment of over 24% in its equity capital. Accordingly such units will not be required to obtain prior approval of the Government to bring in foreign direct investment, provided they are not covered by any other condition contained in Press Note 2(2000 Series). Upon debonding, however, such non-SSI units will not produce items reserved for SSI, without undertaking to export 50% of such items manufactured.

(A.C. DUGGAL) DIRECTOR No. 7(4)/2000-IP Dated : 29th March 2000

Press Note No. 6 (2000 series) Subject : FDI in the Non-Banking Financial Sector – relaxation of norms – reg. Press Note No. 4 (1999 Series), inter-alia, provides for a 100% foreign equity in NonBanking Finance Companies (NBFCs) where such NBFC has to act only as a holding company with a minimum capitalisation of US $ 50 million and specific activities to be undertaken by down stream subsidiaries with minimum 25% domestic equity, of which 10% has to be brought up front and the remaining 15% over a period of 2 years. 2. Government, on review of the policy in this regard, has decided to allow holding companies with a minimum capital of US $ 50 million, to set up a 100% downstream subsidiary to undertake specific NBFC activities. Such a subsidiary, however, would be required to dis-invest its equity to the minimum extent of 25%, through a public offering only, within a period of 3 years. 3. Press Note No. 4 (1997 Series) issued by Government on 30th April, 1997 shall stand amended to the above extent. 4. The other provisions of the NBFC guidelines issued through Press Notes No. 13 of (1997 Series), 8 and 16 of (1998 Series), 11, 12 and 14 of (1999 Series) would continue to be applicable. (A.C. DUGGAL) Director ____________________________________________________

Press Note No. 7 (2000 Series) Subject : Review of existing sectoral policy and sectoral equity cap for Foreign Direct Investment (FDI) / Non Resident Indian (NRI) / Overseas Corporate Bodies (OCB) Investment. In pursuance of Government’s commitment to further liberalising the FDI regime, Government, on review of the policy on FDI, has decided to bring about the following changes in the FDI policy : I. Foreign Direct Investment upto 100% is allowed 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. Further, these companies would engage only in business to business (B2B) ecommerce and not in retail trading, inter alia, implying that existing restrictions on FDI in domestic trading would be applicable to e-commerce as well. II. Vide Press Note No. 12 of 1992 series, it had been decided to withdraw the condition of dividend balancing in all foreign investment approvals except for industries in the 22 specified consumer goods sector. On review of the existing policy on dividend balancing applicable to 22 specified consumer goods industries, and with a view to attracting FDI, it has been decided, with immediate effect, to remove the condition of dividend balancing on these 22 consumer goods industries. This decision will come into force from the date of issue of this Press Note and the export obligation and concomitant dividend balancing will remain applicable until the date of issue of this Press Note. III. Under Press Note No. 2 of 1998 series, projects for electricity generation, transmission and distribution with foreign equity upto 100%, had been made eligible for automatic approval provided the foreign equity in any such project does not exceed Rs. 1500 crore. The categories that qualified for such automatic approval are hydroelectric power plants, coal / lignite based thermal power plants, oil based thermal power plants and gas based thermal power plants. Generation, transmission and distribution of electrical energy produced in atomic reactor power plants is not elgible for automatic approval. Keeping in view the growing demand for power in the country and the need for more investment in this sector, Government, as part of further liberalisation of FDI regime, has decided to remove the upper limit for foreign direct investment in respect of projects relating to electric generation, transmission and distribution (other than atomic reactor power plants). IV. As per existing guidelines for FDI in petroleum sector, FDI in refining is permitted upto 26% (public sector holding of 26% and balance 48% by public). In case of private Indian companies, FDI in refining is permitted upto 49%. Government, as part of liberalisation of FDI regime has decided to increase the level of FDI in oil refining sector under automatic route from the existing 49% to 100%.

(M.S. SRINIVASAN) Joint Secretary to the Government of India No. 7(4)/2000-IP dated 14th July 2000

Press Note No.8 (2000 Series)

The present guidelines provide for approval under the automatic route for all foreign direct investment proposals relating to the Information Technology sector, with the exception of Business-toconsumer (B2C) e-commerce, subject, inter alia, to the following: Automatic route for FDI and/or technology collaboration would not be available to those who have or had any previous joint venture or technology transfer/trade mark agreement in the same or allied field in India (Clause 1(1) of Press Note 18 dated 14.12.1998). 2. Considering the special nature and needs and with a view to further simplifying the approval procedures and facilitating greater investment inflows into the IT sector in the country, it has been decided that FDI proposals relating to the IT sector will, with immediate effect, be exempt from the condition cited above.

( M.S. SRINIVASAN ) Joint Secretary to the Government of India ---------------------------------------------------------------------------------------------------F.No. 5(24)/2000-FC.I New Delhi, the 29th August, 2000.

Press Note No. 9 (2000 series) Subject : Review of existing sectoral policy and sectoral equity cap for Foreign Direct Investment (FDI) and investment by Non Resident Indians (NRI) / Overseas Corporate Bodies (OCB).

In pursuance of Government’s commitment to liberalisting the FDI regime, Government, on review of the policy on FDI, has decided to bring about the following changes in the FDI policy : I. FDI upto 100% is allowed through the automatic route for all manufacturing activities in Special Economic Zones (SEZs), except for the following activities : a. arms and ammunition, explosives and allied items of defence equipment, defence aircraft and warships; b. atomic substances; c. narcotics and psychotropic substances and hazardous chemicals; d. distillation and brewing of alcoholic drinks; and e. cigarettes / cigars and manufactured tobacco substitutes. II.

FDI upto 100% is allowed for the following activities in the telecom sector : a. b. c. d.

ISPs not providing gateways (both for satellite and submarine cables); Infrastructure Providers providing dark fibre (IP Category I); Electronic Mail; and Voice Mail The above would be subject to the following conditions :

a. FDI upto 100% is allowed subject to the condition that such companies would divest 26% of their equity in favour of Indian public in 5 years, if these companies are listed in other parts of the world. b. The above services would be subject to licensing and security requirements, wherever required. c. Proposals for FDI beyond 49% shall be considered by FIPB on case to case basis. III. Payment of royalty upto 2% for exports and 1% for domestic sales is allowed under automatic route on use of trademarks and brand name of the foreign collaborator without technology transfer. IV. Payment of royalty upto 8% on exports and 5% on domestic sales by wholly owned subsidiaries to offshore parent companies is allowed under the automatic route without any restriction on the duration of royalty payments. V. Offshore Venture Capital Funds / Companies are allowed to invest in domestic venture capital undertakings as well as other companies through the automatic route, subject only to SEBI regulations and sector specific caps on FDI.

(A.C. DUGGAL) Director No. 7(4)/2000-IP dated 8th September 2000

PRESS NOTE NO. 10 (2000 SERIES) Subject : Review of existing sectoral policy and sectoral equity cap for Foreign Direct Investment (FDI) and investment by Non Resident Indians (NRI) / Overseas Corporate Bodies (OCB).

In pursuance of Government’s commitment to liberalise the FDI regime, on review of the policy on FDI, it has been decided that foreign equity participation upto 26% in the Insurance sector, as prescribed in the Insurance Act, 1999, will be allowed under the automatic route. Companies bringing in FDI shall, however, be required to obtain necessary licence from the Insurance Regulatory & Development Authority for undertaking insurance activities. Sd/(M.S. SRINIVASAN) Joint Secretary to the Government of India No. 7(4)/2000-IP dated 19th October 2000

PRESS NOTE NO. 1 (2001 SERIES)

Subject : Guidelines pertaining to approval of foreign/ technical collaborations under the automatic route with previous venture / tie-up in India

As per Press Note No. 18 of 1998, automatic route is not open for those foreign investors who have / had a previous financial / technical / trademark collaboration in an existing domestic company engaged in the same or allied activity. All such proposals are considered by FIPB on merits. 2. International Financial Institutions such as Asian Development Bank (ADB), International Finance Corporation (IFC), Commonwealth Development Corporation (CDC), Deutsche Entwicklungs Gescelschaft (DEG), etc., normally pick up equity stake from time to time in domestic companies. Keeping in view the investment made by International Financial Institutions without an element of technical /trademark collaboration, government has decided that the provisions of Press Note No. 18 will not be applicable to the investments made by these international institutions in Indian companies. Accordingly, International Institutions like ADB, IFC, CDC, DEG, etc., may invest in domestic companies through the automatic route, subject to SEBI/ RBI regulations and sector-specific caps on FDI.

(M.S. SRINIVASAN) Joint Secretary to the Government of India

No. 7(1)/2001-IP dated 2nd January 2001

PRESS NOTE NO. 2 (2001 SERIES) Subject : Liberalisation of the existing norms for foreign investment in the NBFC sector In pursuance of the Government’s commitment to liberalise the FDI regime, it has been decided to further liberalise the FDI guidelines in respect of NBFC sector as under : (a) The existing requirements to bring in capital would continue to be applicable. That is, if the (i)

FDI is less than 51%, US$ 0.5 million to be brought in upfront;

(ii)

FDI is more than 51% and upto 75%, US$ 5 million to be brought in upfront; and

(iii) FDI is more than 75% and upto 100%, US$ 50 million, out of which US$ 7.5 million to be brought in upfront and the balance in 24 months. (b) Foreign investors can set up 100% operating subsidiaries without the condition to disinvest a minimum of 25% of its equity to Indian entities, subject to bringing in US$ 50 million as at (a) (iii) above (without any restriction on number of operating subsidiaries without bringing in additional capital). (c) Joint Venture operating NBFCs that have 75% or less than 75% foreign investment will also be allowed to set up subsidiaries for undertaking other NBFC activities, subject to the subsidiaries also complying with the applicable minimum capital inflow, i.e., (a) (i) and (a) (ii) above. (d) FDI in the NBFC sector is put on automatic route subject to compliance with guidelines of the Reserve Bank of India. RBI would issue appropriate guidelines in this regard. 2. Press Note No.4 (1997 Series), Press Note No.13 (1997 Series), Press Note No.8 (1998 Series), Press Note No.16 (1998 Series), Press Note No.11 (1999 Series), Press Note No.12 (1999 Series) and Press Note No.6 (2000 Series) issued on FDI in NBFC Sector stand modified to this extent. (M. S. SRINVASAN) Joint Secretary to the Government of India No. 5(16)/2001-FC.I dated 17.4.2001

PRESS NOTE NO. 3(2001 SERIES) Subject:- Deletion of the condition of "Export obligation". A number of items are reserved for exclusive production in the Small Scale Sector. For production of such items in the non-small scale sector units, an industrial licence is required to be obtained under the provisions of the Industries (Development & Regulation) Act, 1951. Industrial licence in such cases is granted subject to export obligation of 50% of annual production in terms of Notification No. S.O. 881(E) dated 18.12.97. 2. The list of items reserved for small scale sector is reviewed from time to time. Taking into account various factors, items are considered for dereservation. After dereservation, the condition of export obligation becomes redundant and has to be deleted, for which holders of IL/LOI have to approach Secretariat for Industrial Assistance (SIA). 3. In order to avoid references by holders of IL/LOI on a case by case basis for an item(s) which has/have been dereserved by a notification published in the Gazette of India, it has been decided that after issue of this Press Note, Industrial licences/Letter(s) of Intent issued by Secretariat for Industrial Assistance (SIA) in the past which carry the condition of export obligation will be deemed to have been exempted from the operation of this condition for items which stand dereserved by an appropriate notification. No separate amendment/endorsement deleting the condition of export obligation in Industrial licence(s)/Letter of Intent would be necessary. It will be sufficient to attach a copy of this Press Note and the relevant notification on dereservation of an item for the purpose of obtaining exemption from the condition of "Export obligation". 4 It is also open to entrepreneurs to file an Industrial Entrepreneurs' Memorandum (IEM) in lieu of Industrial Licence/LOI held by them, if they so desire, and if the Industrial Licence/LOI has not been granted in relaxation of locational policy; or when any variation from the conditions and parameters stipulated in the Industrial Licence/LOI is contemplated.

(M.S. SRINIVASAN) Joint Secretary to the Government of India ________________________________________________________________ No.2(2)/2001-EAU dated 25.04.2001

PRESS NOTE NO. 4 (2001 SERIES) Subject : Revision of existing sectoral guidelines and equity cap on Foreign Direct Investment (FDI), including investment by Non Resident Indians (NRIs) and Overseas Corporate Bodies (OCBs)

With a view to further liberalising the FDI regime, Government have effected the following changes in the FDI policy: i. FDI up to 100% is permitted on the automatic route for manufacture of drugs and pharmaceutical, provided the activity does not attract compulsory licensing or involve use of recombinant DNA technology, and specific cell / tissue targeted formulations. FDI proposals for the manufacture of licensable drugs and pharmaceuticals and bulk drugs produced by recombinant DNA technology, and specific cell / tissue targeted formulations will require prior Government approval. ii. FDI up to 100% is permitted in airports, with FDI above 74% requiring prior approval of the Government. iii. The defence industry sector is opened up to 100% for Indian private sector participation with FDI permissible up to 26%, both subject to licensing. iv. FDI up to 100% is permitted for development of integrated townships, including housing, commercial premises, hotels, resorts, city and regional level urban infrastructure facilities such as roads and bridges, mass rapid transit systems; and manufacture of building materials. Development of land and providing allied infrastructure will form an integral part of township’s development, for which necessary guidelines/norms relating to minimum capitalisation, minimum land area, etc., will be notified separately by the Government. FDI in this sector would be permissible with prior Government approval. v.

FDI up to 100% is permitted on the automatic route in hotel and tourism sector.

vi. FDI up to 100% is permitted in courier services subject to existing laws and exclusion of activity relating to distribution of letters. FDI in this sector would be permissible with prior Government approval. vii. FDI up to 100% is permitted on the automatic route for Mass Rapid Transport Systems in all metropolitan cities, including associated commercial development of real estate. viii. NRI investment in foreign exchange is made fully repatriable whereas investments made in Indian rupees through rupee accounts shall remain nonrepatriable. ix. FDI up to 74% is permitted for the following telecom services subject to licensing and security requirements: a. b. c.

Internet service providers with gateways; Radio paging; and End-to-end bandwidth

Proposals with FDI beyond 49% shall require prior Government approval. x. FDI up to 49% from all sources is permitted in the banking sector on the automatic route subject to conformity with guidelines issued by RBI from time to time.

2. The provisions of Press Note No. 2 of 2000 stand modified to the above extent.

(M. S. SRINIVASAN) Joint Secretary No. 5(6)/2000-FC I dated: 21 May 2001.

PRESS NOTE NO.1 (2002 SERIES)

Press Note No.9 of 2000, inter-alia, provides for payment of royalty upto 2% on exports and 1% on domestic sales under automatic route for use of trademark and brand name of the foreign collaborator without technology transfer. In case of technology transfer, payment of royalty subsumes the payment of royalty for use of trademark and brand name of the foreign collaborator. The issue regarding calculation of royalty for use of trademark and brand name has been examined by the Government and it has been decided that the following formula for calculation of royalty for use of trademark and brand name be adopted: “Royalty on brand name/trade mark shall be paid as a percentage of net sales, viz., gross sales less agents’/dealers’ commission, transport cost, including ocean freight, insurance, duties, taxes and other charges, and cost of raw materials, parts, components imported from the foreign licensor or its subsidiary/affiliated company.” 2.

This is for information of investors.

(M.S. SRINIVASAN) Joint Secretary to the Government of India No.8(2)2001-FC.I dated 3rd.January 2002

PRESS NOTE NO. 2 (2002 SERIES) Subject:

Guidelines for licensing production of Arms & Ammunitions

In pursuance of the Government decision to allow private sector participation up to 100% in the defence industry sector with foreign direct investment (FDI) permissible up to 26%, both subject to licensing as notified vide Press Note No. 4 (2001 series), the following guidelines for licensing production of arms and ammunitions are hereby notified: 1.

Licence applications will be considered and licences given by the Department of Industrial Policy & Promotion, Ministry of Commerce & Industry, in consultation with Ministry of Defence.

2.

Cases involving FDI will be considered by the FIPB and licences given by the Department of Industrial Policy & Promotion in consultation with Ministry of Defence.

3.

The applicant should be an Indian company / partnership firm.

4.

The management of the applicant company / partnership should be in Indian hands with majority representation on the Board as well as the Chief Executive of the company / partnership firm being resident Indians.

5.

Full particulars of the Directors and the Chief Executives should be furnished along with the applications.

6.

The Government reserves the right to verify the antecedents of the foreign collaborators and domestic promoters including their financial standing and credentials in the world market. Preference would be given to original equipment manufacturers or design establishments, and companies having a good track record of past supplies to Armed Forces, Space and Atomic energy sectors and having an established R & D base.

7.

There would be no minimum capitalization for the FDI. A proper assessment, however, needs to be done by the management of the applicant company depending upon the product and the technology. The licensing authority would satisfy itself about the adequacy of the net worth of the foreign investor taking into account the category of weapons and equipment that are proposed to be manufactured.

8.

There would be a three-year lock-in period for transfer of equity from one foreign investor to another foreign investor (including NRIs & OCBs with 60% or more NRI stake) and such transfer would be subject to prior approval of the FIPB and the Government.

9.

The Ministry of Defence is not in a position to give purchase guarantee for products to be manufactured. However, the planned acquisition programme for such equipment and overall requirements would be made available to the extent possible.

10.

The capacity norms for production will be provided in the licence based on the application as well as the recommendations of the Ministry of Defence, which will look into existing capacities of similar and allied products.

11.

Import of equipment for pre-production activity including development of prototype by the applicant company would be permitted.

12.

Adequate safety and security procedures would need to be put in place by the licensee once the licence is granted and production commences. These would be subject to verification by authorized Government agencies.

13.

The standards and testing procedures for equipment to be produced under licence from foreign collaborators or from indigenous R & D will have to be provided by the licensee to the Government nominated quality assurance agency under appropriate confidentiality clause. The nominated quality assurance agency would inspect the finished product and would conduct surveillance and audit of the Quality Assurance Procedures of the licensee. Self-certification would be permitted by the Ministry of Defence on case to case basis, which may involve either individual items, or group of items manufactured by the licensee. Such permission would be for a fixed period and subject to renewals.

14.

Purchase preference and price preference may be given to the Public Sector organizations as per guidelines of the Department of Public Enterprises.

15.

Arms and ammunition produced by the private manufacturers will be primarily sold to the Ministry of Defence. These items may also be sold to other Government entities under the control of the Ministry of Home Affairs and State Governments with the prior approval of the Ministry of Defence. No such item should be sold within the country to any other person or entity. The export of manufactured items would be subject to policy and guidelines as applicable to Ordnance Factories and Defence Public Sector Undertakings. Non-lethal items would be permitted for sale to persons / entities other than the Central or State Governments with the prior approval of the Ministry of Defence. Licensee would also need to institute a verifiable system of removal of all goods out of their factories. Violation of these provisions may lead to cancellation of the licence.

16.

Government decision on applications to FIPB for FDI in defence industry sector will be normally communicated within a time frame of 10 weeks from the date of acknowledgement by the Secretariat for Industrial Assistance in the Department of Industrial Policy & Promotion.

(M.S. SRINIVASAN) Joint Secretary to the Government of India No. 5(37)/2001-FC I dated 4th January 2002

PRESS NOTE NO. 3 (2002 SERIES) Subject:

Guidelines for FDI in development of integrated township including housing and building material

Government vide Press Note No. 4 (2001 series) permitted FDI up to 100% for development of integrated townships, including housing, commercial premises, hotels, resorts, city and regional level urban infrastructure facilities such as roads and bridges, mass rapid transit systems and manufacture of building materials. Development of land and providing allied infrastructure will form an integrated part of township’s development. 2. FDI in the development of integrated townships will be subject to the following guidelines: i)

The foreign company intending to invest, shall be registered as an Indian Company under Companies Act 1956 and will henceforth be allowed to take up land assembly and its development as a part of Integrated Township Development. All such cases would be processed by FIPB on the recommendation of Ministry of Urban Development & Poverty Alleviation and other concerned Ministries / Departments. Ministry of Urban Development & Poverty Alleviation will develop an exclusive cell to deal with such cases.

ii)

The core business of the company seeking to make investment, should be integrated township development with a record of successful execution of such projects elsewhere.

iii)

The minimum area to be developed by such a company should be 100 acres for which norms and standards are to be followed as per local bylaws / rules. In the absence of such bylaws / rules, a minimum of two thousand dwelling units for about ten thousand population will need to be developed by the investor.

iv)

The investing Foreign company should achieve clear milestones once their proposal has been approved.

v)

a)

The minimum capitalisation norm shall be US$ 10 million for a wholly owned subsidiary and US$ 5 million for joint ventures with Indian partner/s. The funds would have to be brought in upfront.

b)

A minimum lock-in period of three years from completion of minimum capitalisation shall apply before repatriation of original investment is permitted.

c)

A minimum of 50% of the integrated project development must be completed within a period of five years from the date of possession of the first piece of land. However, if the investor intends to exit earlier due to reasons beyond his control, it shall be decided by FIPB on a case-to-case basis.

Conditions regarding the use of land for commercial purposes, development charges, external development charges and other charges as laid down in Master Plan / Bylaws, preparation of layout and building plan, development of internal and peripheral development, development of other infrastructure facilities including the trunk services etc., will be the

responsibility of the investor as per planning norms and standards on similar lines as those applicable to local investors. In the absence of such standards and norms, every State Government may decide their own conditions for which the Urban Development Plan Formulation and Implementation guidelines circulated by the Ministry of Urban Development & Poverty Alleviation may serve as a guiding principle. vi)

Land with assembled area for peripheral services such as police stations, milk booths will be handed over free of cost to the Government / local authority / agency as the case may be.

vii)

The Developer will retain the lands for community services such as (i) schools (ii) shopping complex (iii) community centres (iv) ration shop (v) hospital / dispensary. These services will be developed by developer himself and shall be made operational before the houses are occupied.

viii)

The developer, after properly developing playgrounds, park, will make it available to the local authorities free of cost.

ix)

The developer will ensure the norms and standards as applicable under local laws / rules.

x)

For companies investing in Special Economic Zones, Foreign Investment Promotion Board may accord exemption to any of the above mentioned conditions on a case-to-case basis. This will, however, be an interim measure till guidelines are evolved in due course in a need based manner.

(M.S. SRINIVASAN) Joint Secretary to the Government of India No. 5(6)/2000-FC I dated 4th January 2002

PRESS NOTE NO. 4 (2002 SERIES) Subject: Revision of existing sectoral guidelines for FDI, including investment by nonresident Indians and overseas corporate bodies Press Note 2 (2000 series) dated the 11th February, 2000 enclosing the sector specific guidelines for Foreign Direct Investment (FDI), inter alia includes the following provisions for the Advertising and Film sectors: Automatic approval is available for the following: -

Up to 74% FDI in Advertising sector.

Up to 100% FDI in Film industry (i.e., film financing, production, distribution, exhibition, marketing and associated activities relating to film industry subject to the following: I. Companies with an established track record in films, TV, music, finance, and insurance would be permitted. II. The company should have a minimum paid up capital of US$ 10 million if it is the single largest equity shareholder and at least US$ 5 million in other cases. III. Minimum level of foreign equity investment would be US$ 2.5 million for the single largest equity shareholder and US$ 1 million in other cases IV. Debt equity ratio of not more than 1:1 i.e. domestic borrowings shall not exceed equity V. Provisions of dividend balancing would apply. 2. With a view to further liberalizing the FDI regime, the Government have permitted FDI up to 100% on the automatic route in the advertising sector. FDI up to 100% in the film sector, which is already on the automatic route, will not be subject to the conditions indicated at I to V above. 3. The provisions of Press Note No. 2 of 2000 series stand modified to the above extent.

(M. S. SRINIVASAN) Joint Secretary to the Government of India

PRESS NOTE NO. 5 (2002 Series)

Subject: Prohibition on foreign investment in lottery business, gambling and betting – regarding

As per existing policy, lottery business, gambling and betting are not open to foreign investment, which applies to FDI, FII portfolio investment, NRI/OCB portfolio investment, NRI/OCB investment on non-repatriation basis and investment by foreign venture capital investors. 2. Government has been receiving queries from certain State Governments, prospective investors, technology providers, franchise / trademark / brand name licensors, management consultants, etc., as to whether FDI is permissible in Government / private lotteries, online lotteries, casinos, etc., and also whether foreign technology collaboration, including licensing of franchise / trademark / brand name, management contract, etc., are permitted in the lottery business, gambling and betting sector. 3. It is clarified that both foreign investment and foreign technology collaboration in any form are completely prohibited in the lottery business, gambling and betting sector.

(M.S. SRINIVASAN) Joint Secretary to the Government of India F. No. 5(31)/2000-FC I dated 5th July 2002

PRESS NOTE NO. 6 (2002 SERIES) Subject: Revision of existing sectoral guidelines for FDI, including investment by nonresident Indians and overseas corporate bodies As part of the ongoing liberalisation of the FDI regime, the Government, in partial relaxation of the extant policy which prohibits FDI in the agriculture sector, including plantations, has decided to allow FDI up to 100% in tea sector, including tea plantations. Proposals for FDI in tea sector will require prior approval of the Central Government and would be subject to following conditions: (i) compulsory divestment of 26% equity of the company in favour of an Indian partner / Indian public within a period of five years; and (ii) prior approval of the State Government concerned in case of any future land use change. The above dispensation would be applicable to all fresh investments (FDI) made in this sector from the date of this notification. 2. The provisions of Press Note No. 2 (2000 series) dated 11.2.2000 stand modified to the above extent.

(M. S. SRINIVASAN) Joint Secretary to the Government of India No. 5(9)/2000-FC I dated 5th July 2002

Press Note No. 1 (2003 Series)

Subject:- Revision of Form for Carry-on-Business Licence. At present applications for grant of Carry-on-Business (COB) licence under the provisions of the Industries(Development & Regulation) Act, 1951 are to be submitted in Form ‘EE’ with the Secretariat for Industrial Assistance in Department of Industrial Policy & Promotion, Udyog Bhavan, New Delhi. Following an exercise to simplify this Form and make it convenient for the entrepreneurs applying for grant of Carry-on-Business licence it has been decided that, henceforth, all applications for grant of COB licence will be accepted by the SIA in the revised format as given in the annexure (given below) to this Press Note.

(A.E. AHMAD) JOINT SECRETARY TO THE GOVT. OF INDIA No. 7(2)/2003–IP dated 21st March, 2003

FORM EE Carry on Business Licence Application

I.

Name and Address of the Applicant company in full (BLOCK LETTERS). Name of the applicant company Postal Address

Pin Code Fax Telephone E-Mail

II.

Registrar of Companies Registration No.

III(1) Location of the Factory Address

District State Pin Code Fax

Telephone

E-Mail

(2) Please indicate whether the location is (please √ the appropriate box) a.

Within 25 kms from the periphery of a city having population above one million according to 1991 census Yes

b

No

If Yes, then whether it is located in an Industrial area / Industrial Estate set up prior to 25.7.1991 Yes

No

IV. Items of manufacture (including by-product/co-product)/ (supplementary sheets may be used if necessary).

(a)

Item code (NATIONAL INDUSTRIAL CLASSIFICATION OF ALL ECONOMIC ACTIVITY (NIC), 1998)

(b) Item Description

(c) (d)

Annual Capacity Unit of capacity MT/KL/NUMBERS/ Rs.Lakh/others(to be specified)

(e) Indicate SSI Registration No.(if applicable) (please attach an attested copy)

V.

Capital structure

1. Authorised capital

A.

Equity

Rs……………..Divided into ………… shares of Rs. ….. each

Preference

Rs……………..Divided into ………… shares of Rs. ….. each

2. Paid-up Capital

B.

Equity

Rs……………..Divided into ………… shares of Rs. ….. each

Preference

Rs……………..Divided into ………… shares of Rs. ….. each

C.

Pattern of Shareholding

i) Foreign (give name and address, including name of Country, Telephone/Fax Nos. and E-mail)

ii.

C.

No. of Share

Equity Face Amount Valu e

%

No. of Share

Preference Face Amount Valu e

Non-resident Indian (NRI) Individual/OCB (give name and address, telephone No./fax No. and E-mail.

(a) With repatriation benefits

(b) without repatriation benefits

iii. Resident Indian Individual /others (give name and address including name of country, telephone No./fax No. and Email.

Grand Total

VI.

VII.

Please indicate the 'effective date' i.e date on which it become necessary to make application for COB licence. D D M M Y Y Y Y

Value of fixed assets (based on original cost of acquisition) i.e. investment in land, building, plant and machinery as on 'effective date'.

%

(1)

(i) Land (ii) Building (iii) Plant and Machinery (a) Imported (b) Indigenous Total (a+b)

(2)

Indicate the value of fixed assets in plant and machinery for the past three years.

(a)

Ist Year

(b)

IInd Year

(c)

IIIrd Year

VIII.

Past production, including by-product during the last three calendar years (with reference to the effective date).

Name of the principal product or by-product

IX.

Quantity/Value

Staff and labour employed: Head Office

(a) Managerial: (b) Supervisory: Technical Non-technical (c) Clerical: (d) Labour: Skilled Semi-skilled Unskilled (e) Other categories if any:

Factory

Total

X.

Payment Details (Rs. 2500* is payable)

Draft No.

______________________________________

Amount (Rs.) Draft Date Drawn on

__________________________ Payable at __________________ (Name of the Bank)

* Demand draft should be made in favour of Pay & Accounts Officer, Deptt. of Industrial Development, to be payable at State Bank of India, Nirman Bhawan, New Delhi

Declaration I/We hereby certify that the above statements are true and correct to the best of my/our knowledge and belief.

(Signature of Applicant)

:

……………………………………

(Name in block letters)

:

……………………………………..

(Designation of the signatory): Place

:

D Date

……………………………………..

D

………………….…………………..

M

M

Y

Y

Y

Y

Note for Guidance of Entrepreneurs submitting applications for grant of Carryon-Business Licence (This part contains information for the guidance of entrepreneurs and may be retained by them, it need not accompany the application)

1.

This form is to be used for making application for the grant of Carry-OnBusiness (COB) Licence under the provisions of Sections 13(a), 13(b), 13(c) and 29B(2) of the Industries (Development & Regulation) Act, 1951.

2.

Application is to be submitted to Secretariat for Industrial Assistance, Department of Industrial Policy & Promotion, Ministry of Commerce & Industry, Udyog Bhawan, New Delhi with 5 spare copies of the application.

3.

Application shall be necessarily accompanied by a Demand Draft for Rs. 2500/- (Rupees Two thousand and five hundred only) drawn in favour of "Pay and Accounts Officer, Department of Industrial Development" payable at State Bank of India, Nirman Bhawan Branch, New Delhi.

4.

The application should be complete in all respects. Incomplete applications will not be entertained. The application format should be duly signed and the designation/authority of the person signing the application should be clearly shown.

5.

On receipt of application SIA will issue an Acknowledgement with a distinctive reference number. The applicant has to quote the distinctive reference number in all future correspondence.

6.

The applicant shall furnish details of investment and production duly certified by a Chartered Accountant.

7.

In case unit is registered with technical authorities and/or State Director of Industries, a notarised copy of the registration certificate is to be attached.

8.

Balance sheet for the last three years should be attached with three copies of the application.

9.

Applicant shall furnish a list of names and addresses of proprietors, partners, owners or Board of Directors.

10.

In calculating the value of Plant & Machinery, the original price thereof irrespective of whether the Plant & Machinery are new or second hand, shall be taken into account. 11.

In calculating the value of plant and machinery, the following shall be excluded, namely:-

(i)

the cost of equipments such as tools, jigs, dies, moulds and spare parts for maintenance and the cost of consumable stores;

(ii)

the cost of installation of plant and machinery;

(iii)

the cost of Research and Development (R&D) equipment and pollution control equipment;

(iv)

the cost of generation sets, extra transformer, etc. installed by the undertaking as per the regulations of the State Electricity Board;

(v)

the Bank charges and service charges paid to the National Small Industries Corporation or the State Small Industries Corporation;

(vi)

the cost involved in procurement or installation of cables, wiring, bus bars, electrical control panels (not those mounted on individual machines), Oil Circuit Breakers/Miniature Circuit Breakers, etc. which are necessarily to be used for providing electrical power to the plant and machinery/safety measures;

(vii)

the cost of gas producer plant;

(viii)

transportation charges (excluding of taxes e.g. Sales-tax, Excise etc.) For indigenous machinery from the place of manufacturing to the site of the factory;

(ix)

charges paid for technical know-how for erection of plant and machinery;

(x)

cost of such storage tanks which store raw material finished products only and are not linked with the manufacturing process; and

(xi)

12.

cost of fire fighting equipments

In the case of imported machinery, the following shall be included in calculating the value, namely:-

(i)

Import duty (excluding miscellaneous expenses as transportation from the port to the site of the factory, demurrage paid at the port).

(ii)

the shipping charges

(iii)

Customs clearance charges, and Sales tax

PRESS NOTE NO. 2 (2003 SERIES) Subject : Liberalization of Foreign Technology Agreement policy and procedures

In pursuance of its commitment to progressively liberalise the FDI regime, the Government has reviewed its policy governing the payment of royalties under Foreign Technology Collaboration. 2. Presently, wholly owned subsidiaries are permitted to make payment of royalty up to 8% on exports and 5% on domestic sales to their offshore parent companies on the automatic route without any restriction on the duration of the royalty payments. However, royalty payments by other companies are allowed for a period not exceeding seven years from the date of commencement of commercial production or ten years from the date of agreement, whichever is earlier. 3. With a view to further liberalising the foreign technology collaboration agreement policy and extending a uniform policy dispensation, it has now been decided that all companies, irrespective of the extent of foreign equity in the shareholding, who have entered into foreign technology collaboration agreements may henceforth be permitted on the automatic approval route, to make royalty payments at 8% on exports and 5% on domestic sales without any restriction on the duration of the royalty payments. The ceiling on payment of lumpsum fee / royalty on the automatic route would continue to apply in all cases.

(UMESH KUMAR) Joint Secretary to the Government of India

No. 5(5)/2003-FC dated 24th June 2003

PRESS NOTE NO. 3 (2003 SERIES) Subject: Capitalisation of import payables – liberalisation of policy At present, issue of shares by a company in India to a person resident outside India is permitted only against inward remittance of convertible foreign exchange through normal banking channels or by debit to NRE / FCNR account of the person concerned maintained with an authorised foreign exchange dealer / bank. 2. As a part of the ongoing process of liberalisation, it has been decided to permit issue of equity shares against lumpsum fee, royalty and External Commercial Borrowings (ECBs) in convertible foreign currency already due for payment / repayment, subject to meeting all applicable tax liabilities and procedures.

(R.S. JULANIYA) Director F. No. 5(4)/2003-FC dated 29th July 2003

PRESS NOTE NO. 4 (2003 SERIES) As the entrepreneurs are aware, after consideration of an application for Industrial Licence for setting up industrial undertaking or expansion of the existing industrial undertaking or for the manufacture of new article, a Letter of Intent (LOI) is issued in the first instance. The conditions contained in the Letter of Intent are required to be fulfilled within a period of 3 years or within extended period of validity as may be specifically allowed by the Government. These conditions usually relate to setting up of pollution control equipment, site clearance from the State Government and certain special conditions for specific sectors. On fulfillment of the prescribed conditions, the holder of 'Letter of Intent' is required to approach Secretariat for Industrial Assistance and the Administrative Ministry concerned for getting the Letter of Intent converted into Industrial Licence. 2. As a measure of further simplification of procedures, the Government has decided that Industrial Licence will now be granted directly against applications to ensure speedy implementation of projects. This procedure will, however, not apply to the applications relating to manufacture of items reserved for exclusive production in the small scale sector. Such application will continue to be processed as per existing procedure i.e. issue of LOI in the first instance and conversion of LOI into Industrial Licence after execution of legal undertaking (LUT) with DGFT for fulfillment of condition relating to export obligation. It is, however, clarified that it will be the responsibility of the entrepreneur to ensure that all requisite approvals/clearances under other statutes/regulations/notifications etc. issued by the Central or the State Government(s) from time to time are obtained for the manufacturing activity specified in the Industrial Licence. 3. It is expected that the above mentioned decision will facilitate the entrepreneurs and ensure speedy implementation of projects in the licensed sector.

(UMESH KUMAR) Joint Secretary to the Govt. Of India

No.2(1)/2003-PR&C Dated the 10th October, 2003

PRESS NOTE NO.5 (2003 SERIES) Subject: Issue of shares against External Commercial Borrowings – liberalisation of. Vide Press Note 3 (2003 Series) dated 28th July, 2003 issue of equity shares against lump-sum fee, royalty and External Commercial Borrowings (ECBs) in convertible foreign currency already due for payment/repayment, subject to meeting all applicable tax liabilities and procedures has been permitted. As a part of the ongoing process of liberalisation, it has been decided to permit issue of equity shares against all External Commercial Borrowings (excluding those deemed as ECBs) received in convertible foreign currency, subject to meeting all tax liabilities and procedures.

(R.S. JULANIYA) Director F.No.5 (4)/2003-FC dated 28.11.03

Government of India Ministry of Commerce & Industry Department of Industrial Policy & Promotion Secretariat for Industrial Assistance Press Note No. 1 (2005

Subject:

Series)

Guidelines pertaining to approval of foreign/technical collaborations under the automatic route with previous ventures/tie-up in India.

The Government has reviewed the guidelines notified vide Press Note 18 (1998 series) which stipulated approval of the Government for new proposals for foreign investment/ technical collaboration where the foreign investor has or had any previous joint venture or technology transfer/ trademark agreement in the same or allied field in India. 2.

New proposals

for foreign

investment/technical

collaboration

would henceforth be allowed under the automatic route, subject to sectoral policies, as per the following guidelines: i) Prior approval of the Government would be required only in cases where the foreign investor has an existing joint venture or technoldgy transfer/trademark agreement in the 'same' field. The onus to provide requisite justification as also proof to the satisfaction of the Government that the new proposal would or would not in any way jeopardize the interests of the existing joint venture or technology/ trademark partner or other stakeholders

ii)

would lie equally on supplier and the Indian Even in cases where venture or technology

the foreign investor/ technology partner. the foreign investor has a joint transfer/ trademark agreement in

Page 1 of 2

the 'same' field prior approval of the Government will not be required in the following cases: a. Investments to be made by Venture Capital Funds registered with the Security and Exchange Board of India (SEBI); or b. where in the existing joint-venture investment by either of the parties is less than 3%; or c. where the existing venture/ collaboration is defunct or sick. In so far as joint ventures to be entered into after the date of this Press Note are concerned, the joint venture agreement may embody a 'conflict of interest' clause to safeguard the interests of joint venture partners in the event of one of the partners desiring to set up another joint venture or a wholly owned subsidiary in the 'same' field of economic activity. These guidelines would come into force with immediate effect. iii)

3.

Joint Secretary

No.

8/1/2003-FC

(Pt.)

?-a. \~ (Umesh Kumar) to the Government of India

Dated 12th January 2005

Copy forwarded to the Press Information Officer, Press Information Bureau for giving wide publicity to the above Press Note.

Government of India Ministry of Commerce & Industry Department of Industrial Policy & Promotion SIA (FC Division)

Press Note Subject:

2 (2005)

Foreign Direct Investment (FDI) in townships, housing, built-up infrastructure and construction-development projects

With a view to catalysing investment in townships, housing, built-up infrastructure and construction-development projects as an instrument to generate economic activity, create new employment opportunities and add to the available housing stock and built-up infrastructure, the Government has decided to allow FDI up to 100% under the automatic route in townships, housing, built-up infrastructure and construction-development projects (which would include, but not be restricted to, housing, commercial premises, hotels, resorts, hospitals, educational institutions, recreational facilities, city and regional level infrastructure), subject to the followingguidelines: a.

Minimum area to be developed under each project would be as under: i.

In case of development of serviced housing plots, a minimum land area of 10 hectares

ii.

In case of construction-development projects, a minimum builtup area of 50,000 sq.mts

iii.

In case of a combination project, anyone

of the above two

conditions would suffice b.

The investment would further be subject to the following conditions: i.

Minimum capitalization of US$10 million for wholly owned subsidiaries and US$ 5 million for joint ventures with Indian partners. The funds would have to be brought in within six months of commencement of business of the Company.

ii.

Original investment cannot be repatriated before a period of three

years

from

completion

of minimum

capitalization.

However, the investor may be permitted to exit earlier with prior approval of the Government through the FIPS. c.

At least 50% of the project must be developed within a period of five years from the date of obtaining all statutory clearances. The investor would not be permitted to sell undeveloped plots.

Government of India Ministry of Commerce & Industry Department of Industrial Policy & Promotion SIA (FC Division)

For the purpose of these guidelines, "undeveloped plots" will mean where roads, water supply, street lighting, drainage, sewerage, and other conveniences, as applicable under prescribed regulations, have not been i~,,ade available

It will be necessary that the investor

provides this infrastructure and obtains the completion certificate from the concerned local body/service agency before he would be allowed to dispose of serviced housing plots. d.

The project shall conform to the norms and standards, including land use requirements and provision of community amenities and common facilities, as laid down in the applicable building control regulations, bye-laws,

rules,

and

other

regulations

of

the

State

Government!Municipal/Local B.odyconcerned. e.

The investor shall be responsible for obtaining all necessary approvals, including those of the building/layout plans, developing internal and peripheral areas and other infrastructure facilities, payment of development, external development and other charges and complying with all other requirements as prescribed under applicable rules/bye-Iaws/regulations of the

State Government!

Municipal/Local Body concerned. f.

The State Government! Municipal/ Local Body concerned, which approves the building / development plans, would monitor compliance of the above conditions by the developer."

2.

Para (iv) of Press Note 4 (2001 Series), issued by the Government on

21.5.2001, and Press Note 3 (2002 Series), issued on 4.1.2002, stand superceded.

'h.~ (Umesh Kumar) Joint Secretary to the Government of India No. 5(6)/2000-FC dated3..JMarch 2005

Copy forwarded to Press Information Officer, Press Bureau, for giving wide publicity to the above Press Note. j\

Information

Government of India Ministry of Commerce & Industry Department of Industrial Policy & Promotion (Secretariat for Industrial Assistance) PRESS NOTE NO. Subject:

1.

3

(2005 SERIES)

Clarification regarding Guidelines pertaining to approval of foreign/technical collaborations under the automatic route with previous ventures/tie-ups in India. ….

The Government, vide Press Note 1 (2005 Series) dated 12.1.2005,

notified

fresh

guidelines

for

approval

of

new

proposals

for

foreign/technical collaboration under the automatic route with previous venture/tie up in India. According to these guidelines, prior approval of the Government would be required for new proposals for foreign investment/technical collaboration, in cases where the foreign investor has an existing joint venture or technology transfer/trademark agreement in the same field in India. 2.

The Government had, earlier vide Press Note 10 (1999 Series)

notified the definition of “same field” as the 4 digit National Industrial Classification (NIC) 1987 Code.

It is hereby reiterated that for the

purposes of Press Note 1 (2005 Series), the definition of ‘same’ field would continue to be 4 digit NIC 1987 Code. 3.

It is also clarified that proposals in the Information Technology

sector, investments by multinational financial institutions and in the mining sector for same area/mineral were exempted from the application of Press Note 18 (1998 Series) vide Press Note 8 (2000), Press Note 1(2001) and Press Note 2(2000) respectively. Investment proposals in these sectors would continue to be exempt from Press Note 1 (2005 Series). 4.

From para 2(i) of the guidelines notified vide Press Note 1 (2005

Series), it is clear that prior Government approval for new proposals would be required only in cases

where the foreign investor has an

existing joint venture, technology transfer/trademark agreement in the

‘same’ field subject to provisions of para 2(ii) of the Press Note 1 (2005 Series). 5.

For the purpose of avoiding any ambiguity it is reiterated that joint

ventures, technology transfer/trademark agreements existing on the date of issue of the said Press Note i.e. 12.1.2005 would be treated as existing joint venture, technology transfer/trademark agreement for the purposes of Press Note 1 (2005 Series).

( UMESH KUMAR ) Joint Secretary to the Government of India __________________________________________________________ F.No.8/1/2003-FC(Pt.) New Delhi, dated the 15th March, 2005. Copy forwarded to the Press Information Officer, Press Information Bureau for giving wide publicity to the above Press Note.

Government of India Ministry of Commerce & Industry Department of Industrial Policy & Promotion Secretariat for Industrial Assistance

PRESS NOTE NO. 5 (2005 SERIES)

Subject: Enhancement of the Foreign Direct Investment ceiling from 49 per

cent to 74 per cent in the Telecom sector

1.

In pursuance of the Government’s commitment to liberalise the FDI regime, it

has been decided to enhance the Foreign Direct Investment ceiling from 49 per cent to 74 per cent in certain telecom services [such as Basic, Cellular, Unified Access Services, National/International Long Distance, V-Sat, Public Mobile Radio Trunked Services (PMRTS), Global Mobile Personal Communications Services (GMPCS) and other value added services], subject to the following conditions:A.

The total composite foreign holding including but not limited to investments by Foreign Institutional Investors (FIIs), Non-resident Indians (NRIs), Foreign Currency Convertible Bonds (FCCBs), American Depository Receipts (ADRs), Global

Depository

Receipts

(GDRs),

convertible

preference

shares,

proportionate foreign investment in Indian promoters/investment companies including their holding companies, etc., herein after referred as FDI, will not exceed 74 per cent. Thus, 74 per cent foreign investment can be made directly or indirectly in the operating company or through a holding company. Hence, the remaining 26 per cent will be owned by resident Indian citizens or an Indian Company (i.e. foreign direct investment does not exceed 49 percent and the management is with the Indian owners). It is clarified that proportionate foreign component of such an Indian Company will also be counted towards the ceiling of 74%. However, foreign component in the total holding of Indian public sector banks and Indian public sector financial institutions will be treated as ‘Indian’ holding. The licensee will be required to disclose the status of such foreign holding and certify that the foreign investment is within the ceiling of 74% on a half yearly basis.

1

B.

The majority Directors on the Board including Chairman, Managing Director and Chief Executive Officer (CEO) shall be resident Indian citizens, enforced through licence agreement. The appointment to these positions from among resident Indian citizens shall be made in consultation with serious Indian investors. Serious investor has been defined below in para G(ii).

C.

The Share Holder Agreements (SHA) shall specifically incorporate the condition that majority directors on the Board including Chairman, Managing Director and CEO shall be resident Indian citizens and shall also envisage the conditions of adherence to Licence Agreement.

D.

FDI upto 49 per cent will continue to be on automatic route. Foreign Investment Promotion Board (FIPB) approval shall be required for FDI in the licensee company/Indian promoters/investment companies including their holding companies if it has a bearing on the overall ceiling of 74 per cent. While approving the investment proposals, FIPB shall take note that investment is not coming from unfriendly countries.

E.

The investment approval by FIPB shall envisage the conditionality that Company would adhere to licence Agreement.

F.

FDI shall be subject to laws of India and not the laws of the foreign country/countries.

G.

Department of Telecommunications (DoT) will enforce the above and the conditions mentioned below through appropriate amendment in licence:(i)

There shall be a non-obstante clause in the licence which confers powers upon the licensor to cancel the licence under certain defined circumstances.

(ii)

In order to ensure that at least one serious resident Indian promoter subscribes reasonable amount of the resident Indian shareholding, such resident Indian promoter shall hold at least 10 per cent equity of the licensee company.

(iii)

The Company shall acknowledge compliance with the licence agreement as a part of Memorandum of Association of the Company. Any violation of the licence agreement shall automatically lead to the company being unable to carry on its business in this regard. The duty to comply with the licence agreement shall also be made a part of Articles of Association. 2

(iv)

Chief Technical Officer (CTO)/Chief Finance Officer (CFO) shall be resident Indian citizens. The Licensor/DoT shall also be empowered to notify key positions to be held by resident Indian citizens.

(v)

The Company shall not transfer the following to any person/ place outside India:(a)

any accounting information relating to subscriber (except for roaming/billing) (Note: it does not restrict a statutorily required disclosure of financial nature) ;

(b)

user information (except pertaining to foreign subscribers using Indian Operator’s network while roaming); and

(c)

details of their infrastructure/network diagram except to telecom equipment

suppliers/manufacturers

who

undertake

the

installation, commissioning etc. of the infrastructure of the licensee Company on signing of non-disclosure agreement. (vi)

The Company when entering into roaming agreements with service providers outside India must provide, on demand, the list of such users (telephone numbers, in case of foreign subscribers using Indian Operator’s network while roaming).

(vii)

The Company must provide traceable identity of their subscribers. However, in case of providing service to roaming subscriber of foreign Companies, the Indian Company shall endeavor to obtain traceable identity of roaming subscribers from the foreign company as a part of its roaming agreement.

(viii)

No traffic (mobile and landline) from subscribers within India to subscribers within India shall be hauled to any place outside India.

(ix)

No Remote Access (RA) shall be provided to any equipment manufacturer or any other agency out side the country for any maintenance/repairs by the licensee. However, RA may be allowed for catastrophic software failure (such as failure to boot up etc.) which would lead to major part of the network becoming non-functional for a prolonged period, subject to meeting the following conditions:(a) An identified Government agency (Intelligence Bureau) will be notified, when RA is to be provided.

3

(b) Remote Access password is to be enabled for a definite period only and only for access from pre-approved locations of the Original Equipment Manufacturer (OEM) Vendors and only for the equipments specifically under repair/maintenance. (c) The control of Remote Access i.e. activation, transfer of data, termination etc. shall be within the country and not at a Remote location, abroad. (d) The Government agency will be given all support to record the transactions for on-line monitoring. (e) Any equipment or software that forms part of the overall monitoring shall not be permitted to have remote access under any circumstances. (f)

DoT will define appropriately the terms catastrophic software failure, major part of the network, and prolonged period used under this clause.

(x)

It shall be open to the Department of Telecommunications to restrict the Licensee Company from operating in any sensitive area from the National Security angle.

(xi)

In order to maintain the privacy of voice and data, monitoring shall only be upon authorisation by the Union Home Secretary or Home Secretaries of the States/Union Territories.

(xii)

For monitoring traffic, the licensee company shall provide blind access of their network and other facilities as well as to books of accounts to the security agencies.

(xiii)

In case of not adhering to Licence conditions envisaged in para G, the licence(s) granted to the company shall be deemed as cancelled and the licensor shall have the right to encash the performance bank guarantee(s) and the licensor shall not be liable for loss of any kind.

2.

The conditions at para 1 above shall also be applicable to the existing

companies operating telecom service(s) which had the FDI cap of 49%.

4

3.

The relevant provisions of FDI policy for ‘investment companies’, as given in

Press Note 2 (2000 series) dated 11.2.2000 issued by Department of Industrial Policy and Promotion will no longer be applicable to telecom sector. 4.

An initial correction time of 4 months from the date of issue of this notification

shall be allowed to the existing licensee companies providing telecom services mentioned in para 1 above for ensuring adherence to the aforesaid conditions. An unconditional compliance to the aforesaid conditions shall be submitted to the licensor within this period. 5.

Press Note 15 (1998 series) and Press Note 2 (2000 series) issued by

Department of Industrial Policy & Promotion stand modified to the above extent.

(Umesh Kumar) Joint Secretary to the Government of India ---------------------------------------------------------------------------------------------------------------No. 9(1)/2002-FC dated 3rd November 2005

Copy forwarded to Press Information Officer, Press Information Bureau, for giving wide publicity to the above Press Note.

5

Government of India Ministry of Commerce & Industry Department of Industrial Policy & Promotion SIA (FC Division)

Press Note No. 01 (2006 Series) Subject:

Foreign Direct Investment (FDI) in Up-linking of TV Channels

At present, FDI up to 49% is permitted for setting up hardware, Up-linking HUB, etc., subject to compliance with the Broadcasting Laws and Regulations and subject to the detailed guidelines for Up-linking announced by the Ministry of Information and Broadcasting from time to time.

2.

Under the revised guidelines for Up-linking notified on 2.12.2005, the

Government has decided to allow FDI in the Up-linking of TV Channels as under: a)

FDI up to 49% would be permitted with prior approval of the Government for setting up Up-linking HUB/ Teleports;

b)

FDI up to 100% would be allowed with prior approval of the Government for Up-linking a Non-News & Current Affairs TV Channel;

c)

FDI (including investment by Foreign Institutional Investors (FIIs) up to 26% would be permitted with prior approval of the Government for Uplinking a News & Current Affairs TV Channel subject to the condition that the portfolio investment in the form of FII/ NRI deposits shall not be “persons acting in concert” with FDI investors, as defined in the SEBI (Substantial Acquisition of Shares and Takeovers) Regulations, 1997. The Company permitted to uplink the channel shall certify the continued compliance of this requirement through the Company Secretary at the end of each financial year. While calculating foreign equity of the applicant company, the foreign holding component, if any, in the equity of the Indian shareholder companies of the applicant company will be duly reckoned on pro-rata basis, so as to arrive at the total foreign holding in the applicant company. However, the indirect FII equity in a company as on 31st March of the year would be taken for the purposes of pro-rata reckoning of foreign holdings.

3.

FDI for Up-linking TV Channels will be subject to compliance with the Up-

linking Policy of the Government of India notified by the Ministry of Information & Broadcasting from time to time.

(Umesh Kumar) Joint Secretary to the Government of India -----------------------------------------------------------------------------------------------------------F.No. 5(35)/99-FC New Delhi dated the 13th January 2006 Copy forwarded to Press Information Officer, Press Information Bureau, for giving wide publicity to the above Press Note.

Government of India Ministry of Commerce & Industry Department of Industrial Policy & Promotion SIA (FC Division)

PRESS NOTE NO. 2 (2006 SERIES)

Subject:

Clarification regarding Foreign Direct Investment (FDI) in townships, housing, built-up infrastructure and construction-development projects.

The Government, vide Press Note 2 (2005 Series) dated 2.3.2005, had notified the policy for Foreign Direct Investment (FDI) in townships, housing, built-up infrastructure and construction-development projects. The Government has received few requests from investors seeking clarifications on applicability of these policy guidelines to some other sectors such as Special Economic Zones, Hotels, Hospitals, etc. 2.

The matter has been considered in the light of the policy prevailing prior to issue of the

subject Press Note. FDI up to 100% was already allowed under the automatic route in the Hotel and tourism sector vide Press Note 4 (2001 Series) and in the Hospital sector vide Press Note 2 (2000 Series). Special Economic Zones are separately regulated under the Special Economic Zone Act, 2005. 3.

It is clarified that the provisions of Press Note 2 (2005 Series) shall not apply to Special

Economic Zones; neither shall it apply to establishment and operation of hotels and hospitals which shall continue to be governed by Press Note 4 (2001 Series) and Press Note 2 (2000 Series) respectively.

(Umesh Kumar) Joint Secretary to the Government of India F. No. 12/36/2005-FC dated

16th January 2006

Copy forwarded to Press Information Officer, Press Information Bureau, for giving wide publicity to the above Press Note.

No. 5(3)/2005-FC Government of India Ministry of Commerce & Industry Department of Industrial Policy & Promotion (FC Section)

Press Note 3 (2006 Series) Subject:

Guidelines for FDI in Retail Trade of ‘Single Brand’ Products

The Government has decided to allow FDI up to 51%, with prior Government approval, in retail trade of ‘Single Brand’ products. This is, inter alia, aimed at attracting investments in production and marketing, improving the availability of such goods for the consumer, encouraging increased sourcing of goods from India, and enhancing competitiveness of Indian enterprises through access to global designs, technologies and management practices. 2. FDI up to 51% in retail trade of ‘Single Brand’ products would be subject to the following conditions: i. Products to be sold should be of a ‘Single Brand’ only. ii. Products should be sold under the same brand internationally. iii. ‘Single Brand’ product-retailing would cover only products which are branded during manufacturing. 3. FDI would be allowed only with prior approval of the Government. Application seeking permission of the Government for FDI in retail trade of ‘Single Brand’ products would be made to the Secretariat for Industrial Assistance (SIA) in the Department of Industrial Policy & Promotion. The application would specifically indicate the product/ product categories which are proposed to be sold under a ‘Single Brand’. Any addition to the product/ product categories to be sold under ‘Single Brand’ would require a fresh approval of the Government. 4. Applications would be processed in the Department of Industrial Policy & Promotion, to determine whether the products proposed to be sold satisfy the notified guidelines, before being considered by the FIPB for Government approval. 5.

These guidelines would come into force with immediate effect.

(Umesh Kumar) Joint Secretary to the Government of India F. No. 5(3)/2005-FC dated 10-2-2006

Government of India Ministry of Commerce & Industry Department of Industrial Policy & Promotion (FC Section) PRESS NOTE NO. 4 (2006 Series) Subject:

Rationalisation of the FDI Policy

The policy on Foreign Direct Investment (FDI) has been reviewed on a continuing basis and several measures announced from time to time for rationalization / liberalization of the policy and simplification of procedures. 2. Government of India has recently further reviewed the policy on FDI and decided as under: a. To allow under the automatic route, FDI up to 100%, for : i. distillation & brewing of potable alcohol; ii. manufacture of industrial explosives; iii. manufacture of hazardous chemicals; iv. manufacturing activities located within 25 kms of the Standard Urban Area limits which require Industrial license under the Industries(Development & Regulation)Act, 1951; v. setting up Greenfield airport projects; vi. laying of Natural Gas/LNG pipelines, market study & formulation and Investment financing in the Petroleum & Natural Gas sector; and vii. cash & carry wholesale trading and export trading. b.

To increase FDI caps to 100% and permit it under the automatic route for: i. coal & lignite mining for captive consumption; ii. setting up infrastructure relating to marketing in Petroleum & Natural Gas sector; and iii. exploration and mining of diamonds & precious stones.

c.

To allow FDI up to 100% under the automatic route in i. power trading subject to compliance with Regulations under the Electricity Act, 2003; ii. processing and warehousing of coffee and rubber.

Page 1 of 11

d.

To allow FDI up to 51 % with prior Government approval for retail trade of ‘Single Brand’ products, detailed guidelines for which have been notified vide Press Note 3 (2006 Series).

e.

To allow under the automatic route transfer of shares from residents to nonresidents in financial services, and where Securities & Exchange Board of India (Substantial Acquisition and Takeover) Regulations are attracted, in cases where approvals are required from the Reserve Bank of India/ Securities & Exchange Board of India (Substantial Acquisition and Takeover) Regulations /Insurance Regulatory & Development Authority. With this, transfer of shares from residents to non-residents, including acquisition of shares in an existing company would be on the automatic route subject to sectoral policy on FDI.

f.

To dispense with the requirement of mandatory divestment of 26% foreign equity in B2B e-Commerce.

3. FDI/NRI investment under the automatic route shall continue to be governed by the Sectoral regulations/licensing requirements. 4. A summary of the FDI policy and regulations applicable in various sectors / activities is at the Annex.

(Umesh Kumar) Joint Secretary to the Government of India F, No. 5(3)/2005-FC dated 10 –2-2006

Page 2 of 11

ANNEX TO PRESS NOTE 4 (2006 Series)

Policy on Foreign Direct Investment (FDI) I.

Sectors prohibited for FDI i. Retail trading (except Single Brand Product retailing) ii. Atomic energy iii. Lottery business iv. Gambling and Betting .

II.

All Activities/ Sectors would require prior Government approval for FDI in the following circumstances: i. where provisions of Press Note 1(2005 Series) are attracted; ii. where more than 24% foreign equity is proposed to be inducted for manufacture of items reserved for the Small Scale sector.

III.

In Sectors/Activities not listed below, FDI is permitted up to 100% on the automatic route subject to sectoral rules / regulations applicable.

IV.

Sector-specific policy for FDI

S.N

Sector/Activity

1.

Airports-

a.

Greenfield projects

FDI Cap / Equity

Entry Route

Other conditions

100%

Automatic

Subject to sectoral regulations notified by Ministry of Civil Aviation www.civilaviation.nic. in

Relevant Press Note issued by D/o IPP www.dipp.gov.in

PN 4 / 2006

b.

Existing projects

100%

FIPB beyond 74%.

Subject to sectoral regulations notified by Ministry of Civil Aviation www.civilaviation.nic. in

PN 4 / 2006

2.

Air Transport Services

49%- FDI; 100%- for NRI investmen t

Automatic

Subject to no direct or indirect participation by foreign airlines. Government of India Gazette Notification dated 2.11.2004 issued by Ministry of Civil Aviation www.civilaviation.nic. in

.

3.

Alcohol Distillation Brewing

100%

Automatic

Subject to license by appropriate authority

&

PN 4 / 2006

Page 3 of 11

4.

Asset Reconstruction Companies

49% (only FDI)

FIPB

Where any individual investment exceeds 10% of the equity, provisions of Section 3(3)(f) of Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 should be complied with. www.finmin.nic.in

5.

Atomic Minerals

74%

FIPB

Subject to guidelines issued by Department of Atomic Energy vide Resolution No. 8/1(1)/97-PSU/1422 dated 6.10.98.

6.

Banking - Private sector

74% (FDI+FII)

Automatic

Subject to guidelines for setting up branches/ subsidiaries of foreign banks issued by RBI. www.rbi.org.in

PN 2 / 2004

7.

Broadcasting

a.

FM Radio

FDI +FII investment up to 20%

FIPB

Subject to Guidelines notified by Ministry of Information & Broadcasting www.mib.nic.in

PN 6 / 2005

b.

Cable network

49% (FDI+FII)

FIPB

Subject to Cable Television Network Rules (1994) Notified by Ministry of Information & Broadcasting www.mib.nic.in

c.

Direct-To-Home

49% (FDI+FII). Within this limit, FDI component not to exceed 20%

FIPB

Subject to guidelines issued by Ministry of Information & Broadcasting www.mib.nic.in

d.

Setting hardware

49% (FDI+FII)

FIPB

Subject Policy

up facilities

to Up-linking notified by

PN 1 / 2006

Page 4 of 11

such as up-linking, HUB, etc

Ministry of Information & Broadcasting www.mib.nic.in

e.

Up-linking a News & Current Affairs TV Channel

26% FDI+FII

FIPB

Subject to guidelines issued by Ministry of Information & Broadcasting www.mib.nic.in

PN 1/ 2006

f.

Up-linking a Nonnews & Current Affairs TV Channel

100%

FIPB

Subject to guidelines issued by Ministry of Information & Broadcasting www.mib.nic.in

PN 1 / 2006

8.

Cigars CigarettesManufacture

&

100%

FIPB

Subject to industrial license under the Industries (Development & Regulation) Act, 1951

PN 4 / 2006

9.

Coal & Lignite mining for captive consumption by power projects, and iron & steel, cement production and other eligible activities permitted under the Coal Mines (Nationalisation) Act, 1973.

100%

Automatic

Subject to provisions of Coal Mines (Nationalization) Act, 1973 www.coal.nic.in

PN 4 / 2006

10.

Coffee & Rubber processing & warehousing

100%

Automatic

11.

Construction Development projects, including housing, commercial premises, resorts, educational institutions, recreational facilities, city and regional level infrastructure, townships.

100%

Automatic

PN 4 / 2006

Subject to conditions notified vide Press Note 2 (2005 Series) including: a. minimum capitalization of US$ 10 million for wholly owned subsidiaries and US$ 5 million for joint venture. The funds would have to be brought within six months

PN 2 / 2005 & PN 2 / 2006

Page 5 of 11

b.

of commencement of business of the Company. Minimum area to be developed under each project10 hectares in case of development of serviced housing plots; and built-up area of 50,000 sq. mts. in case of construction development project; and any of the above in case of a combination project.

[Note: For investment by NRIs, the conditions mentioned in Press Note 2 / 2005 are not applicable.] 12.

Courier services for carrying packages, parcels and other items which do not come within the ambit of the Indian Post Office Act, 1898.

100%

FIPB

Subject to existing laws and exclusion of activity relating to distribution of letters, which is exclusively reserved for the State. www.indiapost.gov.in

PN 4 / 2001

13.

Defence production

26%

FIPB

Subject to licensing under Industries (Development & Regulation) Act, 1951 and guidelines on FDI in production of arms & ammunition.

PN 4 / 2001 & PN 2 / 2002

14.

Floriculture, Horticulture, Development of Seeds, Animal Husbandry, Pisciculture, aqua-culture, cultivation of

100%

Automatic

PN 4 / 2006

Page 6 of 11

vegetables,, mushrooms, under controlled conditions and services related to agro and allied sectors. 15.

Hazardous chemicals, viz., hydrocyanic acid and its derivatives; phosgene and its derivatives; and isocyanates and diisocyantes of hydrocarbon.

100%

Automatic

Subject to industrial license under the Industries (Development & Regulation) Act, 1951 and other sectoral regulations.

PN 4 / 2006

16.

Industrial explosivesManufacture

100%

Automatic

Subject to industrial license under Industries (Development & Regulation) Act, 1951 and regulations under Explosives Act, 1898

PN 4 / 2006

17.

Insurance

26%

Automatic

Subject to licensing by the Insurance Regulatory & Development Authority www.irda.nic.in .

PN 10 / 2000

18.

Investing companies in infrastructure / services sector (except telecom sector)

49%

FIPB

Foreign investment in an investing company will not be counted towards sectoral cap in infrastructure /services sector provided the investment is up to 49% and the management of the company is in Indian hands.

PN 2 / 2000 & PN 5 / 2005

19.

Mining covering exploration and mining of diamonds & precious stones; gold, silver and minerals.

100%

Automatic

Subject to Mines & Minerals (Development & Regulation) Act, 1957 www.mines.nic.in Press Note 18 (1998) and Press Note 1 (2005) are not applicable for setting up 100% owned

PN 2 / 2000, PN 3 / 2005,& PN 4 / 2006

Page 7 of 11

subsidiaries in so far as the mining sector is concerned, subject to a declaration from the applicant that he has no existing joint venture for the same area and / or the particular mineral. 20. i) ii) iii) iv) v) vi) vii) viii) ix) x) xi) xii) xiii) xiv) xv) xvi) xvii) xviii) xix)

Non Banking Finance Companies- approved activities Merchant banking Underwriting Portfolio Management Services Investment Advisory Services Financial Consultancy Stock Broking Asset Management Venture Capital Custodial Services Factoring Credit Reference Agencies Credit Rating Agencies Leasing & Finance Housing Finance Forex Broking Credit card business Money changing business

Micro credit Rural credit.

100%

Automatic

Subject to: a. minimum capitalization norms for fund based NBFCs - US$ 0.5 million to be brought upfront for FDI up to 51%; US$ 5 million to be brought upfront for FDI above 51% and up to 75%; and US$ 50 million out of which US$ 7.5 million to be brought upfront and the balance in 24 months for FDI beyond 75% and up to 100%. b. minimum capitalization norms for non-fund based NBFC activities- US$ 0.5 million. c. foreign investors can set up 100% operating subsidiaries without the condition to disinvest a minimum of 25% of its equity to Indian entities subject to bringing in Under Secretary 50 million without any restriction on number of operating

PN 2 / 2000, PN 6 / 2000, & PN 2 / 2001

Page 8 of 11

subsidiaries without bringing additional capital. d. joint venture operating NBFC’s that have 75% or less than 75% foreign investment will also be allowed to set up subsidiaries for undertaking other NBFC activities subject to the subsidiaries also complying with the applicable minimum capital inflow. e. compliance with the guidelines of the RBI. 21.

Petroleum & Natural Gas sector

a.

Other than Refining and including market study and formulation; investment/ financing; setting up infrastructure for marketing in Petroleum & Natural Gas sector.

100%

Automatic

Subject to sectoral regulations issued by Ministry of Petroleum & Natural Gas; and in the case of actual trading and marketing of petroleum products, divestment of 26% equity in favour of Indian partner/public within 5 years. www.petroleum.nic.in

PN 1 / 2004 & PN 4 / 2006

b.

Refining

26% in case of PSUs

FIPB (in case of PSUs)

Subject to Sectoral policy www.petroleum.nic.in

PN 2 / 2000

100% in case of Private companies 22.

Print Media-

a.

Publishing of newspaper and periodicals dealing with news and

26%

Automatic (in case of private companies)

FIPB

Subject to Guidelines notified by Ministry of Information &

Page 9 of 11

current affairs

Broadcasting. www.mib.nic.in

b.

Publishing of scientific magazines/ specialty journals/ periodicals

100%

FIPB

23

Power including generation (except Atomic energy); transmission, distribution and Power Trading.

100%

Automatic

24.

Tea including plantation

100%

FIPB

Subject to divestment of 26% equity in favour of Indian partner/Indian public within 5 years and prior approval of State Government for change in land use.

PN 6 / 2002

25.

Telecommunication

a.

Basic and cellular, Unified Access Services, National/Internation al Long Distance, V-Sat, Public Mobile Radio Trunked Services (PMRTS), Global Mobile Personal Communications Services (GMPCS) and other value added telecom services

74% (Including FDI, FII, NRI, FCCBs, ADRs, GDRs, convertible preference shares, and proportiona te foreign equity in Indian promoters/ Investing Company)

Automatic up to 49%.

Subject to guidelines notified in the PN 5 / 2005 Series

PN 5 / 2005

ISP with gateways, radio-paging, endto-end bandwidth.

74%

Automatic up to 49%.

Subject to licensing and security requirements notified by the Department of Telecommunications www.dotindia.com

PN 4 / 2001

b.

Sector, tea

Subject to guidelines issued by Ministry of Information & Broadcasting. www.mib.nic.in Subject provisions of the Electricity Act, 2003 www.powermin.nic.in

PN 1 / 2004

PN 2 / 1998, PN / 7 2000, & PN 4 / 2006

FIPB beyond 49%

FIPB beyond 49%

Page 10 of 11

c.

ISP without gateway, infrastructure provider providing dark fibre, electronic mail and voice mail

100%

Automatic Subject to the condition up to 49%. that such companies shall divest 26% of their equity in favour of Indian FIPB public in 5 years, if these beyond companies are listed in 49% other parts of the world. Also subject to licensing and security requirements, where required. www.dotindia.com

PN 9 / 2000

d.

Manufacture telecom equipments

100%

Automatic

Subject to sectoral requirements. www.dotindia.com

PN 2 / 2000

26.

Trading

a.

Wholesale / cash & carry trading

100%

Automatic

PN 4 / 2006

b.

Trading for exports

100%

Automatic

c.

Trading of items sourced from small scale sector

100%

FIPB

Subject to guidelines for FDI in trading issued by Department of Industrial Policy & Promotion vide Press Note 3 (2006 Series).

d.

Test marketing of such items for which a company has approval for manufacture

100%

FIPB

e.

Single Brand product retailing

51%

FIPB

27.

Satellites Establishment and operation

74%

FIPB

28.

Special Economic Zones and Free Trade Warehousing Zones covering setting up of these Zones and setting up units in the Zones

100%

Automatic

of

-

Subject to Sectoral guidelines issued by Department of Space / ISRO www.isro.org Subject to Special Economic Zones Act, 2005 and the Foreign Trade Policy. www.sezindia.nic.in

PN 9 / 2000; PN 2 /2006; & PN 4 / 2006

***

Page 11 of 11

Government of India Ministry of Commerce & Industry Department of Industrial Policy & Promotion SIA (FC Division)

fB.ESS NOTE NO.5 (2006 SERl5§1

..

.~:

Subject:

Enhancement of Foreign Direct Investment ceiling from 490/0to 74°k in the Telecom Sector Amendment to Press Note 5 (2005 Series)

-

Guidelines for enhancement

of Foreign Direct Investment (FDI) ceiling in

the telecom sector were notified vide Press Note 5 (2005 Series) on 3.11:2005. In terms of para 4 of the said Press Note, an initial correction time of 4 months from the date of issue of the Press Note was allowed to the existing licensee companies providing telecom services for ensuring adherence to the conditions. The Government has decided to extend the time limit for the telecom service provider companies to comply with the conditions set out in Press Note 5 (2005 Series) by four monthsw.eJ. from 3.3.2006, Le, till 2.7.2006. Press Note 5 (2005 Series) dated 3.11.2005 stands modified to the above extent.

ti~

(JJmeshKumar) Joint Secretary to the Government of India F. No. 9(1)/2002-FC dated

3rd

March2006

Government of India Ministry of Commerce & Industry Department of Industrial Policy & Promotion SIA (FC Division)

PRESS NOTE NO. 7 (2006 SERIES)

Subject:

Enhancement of Foreign Direct Investment ceiling from 49% to 74% in Telecom Sector – Amendment to Press Note 5 (2005 Series)

The Government, vide Press Note 5 (2005 Series) dated 3.11.2005, had notified the enhancement of Foreign Direct Investment (FDI) limits in the Telecom Sector subject to specified conditions. In terms of para 4 of the said Press Note, an initial correction time of 4 months from the date of issue of the Press Note was allowed to the existing licensee companies for adherence of the conditions. The correction time was extended from time to time and the last extension was allowed up to 2nd October 2006 vide Press Note 6 (2006 Series) dated 3.7.2006. It is notified for the benefit of investors that the Government has decided to further extend the time period for the telecom service provider companies to comply with the conditions set out in Press Note 5 (2005 Series) by three months w.e.f 3.10.2006 up to 2nd January 2007. Press Note 5 (2005 Series) dated 3.11.2005 stands modified to the above extent.

(Gauri Singh) Director F. No. 9(1)/2002-FC dated

3rd October 2006

Copy forwarded to Press Information Officer, Press Information Bureau, for giving wide publicity to the above Press Note.

Government of India Ministry of Commerce & Industry Department of Industrial Policy & Promotion SIA (FC Division)

PRESS NOTE NO. 1 (2007 SERIES)

Subject:

Enhancement of Foreign Direct Investment ceiling from 49% to 74% in Telecom Sector – Amendment to Press Note 5 (2005 Series)

The Government, vide Press Note 5 (2005 Series) dated 3.11.2005, had notified the enhancement of Foreign Direct Investment (FDI) limits in the Telecom Sector subject to specified conditions. In terms of para 4 of the said Press Note, an initial correction time of 4 months from the date of issue of the Press Note was allowed to the existing licensee companies for adherence of the conditions. The correction time was extended from time to time and the last extension was allowed up to 2nd January 2007 vide Press Note 7 (2006 Series) dated 3.10.2006. It is notified for the benefit of investors that the Government has decided to further extend the time period for the telecom service provider companies to comply with the conditions set out in Press Note 5 (2005 Series) by three months w.e.f 3.1.2007 up to 2nd April 2007. Press Note 5 (2005 Series) dated 3.11.2005 stands modified to the above extent.

(Gopal Krishna) Joint Secretary to the Government of India F. No. 9(1)/2002-FC dated 2nd January 2007 Copy forwarded to Press Information Officer, Press Information Bureau, for giving wide publicity to the above Press Note.

Government of India Ministry of Commerce & Industry Department of Industrial Policy & Promotion (Secretariat for Industrial Assistance)

Press Note 2 (2007 series) In the Annex to the FDI policy notified vide Press Note 4 (2006 series) dated 10.2.2006, the following substitution is hereby made: For the existing provision S.No .

Sector/ Activity

FDI Entry Cap / Route Equity

25.

Telecommunications

c.

ISP without 100 gateway, infrastructure provider providing dark fibre, electronic mail and voice mail

Automatic up to 49%

FIPB beyond 49%

Read the revised provision as: S.No Sector/Activity FDI Entry . Cap / Route Equity

25.

Telecommunications

c.

(a) ISP without 100 gateway; (b) infrastructure provider providing dark fibre, right of way, duct space, tower (CategoryI); (c) electronic mail and voice mail

Automatic up to 49%

FIPB beyond 49%

Other conditions

Relevant Press Note issued by D/o IPP www.dipp.gov.in

Subject to the condition that P N 9/2000 such companies shall divest 26% of their equity in favour of Indian public in 5 years, if these companies are listed in other parts of the world. Also subject to licensing and security requirements, where required. www.dotindia.com

Other conditions

Relevant Press Note issued by D/o IPP www.dipp.gov. in

Subject to the condition that P N 9/2000 such companies shall divest 26% of their equity in favour of Indian public in 5 years, if these companies are listed in other parts of the world. Also subject to licensing and security requirements, where required. www.dotindia.com

(Gauri Singh) Director -----------------------------------------------------------------------------------------------------------------------------F..No. 12/2/2006-FC New Delhi dated the 21st February 2007

Forwarded to the Press Information Bureau to give wide publicity to the contents of the above Press Release.

Government of India Ministry of Commerce & Industry Department of Industrial Policy & Promotion SIA (FC Division) PRESS NOTE NO. 3 (2007 SERIES) Subject: Enhancement of the Foreign Direct Investment ceiling from 49 per cent to 74 per cent in the Telecom sector – revised guidelines The Government, vide Press Note 5 (2005 Series) dated 3.11.2005, had notified the enhancement of Foreign Direct Investment (FDI) limits from 49 per cent to 74 per cent in certain telecom services subject to specified conditions. 2. The Government has on a review of the policy in this regard, decided to enhance the Foreign Direct Investment limit from 49 per cent to 74 percent in telecom services subject to the following conditions; A.

Foreign Direct Investment (FDI): (i)

The enhancement of the FDI ceiling will be applicable in case of Basic, Cellular, Unified Access Services, National/ International Long Distance, V-Sat, Public Mobile Radio Trunked Services (PMRTS), Global Mobile Personal Communications Services (GMPCS) and other value added Services.

(ii)

Both direct and indirect foreign investment in the licensee company shall be counted for the purpose of FDI ceiling. Foreign Investment shall include investment by Foreign Institutional Investors (FIIs), Nonresident Indians (NRIs), Foreign Currency Convertible Bonds (FCCBs), American Depository Receipts (ADRs), Global Depository Receipts (GDRs) and convertible preference shares held by foreign entity. Indirect foreign investment shall mean foreign investment in the company/ companies holding shares of the licensee company and their holding company/companies or legal entity (such as mutual funds, trusts) on proportionate basis. Shares of the licensee company held by Indian public sector banks and Indian public sector financial institutions will be treated as `Indian holding’. In any case, the `Indian’ shareholding will not be less than 26 percent.

(iii)

FDI up to 49 percent will continue to be on the automatic route. FDI in the licensee company/Indian promoters/investment companies including their holding companies, shall require approval of the Foreign Investment Promotion Board (FIPB) if it has a bearing on the overall ceiling of 74 percent. While approving the investment proposals, FIPB shall take note that investment is not coming from countries of concern and/or unfriendly entities.

(iv)

The investment approval by FIPB shall envisage the conditionality that Company would adhere to licence Agreement.

(v)

FDI shall be subject to laws of India and not the laws of the foreign country/countries. 1

B.

Security Conditions: (i)

The Chief Officer Incharge of technical network operations and the Chief Security Officer should be a resident Indian citizen.

(ii)

Details of infrastructure/network diagram (technical details of the network) could be provided on a need basis only to telecom equipment suppliers/manufacturers and the affiliate/parents of the licensee company. Clearance from the licensor (Department of Telecommunications, Government of India ) would be required if such information is to be provided to anybody else.

(iii)

For security reasons, domestic traffic of such entities as may be identified /specified by the licensor shall not be hauled/routed to any place outside India.

(iv)

The licensee company shall take adequate and timely measures to ensure that the information transacted through a network by the subscribers is secure and protected.

(v)

The officers/officials of the licensee companies dealing with the lawful interception of messages will be resident Indian citizens.

(vi)

The majority Directors on the Board of the company shall be Indian citizens.

(vii)

The positions of the Chairman, Managing Director, Chief Executive Officer (CEO) and/or Chief Financial Officer (CFO), if held by foreign nationals, would require to be security vetted by Ministry of Home Affairs (MHA). Security vetting shall be required periodically on yearly basis. In case something adverse is found during the security vetting, the direction of MHA shall be binding on the licensee.

(viii)

The Company shall not transfer the following to any person/place outside India:(a)

Any accounting information relating to subscriber (except for international roaming/billing) (Note: it does not restrict a statutorily required disclosure of financial nature) ; and

(b)

User information (except pertaining to foreign subscribers using Indian Operator’s network while roaming).

(ix)

The Company must provide traceable identity of their subscribers. However, in case of providing service to roaming subscriber of foreign Companies, the Indian Company shall endeavour to obtain traceable identity of roaming subscribers from the foreign company as a part of its roaming agreement.

(x)

On request of the licensor or any other agency authorised by the licensor, the telecom service provider should be able to provide the geographical location of any subscriber (BTS location) at a given point of time.

(xi)

The Remote Access (RA) to Network would be provided only to approved location(s) abroad through approved location(s) in India. The approval for location(s) would be given by the Licensor (DOT) in consultation with the Security Agencies (IB). 2

(xii)

Under no circumstances, should any RA to the suppliers/manufacturers and affiliate(s) be enabled to access Lawful Interception System(LIS), Lawful Interception Monitoring(LIM), Call contents of the traffic and any such sensitive sector/data, which the licensor may notify from time to time.

(xiii)

The licensee company is not allowed to use remote access facility for monitoring of content.

(xiv)

Suitable technical device should be made available at Indian end to the designated security agency/licensor in which a mirror image of the remote access information is available on line for monitoring purposes.

(xv)

Complete audit trail of the remote access activities pertaining to the network operated in India should be maintained for a period of six months and provided on request to the licensor or any other agency authorised by the licensor.

(xvi)

The telecom service providers should ensure that necessary provision (hardware/software) is available in their equipment for doing the Lawful interception and monitoring from a centralized location.

(xvii) The telecom service providers should familiarize/train Vigilance Technical Monitoring (VTM)/security agency officers/officials in respect of relevant operations/features of their systems. (xviii) It shall be open to the licensor to restrict the Licensee Company from operating in any sensitive area from the National Security angle. (xix)

In order to maintain the privacy of voice and data, monitoring shall only be upon authorisation by the Union Home Secretary or Home Secretaries of the States/Union Territories.

(xx)

For monitoring traffic, the licensee company shall provide access of their network and other facilities as well as to books of accounts to the security agencies.

(xxi)

The aforesaid Security Conditions shall be applicable to all the licensee companies operating telecom services covered under this Press Note irrespective of the level of FDI.

(xxii) Other Service Providers (OSPs), providing services like Call Centres, Business Process Outsourcing (BPO), tele-marketing, tele-education, etc, and are registered with DoT as OSP. Such OSPs operate the service using the telecom infrastructure provided by licensed telecom service providers and 100% FDI is permitted for OSPs. As the security conditions are applicable to all licensed telecom service providers, the security conditions mentioned above shall not be separately enforced on OSPs. 3.

The conditions at para 2 above shall also be applicable to the existing companies operating telecom service(s) with the FDI cap of 49%.

4.

The relevant provisions of FDI policy for ‘investment companies’, as given in Press Note 2 (2000 series) dated 11.2.2000 issued by Department of Industrial Policy and Promotion will no longer be applicable to telecom sector. 3

5.

Press Note 15 (1998 series) and Press Note 2 (2000 series) issued by Department of Industrial Policy & Promotion stand modified to the above extent.

6.

An unconditional compliance to the aforesaid conditions shall be submitted by the existing telecom service providers to the licensor within 3 months from date of the Press Note and, thereafter, compliance report shall be submitted on 1st day of July and January on six monthly basis.

7.

Press Note 5 (2005 Series) dated 3.11.2005 stands superceded by this Press Note.

(Gopal Krishna) Joint Secretary to the Government of India F. No. 12/2/2006-FC dated the

19th April, 2007

Copy forwarded to Press Information Officer, Press Information Bureau, for giving wide publicity to the above Press Note.

4

Government of India Ministry of Commerce & Industry Department of Industrial Policy & Promotion SIA(FC Section) Press Note 7 (2008)

Subject:

Consolidated policy on Foreign Direct Investment.

After the review of the policy on Foreign Direct Investment (FDI) undertaken in 2005-06, summary of the policy was notified vide Press Note 4 (2006).

2.

Thereafter, further policy revisions were issued vide Press Note 5(2006)

and Press Note 2 (2007) and 3(2007). A comprehensive review of the FDI policy was undertaken in 2007-08 and the policy measures were notified vide Press Note 1-6 (2008).

3.

A summary of the FDI policy and regulations applicable in various

sectors and activities after incorporating the policy changes up to 31-3-2008 is at Annex.

(Gopal Krishna) Joint Secretary to the Government of India

No. 5(10)/2006-FC dated 16th June 2008

Page 1 of 1

ANNEX to Press Note 7 (2008)

POLICY ON FOREIGN DIRECT INVESTMENT (FDI) (31st March 2008) I.

Sectors prohibited for FDI

II.

i.

Retail Trading (except single brand product retailing)

ii.

Atomic Energy

iii.

Lottery Business

iv.

Gambling and Betting

v.

Business of chit fund

vi.

Nidhi Company

vii.

Trading in Transferable Development Rights (TDRs).

viii.

Activity/sector not opened to private sector investment

Sector-specific policy for FDI:

In the following sectors/activities, FDI is allowed up-to the limit indicated below subject to other conditions as indicated. Sr. No.

I

Sector/Activity

FDI Cap / Equity

Entry Route

Other conditions

AGRICULTURE 1.

Floriculture, Horticulture, Development of Seeds, Animal Husbandry, Pisciculture, Aquaculture and Cultivation of Vegetables & Mushrooms under controlled conditions and services related to agro and allied sectors.

100%

Automatic

100%

FIPB

Note: Besides the above, FDI is not allowed in any other agricultural sector/activity 2.

Tea Sector, including tea plantation Note: Besides the above, FDI is not allowed in any other plantation sector/activity

Subject to divestment of 26% equity in favour of Indian partner/Indian public within 5 years and prior approval

of

State

Government

concerned in case of any change in future land use.

Page 2 of 2

II

INDUSTRY

II A

MINING

3.

Mining covering exploration and mining of diamonds & precious stones; gold, silver and

100%

Automatic

Subject

to

Mines

&

Minerals

(Development & Regulation) Act, 1957 www.mines.nic.in Press Note 18 (1998) and Press

minerals.

Note 1 (2005) are not applicable for

setting

up

100%

owned

subsidiaries in so far as the mining sector is concerned, subject to a declaration from the applicant that he has no existing joint venture for the

same

area

and /or

the

particular mineral. 4.

Coal & Lignite mining for captive consumption by

100%

Automatic

Subject to provisions of Coal Mines (Nationalization) Act, 1973 www.coal.nic.in

power projects, and iron & steel, cement production and other eligible activities permitted under the Coal Mines (Nationalisation) 1973. 5.

Act,

Mining and mineral separation of titanium bearing minerals and ores, its value addition and integrated activities .

100%

FIPB

Subject to sectoral regulations and the Mines and Minerals (Development & Regulation) Act, 1957 and the following conditionsi. value addition facilities are set up

Note : FDI will not be allowed in mining of “prescribed substances” listed in Government of India notification No. S.O. 61(E) dt. 18.1.2006 issued by the Department of Atomic Energy under the Atomic Energy Act,

within India along with transfer of technology; ii. disposal of tailing during the mineral separation shall be carried out in accordance with regulations framed

by

Regulatory

1962.

the

Atomic

Energy

such

Atomic

Board

Energy (Radiation Protection) Rules 2004 and the Atomic Energy (Safe Disposal of Radioactive Wastes) Rules 1987.

II B

MANUFACTURING

6.

AlcoholDistillation &

100%

Automatic

Subject to license by appropriate authority

Brewing 7.

Cigars & CigarettesManufacture

Subject to industrial license under the 100%

FIPB

Industries

(Development

Regulation) Act, 1951

Page 3 of 3

&

Automatic

Coffee& Rubber processing &

8.

100%

warehousing 9.

FIPB

Defence

26%

production

Subject to licensing under Industries (Development

& Regulation) Act,

1951 and guidelines on FDI in production of arms & ammunition. 10.

100%

Hazardous chemicals, viz., hydrocyanic acid and its derivatives; phosgene and its derivatives; and isocyanates diisocyantes hydrocarbon.

11.

Automatic

Subject to industrial license under the Industries

(Development

&

Regulation) Act, 1951 and other sectoral regulations. and of

Industrial explosives-

100%

Automatic

Subject to industrial license under Industries

Manufacture

(Development

&

Regulation) Act, 1951 and regulations under Explosives Act, 1898

12.

Drugs & Pharmaceuticals including those involving use of recombinant DNA technology

II C

POWER

13.

Power including generation

100%

Automatic

100%

Automatic

Subject

to

provisions

Electricity

(except Atomic

Act,

of

the 2003

www.powermin.nic.in

energy); transmission, distribution and Power Trading.

III

SERVICES

14.

CIVIL AVIATION SECTOR

(i) a.

AirportsGreenfield projects

100%

Automatic

Subject to sectoral regulations notified by Ministry of Civil Aviation www civilaviation.nic. in

b.

Existing projects

100%

FIPB beyond 74%

Subject to sectoral regulations notified by Ministry of Civil Aviation www.civilaviation.nic. in

(ii) c.

d.

Air Transport Services including Domestic Scheduled Passenger Airlines; Non-Schedules Airlines; Chartered Airlines; Cargo Airlines; Helicopter and Seaplane Services Subject to no direct or indirect Scheduled Air 49%- FDI; Automatic Transport Services/ Domestic Scheduled Passenger Airline

100%- for NRI investment

Non-Scheduled Air Transport Service/ Non-Scheduled airlines, Chartered airlines, and Cargo airlines

74%- FDI 100%for investment

participation by foreign airlines and sectoral regulations.. Automatic NRIs

Subject to no direct or indirect participation by foreign airlines in Non-Scheduled airlines.

and

Foreign

Chartered

airlines

are

allowed to participate in the equity of companies operating Cargo

Page 4 of 4

airlines. Also subject to sectoral regulations. e.

Helicopter Services/Seaplane services requiring DGCA approval

100%

Foreign airlines are allowed to

Automatic

participate

in

the

equity

of

companies operating Helicopter and

seaplane

airlines.

Also

subject to sectoral regulations. Other services under Civil Aviation Sector

(iii)

Ground Services

f.

Handling

Maintenance and Repair organizations; flying training institutes; and technical training institutions

g.

15.

As s e t Reconstruction Companies

74%- FDI 100%for NRIs investment 100%

49% (only FDI)

Automatic

Subject

to

sectoral

regulations

and

security clearance. Automatic

FIPB Where any individual investment exceeds 10% of the equity, provisions of Section 3(3)(f) of Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest Act,

2002

should

be

complied

with.

www.finmin.nic.in 16.

Banking Private sector

74% (FDI+FII)

Automatic

Subject to guidelines for setting up branches / subsidiaries of foreign banks issued by RBI. www.rbi.org.in

Broadcasting

17. a.

b.

FM Radio

Cable network

FDI +FII investment up to 20%

FIPB

49% (FDI+FII)

FIPB

Subject to Guidelines notified by Ministry of Information & Broadcasting. www.mib.nic.in Subject to Cable Television Network Rules (1994) Notified by Ministry of Information & Broadcasting. www.mib.nic.in

c.

18.

Direct-To-Home

49% (FDI+FII). Within this limit, FDI component not to exceed 20%

FIPB

Subject to guidelines issued by Ministry of Information & Broadcasting. www.mib.nic.in

d.

Setting up hardware facilities such as up-linking, HUB, etc

49% (FDI+FII)

FIPB

Subject to Up-linking Policy notified by Ministry of Information & Broadcasting. www.mib.nic.in

e.

Up-linking a News & Current Affairs TV Channel

26% FDI+FII

FIPB

Subject to guidelines issued by Ministry of Information & Broadcasting. www.mib.nic.in

f.

Up-linking a Nonnews & Current Affairs TV Channel

100%

FIPB

Subject to guidelines issued by Ministry of

Commodity Exchanges

49% (FDI+FII)

Information & Broadcasting. www.mib.nic.in

Investment Registered under PIS be limited 23% and

by FII will to

FIPB

FII purchases shall be restricted to secondary market only. No foreign investor/entity, including persons acting in concert, will hold more than 5% of the equity in these companies.

Page 5 of 5

Investment under FDI Scheme limited to 26%. 19.

Construction Development

100%

Automatic

Subject to conditions notified vide Press Note 2 (2005 Series) including:

projects, including

a. minimum capitalization of US$ 10 million for

housing, wholly owned subsidiaries and US$ 5 million

commercial premises, resorts,

for joint venture. The funds would have to be

educational

brought within six months of commencement

institutions,

of business of the Company.

recreational

b. Minimum area to be developed under

facilities, city

each project- 10 hectares in case of

and regional

development of serviced housing plots; and

level infrastructure, townships.

built-up area of 50,000 sq. mts. in case of construction development project; and any

Note::

FDI is not allowed in Real Estate Business

of the above in case of a combination project. [Note 1: For investment by NRIs, the conditions mentioned in Press Note 2 / 2005 are not applicable. Note 2: For investment in SEZs, Hotels & Hospitals, conditions mentioned in Press Note 2(2005) are not applicable]

20.

Courier services for carrying packages,

100%

FIPB

Subject to existing laws and exclusion of activity relating

to distribution of letters,

parcels and other

exclusively

items which do not

www.indiapost.gov.in

reserved

for

which is

the

State.

come within the ambit of the Indian Post Office Act, 1898. 21.

Credit Information Companies

49 (FDI+FII)

%

FIPB

Foreign Investment in CIC will be subject to Credit Information Companies (Regulation) Act,

Investment by Registered FII under PIS will be limited to 24% only in the CICs listed at the Stock Exchanges within the overall limit of 49% foreign investment.

2005. FII investment will be subject to the conditions that: (a) No single entity should directly or indirectly hold more than 10% equity (b) Any acquisition in excess of 1% will have to be reported to RBI as a reporting requirement; and (c) FIIs investing in CICs shall not seek a representation on the Board of Directors based upon their shareholding.

22.

Industrial Parks both setting up and in established Industrial Parks

100%

Automatic

Conditions in Press Note 2(2005) applicable for construction development projects would not apply provided the Industrial Parks meet with the under-mentioned conditionsi. it would comprise of a minimum of 10 units and no single unit shall occupy more than 50%

Page 6 of 6

of the allocable area; ii. the minimum percentage of the area to be allocated for industrial activity shall not be less than 66% of the total allocable area. 23

Insurance

26%

Automatic

Subject

to

licensing

by

the

Insurance

Regulatory & Development Authority www.irda.nic.in 24.

Investing companies in infrastructure / services sector (except telecom sector)

100%

FIPB

Where there is a prescribed cap for foreign investment, only the direct investment will be considered for the prescribed cap and foreign investment in an investing company will not be set off against this cap provided the foreign direct investment in such investing company does not exceed 49% and the management of the investing company is with the Indian owners.

25. i)

Non Banking Finance Companies Merchant Banking

100%

Automatic

Subject to: a. minimum capitalization norms for fund

ii)

Underwriting Portfolio Management Services

based NBFCs - US$ 0.5 million to be brought upfront for FDI up to 51%; US$ 5 million to be brought upfront for FDI above

iii)

Investment Advisory Services

iv)

Financial Consultancy

v)

Stock Broking

vi)

As s e t Management

vii)

Venture Capital

viii)

Custodial Services

51% and up to 75%; and US$ 50 million out of which US$ 7.5 million to be brought upfront and the balance in 24 months for FDI beyond 75% and up to 100%. b. minimum capitalization norms for nonfund based NBFC activities- US$ 0.5 million. c. foreign investors can set up 100% operating subsidiaries without the condition

ix)

to disinvest a minimum of 25% of its equity to Indian entities subject to bringing in US$ 50 million without any restriction on number Factoring

of operating subsidiaries without bringing

Credit Rating Agencies

additional capital.

xi)

Leasing & Finance

75% or less than 75% foreign investment

xii)

Finance

xiii)

Housing Finance

x)

d. joint venture operating NBFC’s that have

will also be allowed to set up subsidiaries for

undertaking

other

NBFC

activities

subject to the subsidiaries also complying with the applicable minimum capital inflow.

Forex Broking e. compliance with the guidelines of the

xiv) xv)

Credit card Business

xvi)

Money changing

RBI. f. The minimum capitalization norms would apply would be applicable where the foreign holding in a NBFC(both direct and

Page 7 of 7

business xvii)

xviii)

foreign holding in a NBFC(both direct and

Micro credit

indirect) exceeds the limits indicated at (a)

Rural credit

above g. The capital for the purpose of minimum capitalization

norms

shall

consist

of

ordinary shares only. 26.

Petroleum & Natural Gas sector a.

Refining

49% in case of

FIPB (in case of

Subject to Sectoral policy www.petroleum.nic.in and

PSUs

PSUs)

dilution of domestic equity in the existing PSUs.

no

divestment

or

100% in case of Private companies b.

Other than Refining and

Automatic (in case of private companies)

100%

Automatic

Subject to sectoral regulations issued by Ministry of Petroleum & Natural Gas www.petroleum.nic.in

26%

FIPB

Subject to Guidelines notified by Ministry of

including market study and formulation; investment/ financing; setting up infrastructure for marketing in Petroleum & Natural Gas sector. 27.

Print Media

a.

Publishing of newspaper and

Information & Broadcasting. www.mib.nic.in

periodicals dealing with news and current affairs b.

Publishing of scientific

100%

FIPB

Subject to guidelines issued by Ministry of Information & Broadcasting. www.mib.nic.in

magazines/ specialty journals/ periodicals 28.

Telecommunications

a.

Basic and cellular, Unified Access Services, National/ International Long Distance, V-Sat, Public Mobile Radio Trunked Services (PMRTS), Global Mobile Personal

74% (Including FDI, FII, NRI, FCCBs, ADRs, GDRs, convertible preference shares, and proportionate foreign

Automatic up to 49%.

Subject to guidelines notified in the PN 3(2007)

FIPB beyond 49%.

Page 8 of 8

Communications Services (GMPCS) and other value added telecom services

equity in Indian promoters/ Investing Company)

ISP with gateways, radiopaging, end-toend bandwidth.

74%

(a) ISP without gateway, (b) infrastructure provider providing dark fibre, right of way,duct space,tower (Category I); (c) electronic mail and voice mail

100%

d.

Manufacture of telecom equipments

100%

Automatic

29.

Trading 100%

Automatic

100%

Automatic

100%

FIPB

100%

FIPB

b.

c.

a.

b.

Wholesale/cash & carry trading

Trading for exports

c.

Automatic up to 49%.

Subject to licensing and security requirements notified by the Dept. of Telecommunications. www.dotindia.com

FIPB beyond 49%. Automatic up to 49%. FIPB beyond 49%.

Trading of items sourced from small scale sector

Subject to the condition that such companies shall divest 26% of their equity in favour of Indian public in 5 years, if these companies are listed in other parts of the world. Also subject to licensing and security requirements, where required. www.dotindia.com

Subject to sectoral requirements. www.dotindia.com

Subject to the condition that the test marketing approval will be for a period of two years and I nvestment in setting up manufacturing facilities comomences simultaneously with test marketing.

d.

Test marketing of such items for which a company has approval for manufacture

e.

Single Brand product retailing

51%

FIPB

30.

Satellites Establishment and operation

74%

FIPB

Subject to Sectoral guidelines Department of Space/ISRO www.isro.org

31.

Special Economic Zones and Free Trade Warehousing Zones covering

100%

Automatic

Subject to Special Economic Zones Act, 2005 and the Foreign Trade Policy. www.sezindia.nic.in

Subject to guidelines for FDI in trading issued by Department of Industrial Policy & Promotion vide Press Note 3 (2006 Series). issued

Page 9 of 9

by

setting up of these Zones and setting up units in the Zones

II. In Sectors/Activities not listed above, FDI is permitted up to 100% on the automatic route subject to sectoral rules/ regulations applicable. III.

Prior Government approval for FDI required in the following circumstances:

i)

where provisions of Press Note 1 (2005 Series) issued by the Government of India are attracted; where more than 24% foreign equity is proposed to be inducted for manufacture of items reserved for the Small Scale sector.

ii)

***

Page 10 of 10

Government of India Ministry of Commerce & Industry Department of Industrial Policy & Promotion SIA(FC Section) Press Note No. 8 (2008)

Subject: Guidelines for Foreign investment in Commodity Exchanges.

Government of India had laid the guidelines for foreign investment in Commodity Exchanges vide Press Note 2(2008) dated 12th March 2008. As per the guidelines, a composite ceiling for foreign investment of 49% was allowed with prior Government approval subject to the condition that investment under the Portfolio Investment Scheme will be limited to 23% and that under the FDI Scheme will be limited to 26%. Further no foreign investor/entity including persons acting in concert will hold more than 5% of the equity in these companies. 2.

It has been brought to the notice of the Government that some of the

existing Commodity Exchanges had foreign investment above the permitted level as on the date of issue of the said Press Note. 3.

In order to facilitate the existing Commodity Exchanges to comply with the

guidelines notified vide Press Note 2(2008), it has now been decided to allow a transition / complying/correction time to the existing Commodity exchange(s). The Commodity Exchange(s) would be required to divest foreign equity equal to the amount by which the cap was being exceeded in accordance with Press Note 2(2008). Accordingly, all such Commodity Exchanges are hereby advised to adhere to the conditions of Press Note 2(2008) by 30.6.2009. 4.

All Commodity Exchanges shall furnish a compliance report informing the

foreign investment in the Commodity Exchange as on 30.6.2009, along with details of equity structure, to the Department of Industrial Policy & Promotion, Department of Consumer Affairs, Foreign Investment Promotion Board, the Forward Market Commission and SEBI. 5.

Non-compliance of the conditions of Press Note 2(2008) after 30.6.2009

would be a violation of the Foreign Exchange Management Act, 1999.

(Gopal Krishna) Joint Secretary to the Government of India. D/o IPP F.No. 12(58)/2005-FC dated 19th August 2008

Government of India Ministry of Commerce & Industry Department of Industrial Policy & Promotion (FC Section)

Press Note No. 1 (2009) Subject:

Foreign investment in Print Media dealing with news and current affairs.

On a review of the extant policy on Foreign Direct Investment, Government of India has decided to allow foreign investment in publication of facsimile edition of foreign newspapers and Indian edition of foreign magazines dealing with news and current affairs as under. 2. Policy for foreign direct investment (FDI) in publication of facsimile edition of foreign newspapers 2.1 FDI up to 100% is permitted with prior approval of the Government in publication of facsimile edition of foreign newspapers provided the FDI is by the owner of the original foreign newspaper(s) whose facsimile edition is proposed to be brought out in India. 2.2 Publication of facsimile edition of foreign newspapers can be undertaken only by an entity incorporated or registered in India under the provisions of the Companies Act, 1956. 2.3 Publication of facsimile edition of foreign newspaper would also be subject to the Guidelines for publication of newspapers and periodicals dealing with news and current affairs and publication of facsimile edition of foreign newspapers issued by Ministry of Information & Broadcasting on 31.3.2006, as amended from time to time. 3. Policy for foreign investment in publication of Indian editions of foreign magazines dealing with news and current affairs. 3.1 Foreign investment, including FDI and investment by NRIs/PIOs/FII, up to 26%, is permitted with prior approval of the Government. 3.2 ‘Magazine’, for the purpose of these guidelines, will be defined as a periodical publication, brought out on non-daily basis, containing public news or comments on public news. 3.3 Foreign investment would also be subject to the Guidelines for Publication of Indian editions of foreign magazines dealing with news and current affairs issued by the Ministry of Information & Broadcasting on 4.12.2008. 4. FDI Policy announced vide Annex to Press Note 7(2008) dated 16th June 2008 against entry No. 27 stands amplified to the above extent.

GOPAL KRISHNA Joint Secretary to the Government of India th F.No. 9(6)/2008-FC dated 14 January, 2009.

Government of India Ministry of Commerce & Industry Department of Industrial Policy & Promotion (FC Section) Press Note No 2 (2009 Series)

Subject:

Guidelines for calculation of total foreign investment i.e. direct and indirect foreign investment in Indian companies.

Investment in Indian companies can be made both by non-resident as well as resident Indian entities. Any non-resident investment in an Indian company is direct foreign investment. Investment by resident Indian entities could again comprise of both resident and non-resident investment. Thus, such an Indian company would have indirect foreign investment if the Indian investing company has foreign investment in it. The indirect investment can be a cascading investment i.e. through multi-layered structure also. 2.0 The method of calculation of total foreign investment in an Indian company including indirect foreign investment through other Indian companies has been detailed out in entry 10 of Press Note 2(2000), Press Note 1(2006), Press Note 3(2007) and entry 24 of Press Note 7 (2008). The methodology for some sectors is also separately contained in either sectoral regulations or rules and regulations under specific statutes. Essentially the present FDI guidelines provide for three different regimes for calculation of Indirect Foreign Equity2.1 Proportionate method is used in Telecom/ Broadcasting sectors through Press Note 5 of 2005 (modifying Press Note 2 of 2000), Press Note 1(2006) and Press Note 3(2007) 2.2 Insurance: outlined in IRDA regulations (IRDA (Registration of Indian Insurance Companies) Regulations, 2000) and 2.3 In all other sectors, for an investing company in the infrastructure / service sector attracting equity caps, indirect equity is calculated as was given in Press Note 2 of 2000: Investing companies in infrastructure/service sectors (entry no. 10). This policy was reiterated by Press Note 4 of 2006(Entry no.18) which was modified by a Press release dated November 13, 2006 and Press Note 7(2008) (entry 24). According to this, foreign investment in an investing company will not be set off against this cap where the foreign equity in the investing company does not exceed 49% and the Management of the investing company is with Indian owners. FIPB approval is required by Investing Companies for downstream investment. 1

3.0

Recognising the need to bring in clarity, uniformity, consistency and

homogeneity into the exact methodology of calculation across sectors/activities for all direct and indirect foreign investment in Indian companies, Government of India now proposes to issue the following guidelines for calculation of direct and indirect foreign investment.

4.0

Definitions:

4.1

For the purpose of computation of indirect Foreign investment, Foreign

Investment in Indian company shall include all types of foreign investments i.e. FDI, investment by FIIs(holding as on March 31), NRIs, ADRs, GDRs, Foreign Currency Convertible Bonds (FCCB) and convertible preference shares, convertible Currency Debentures regardless of whether the said investments have been made under Schedule 1, 2, 3 and 6 of FEMA (Transfer or Issue of Security by Persons Resident Outside India) Regulations.

4.2

The term ‘Resident Indian Citizen’ shall be interpreted in line with the

definition of ‘person resident in India’ as per FEMA, 1999, read in conjunction with the Indian Citizenship Act.

4.3

A ‘non resident entity’ means a ‘person resident outside India’ as defined

under FEMA 1999.

4.4

The term ‘Indian Company’ means a company registered or incorporated

in India as per the Indian Companies Act, 1956.

4.5

‘Investing

Company’

means

an

Indian

Company

making

equity/preference/CCD investment into another Indian Company.

4.6

Holding Company would have the same meaning as defined in Indian

Companies Act 1956.

2

5.0

Guidelines for calculation of total foreign investment i.e. direct and

indirect foreign investment in an Indian company.

5.1

Counting the Direct Foreign Investment:

5.1.1. All investment directly by a non-resident entity into the Indian company would be counted towards foreign investment. 5.2

Counting of indirect foreign Investment:

5.2.1

The foreign investment through the investing Indian company would not

be considered for calculation of the indirect foreign investment in case of Indian companies which are ‘owned and controlled’ by resident Indian citizens and/or Indian Companies which are owned and controlled by resident Indian citizens .

For this purpose, an Indian company may be taken as being: • “owned” by resident Indian citizens and Indian companies, which are owned and controlled by resident Indian citizens, if more than 50% of the equity interest in it is beneficially owned by resident Indian citizens and Indian companies, which are owned and controlled ultimately by resident Indian citizens; and • “controlled” by resident Indian citizens and Indian companies, which are owned and controlled by resident Indian citizens, if the resident Indian citizens and Indian companies, which are owned and controlled by resident Indian citizens, have the power to appoint a majority of its directors . 5.2.2 For cases where condition 5.2.1 above is not satisfied or if the investing company is owned or controlled by ‘non resident entities’, the entire investment by the investing company into the subject Indian Company would be considered as indirect foreign investment, 5.2.2.1 Provided that, as an exception, the indirect foreign investment in only the 100% owned subsidiaries of operating-cum-investing/investing companies, will be limited to the foreign investment in the operating-cum-investing/ investing company. For the purposes of explanation, it is clarified that this exception is being made since the downstream investment of a 100% owned subsidiary of the 3

holding company is akin to investment made by the holding company and the downstream investment should be a mirror image of the holding company. 5.2.2.2 For the above purpose, an Indian company may be taken as being: • “owned” by ‘non resident entities’, if more than 50% of the equity interest in it is beneficially owned by non-residents • “controlled” by ‘non resident entities’, if non-residents have the power to appoint a majority of its directors 5.2.2.3 Illustration To illustrate, if the indirect foreign investment is being calculated for Company A which has investment through an investing company B having foreign investment, the following would be the method of calculation: (i) where Company B has foreign investment less than 50%- Company A would not be taken as having any indirect foreign investment through Company B. (ii) where Company B has foreign investment of say 75% and: a. invests 26% in Company A, the entire 26% investment by Company B would be treated as indirect foreign investment in Company A; b. Invests 80% in Company A, the indirect foreign investment in Company A would be taken as 80% c. where Company A is a wholly owned subsidiary of Company B (i.e. Company B owns 100% shares of Company A), then only 75% would be treated as indirect foreign equity and the balance 25% would be treated as resident held equity. The indirect foreign equity in Company A would be computed in the ratio of 75: 25 in the total investment of Company B in Company A. 5.3

The total foreign investment would be the sum total of direct and indirect

foreign investment.

5.4

The above methodology of calculation would apply at every stage of

investment in Indian Companies and thus to each and every Indian Company.

5.5

5.5.1

Additional conditions:

The full details about the foreign investment including ownership details

etc. in Indian company(s) and information about the control of the company(s) would be furnished by the Company(s) to the Government of India at the time of seeking approval. 4

5.5.2

In any sector/activity, where Government approval is required for foreign

investment

and

in

cases

where

there

are

any

inter-se

agreements

between/amongst share-holders which have an effect on the appointment of the Board of Directors or on the exercise of voting rights or of creating voting rights disproportionate to shareholding or any incidental matter thereof, such agreements will have to be informed to the approving authority. The approving authority will consider for determining ownership and control such inter-se agreements when considering the case for granting approval for foreign investment.

5.5.3

In all sectors attracting sectoral caps, the balance equity i.e. beyond the

sectoral foreign investment cap, would specifically be beneficially owned by/held with/in the hands of resident Indian citizens and Indian companies, owned and controlled by resident Indian citizens.

5.5.4

In the I& B and Defense sectors where the sectoral cap is less than 49%,

the company would need to be ‘owned and controlled’ by resident Indian citizens and Indian companies, which are owned and controlled by resident Indian citizens.

5.5.4.1 For this purpose, the equity held by the largest Indian shareholder would have to be at least 51% of the total equity, excluding the equity held by Public Sector Banks and Public Financial Institutions, as defined in Section 4A of the Companies Act, 1956. The term ‘largest Indian shareholder’, used in this clause, will include any or a combination of the following: (i)

In the case of an individual shareholder, (a) The individual shareholder, (b) A relative of the shareholder within the meaning of Section 6 of the Companies Act, 1956. (c) A company/ group of companies in which the individual shareholder/HUF to which he belongs has management and controlling interest.

(ii)

In the case of an Indian company, (a) The Indian company

5

(b) A group of Indian companies under the same management and ownership control.

5.5.4.2 For the purpose of this Clause, “Indian company” shall be a company which must have a resident Indian or a relative as defined under Section 6 of the Companies Act, 1956/ HUF, either singly or in combination holding at least 51% of the shares.

5.5.4.3 Provided that, in case of a combination of all or any of the entities mentioned in Sub-Clauses (i) and (ii) of clause 5.5.4.1 above, each of the parties shall have entered into a legally binding agreement to act as a single unit in managing the matters of the applicant company. 5.5.5 If a declaration is made by persons as per section 187C of the Indian Companies Act about a beneficial interest being held by a non resident entity, then even though the investment may be made by a resident Indian citizen, the same shall be counted as foreign investment. 6.0 The above mentioned policy and the methodology would be applicable for determining the total foreign investment in all sectors, excepting in sectors where it is governed specifically under any statutes or rules thereunder. Thus, for the present purposes this methodology will not be applicable in the Insurance Sector where it will continue to be governed by the relevant Regulation. 7.0

Policy for downstream investment by investing companies:

Based on the above methodology for calculation of total foreign investment in Indian companies, the policy on downstream investment-i.e. for only operating companies, operating-cum-investing companies, investing companies and for holding companies without any downstream investment and operations would be notified separately in amendment to Press Note 3 of 1997, Press Note 9 of 1999, entry 10 under Press Note 2 of 2000, entry 18 under Press Note 4 of 2006 as amended by the Press release dated 13th November, 2006, and entry 24 of Press Note 7(2008).

8.0

Any foreign investment already made in accordance with the guidelines

in existence prior to issue of this Press Note would not require any modification to

6

conform with these guidelines. All other investments, past and future, would come under the ambit of these new guidelines.

8.1

Any violation of these guidelines and noncompliance would be a

violation under FEMA 1999 and would lead to action under the relevant regulations under the Act.

9.0 Entry 10 under Press Note 2(2000), entry 18 under Press Note 4(2006), as amended by the Press Release dated 13th November 2006 and entry 24 under Press Note 7(2008) stand deleted. 10.0 The relevant entry pertaining to calculation of foreign equity of the applicant company under paragraph 2(c) of Press Note 1 of 2006 and paragraph 2.A.(ii) of Press Note 3 of 2007 stand deleted. 11.0 Note.

These guidelines will be effective from the date of issue of this Press

GOPAL KRISHNA Joint Secretary to the Government of India D/o IPP F.No. 12/22/2007-FC dated the 13th February 2009

7

Government of India Ministry of Commerce & Industry Department of Industrial Policy & Promotion (FC Section) Press Note No 3 (2009 Series)

Subject:

Guidelines for transfer of ownership or control of Indian companies in sectors with caps from resident Indian citizens to non-resident entities.

At present, the transfer of shares from residents to non-residents, including acquisition of shares in an existing company, is on the automatic route, subject to the sectoral policy on FDI. Concerns have been raised on recent acquisitions of certain Indian companies by non-resident entities in sectors with caps. Accordingly, guidelines for transfer of ownership or control of Indian companies in sectors with caps from resident Indian citizens to non-resident entities have been formulated and are enumerated below.

2.0

Definitions:

2.1 The term ‘Resident Indian Citizen’ shall be interpreted in line with the definition of ‘person resident in India’ as per FEMA, 1999, read in conjunction with the Indian Citizenship Act.

2.2

A ‘non resident entity’ means a ‘person resident outside India’ as defined

under FEMA 1999.

2.3 The term ‘Indian Company’ means a company registered or incorporated in India as per the Indian Companies Act, 1956.

2.4 For the purpose of these guidelines, an Indian company may be taken as being: •

“owned” by resident Indian citizens and Indian companies, which are owned

and controlled by resident Indian citizens, if more than 50% of the equity interest in it is beneficially owned by resident Indian citizens and Indian companies, which are owned and controlled ultimately by resident Indian citizens;

1

•

“controlled” by resident Indian citizens and Indian companies, which are

owned and controlled by resident Indian citizens, if the resident Indian citizens and Indian companies, which are owned and controlled by resident Indian citizens, have the power to appoint a majority of its directors.

2.5 Further, for the above purpose, an Indian company may be taken as being: • “owned” by ‘non resident entities’, if more than 50% of the equity interest in it is beneficially owned by non-residents • “controlled” by ‘non resident entities’, if non-residents have the power to appoint a majority of its directors.

2.6 Foreign investment shall include all types of foreign investments i.e. FDI, investment by FIIs, NRIs, ADRs, GDRs, Foreign Currency Convertible Bonds (FCCB) and convertible preference shares, regardless of whether the said investments have been made under Schedule 1, 2, 3 and 6 of FEMA (Transfer or Issue of Security by Persons Resident Outside India) Regulations.

3.0

Guidelines for transfer of ownership or control of Indian

companies in sectors with caps from resident Indian citizens to non-resident entities in sectors with caps: 3.1

In sectors with caps, including interalia defence production, air

transport services, ground handling services, asset reconstruction companies, private sector banking, broadcasting, commodity exchanges, credit information companies, insurance, print media, telecommunications and satellites, Government approval/FIPB approval would be required in all cases where:

3.1.1 An Indian company is being established with foreign investment and is owned by a non-resident entity or 3.1.2 An Indian company is being established with foreign investment and is controlled by a non-resident entity or 3.1.3 The control of an existing Indian company, currently owned or controlled by resident Indian citizens and Indian companies, which are owned or controlled by resident Indian citizens, will be/is being transferred/passed on to a non-resident entity as a

2

consequence of transfer of shares to non-resident entities through amalgamation, merger, acquisition etc. or 3.1.4 The ownership of an existing Indian company, currently owned or controlled by resident Indian citizens and Indian companies, which are owned or controlled by resident Indian citizens, will be/is being transferred/passed on to a non-resident entity as a consequence of transfer of shares to non-resident entities through amalgamation, merger, acquisition etc. 3.2 It is clarified that these guidelines will not apply for sectors/activities where there are no foreign investment caps, that is, 100% foreign investment is permitted under the automatic route.

4.0 These guidelines will issue in modification of paragraph 2(e) of Press Note 4 of 2006 and will be effective from the date of issue of this Press Note. FDI policy announced vide Annex to Press Note 7(2008) dated 16th June 2008 stands amplified to the above extent.

GOPAL KRISHNA Joint Secretary to the Government of India D/o IPP F.No. 12/22/2007-FC dated the 13th February 2009

3

Government of India Ministry of Commerce & Industry Department of Industrial Policy & Promotion (FC Section)

Press Note No. 4 (2009 Series)

Subject:

Clarificatory guidelines on downstream investment by Indian Companies.

The Policy for downstream investment by Indian companies seeks to lay down and clarify about compliance with the Foreign investment norms on entry route, conditionalities and sectoral caps. The ‘guiding principle’ is that downstream investment by companies ‘owned’ or ‘controlled’ by non resident entities would require to follow the same norms as a direct foreign investment i.e. only as much can be done by way of indirect foreign investment through downstream investment in terms of Press Note 2 (2009 series) as can be done through direct foreign investment and what can be done directly can be done indirectly under same norms. 2.0 The Guidelines for calculation of total foreign investment, both direct and indirect in an Indian company, at every stage of investment, including downstream investment, have been detailed in Press Note 2 of 2009 which enables determination of total foreign investment in any/all Indian Companies. 3.0

Definitions:

3.1 The term ‘Indian Company’ means a company registered or incorporated in India as per the Indian Companies Act, 1956 3.2 ‘Operating Company’ is an Indian company which is undertaking operations in various economic activities and sectors. 3.3 ‘Downstream investment’ means indirect foreign investment by one Indian company into another Indian company by way of subscription or acquisition in terms of Press Note 2 of 2009. Para 5.2 of the said Press Note provides the guidelines for calculation of indirect foreign investment with conditions specified in para 5.5. 3.4 ‘Investing Company’ means an Indian Company holding only investments in another Indian company, directly or indirectly, other than for trading of such holdings/securities. 3.5

‘Foreign Investment’ would have the same meaning as in Press Note 2

(2009 series).

4.0 Guidelines for downstream investment by Investing Indian Companies ‘owned or controlled by non resident entities’ as per Press Note 2 of 2009: Recognizing the need to bring in clarity into the Policy for downstream investment by investing Indian companies, the Government of India now proposes to clarify the policy in this regard. 4.1 The Policy on downstream investment comprises policy for (a) only operating companies (b) operating-cum-investing companies (c) only investing companies. 4.2

The Policy in this regard will be as below:

4.2.1 Only operating companies: Foreign investment in such companies would have to comply with the relevant sectoral conditions on entry route, conditionalities and caps with regard to the sectors in which such companies are operating. 4.2.2 Operating-cum-investing companies: Foreign investment into such companies would have to comply with the relevant sectoral conditions on entry route, conditionalities and caps with regard to the sectors in which such companies are operating. Further, the subject Indian companies into which downstream investments are made by such companies would have to comply with the relevant sectoral conditions on entry route, conditionalities and caps in regard of the sector in which the subject Indian companies are operating. 4.2.3 Investing companies: Foreign Investment in Investing Companies will require the prior Government/FIPB approval, regardless of the amount or extent of foreign investment. The Indian companies into which downstream investments are made by such investing companies would have to comply with the relevant sectoral conditions on entry route, conditionalities and caps in regard of the sector in which the subject Indian companies are operating. 5.0 For companies which do not have any operations and also do not have any downstream investments, for infusion of foreign investment into such companies, Government/FIPB approval would be required, regardless of the amount or extent of foreign investment. Further, as and when such company commences business(s) or makes downstream investment it will have to comply with the relevant sectoral conditions on entry route, conditionalities and caps. 6.0 For Operating-cum- investing companies and investing companies (Para 4.2.2, 4.2.3) and for companies as per para 5.0 above, downstream investments can be made subject to the following conditions: (a) Such company is to notify SIA, DIPP and FIPB of its downstream investment within 30 days of such investment even if equity shares/CCPS/CCD have not been allotted along with the modality of investment in new/existing ventures (with/without expansion programme); (b) downstream investment by way of induction of foreign equity in an existing Indian Company to be duly supported by a resolution of the Board of Directors supporting the said induction as also a shareholders Agreement if any;

(c) issue/transfer/pricing/valuation of shares shall be in accordance with applicable SEBI/RBI guidelines; (d) Investing companies would have to bring in requisite funds from abroad and not leverage funds from domestic market for such investments. This would, however, not preclude downstream operating companies to raise debt in the domestic market. 7.0 Para 11 of Press Note 3 of 1997 and Press Note 9 of 1999 stand deleted. These guidelines will be effective from the date of issue of this Press Note. FDI Policy announced vide Annex to Press Note 7 (2008) dated June 16, 2008 stands amplified to the above extent.

GOPAL KRISHNA Joint Secretary to the Government of India D/o. IPP File No. 12(22)/2007-FC Dated 25th February, 2009 Copy forwarded to 1. Press Information Officer, Press Information Bureau, for giving wide publicity to the above Press Note. 2.

IP&IC cell for uploading the Press Note on the Department’s website.

Government of India Ministry of Commerce & Industry Department of Industrial Policy & Promotion SIA(FC Section) Press Note No. 5 (2009) Subject: Guidelines for Foreign investment in Commodity Exchanges Government of India had laid the guidelines for foreign investment in Commodity Exchanges vide Press Note 2(2008) dated 12th March 2008. As per the guidelines, a composite ceiling for foreign investment of 49% was allowed with prior Government approval, subject to the condition that investment under the Portfolio Investment Scheme will be limited to 23% and that under the FDI Scheme will be limited to 26%. Further, no foreign investor/entity including persons acting in concert will hold more than 5% of the equity in these companies. 2. It had been brought to the notice of the Government that some of the existing Commodity Exchanges had foreign investment above the permitted level, as on the date of issue of the said Press Note and, consequently, the Commodity Exchange(s) would be required to divest foreign equity, equal to the amount by which the cap was being exceeded, in accordance with Press Note 2(2008). Commodity Exchanges were permitted to avail of transition/complying/correction time for this purpose, up to 30.6.2009, vide Press Note 8 of 2008 dated 19 August, 2008. 3. Difficulties have been brought to the notice of the government in complying with the provisions of the Press Note within the stipulated time frame. The Government, on consideration and in order to facilitate the existing Commodity Exchanges to comply with the guidelines notified vide Press Note 2(2008), has now been decided to allow a further transition / complying/correction time to the existing Commodity exchange(s) beyond 30.6.2009. Accordingly, all such Commodity Exchanges are hereby advised to adhere to the conditions of Press Note 2(2008) by 30.9.2009. 4. All Commodity Exchanges shall furnish a compliance report informing the foreign investment in the Commodity Exchange as on 30.9.2009, along with details of equity structure, to the Department of Industrial Policy & Promotion, Department of Consumer Affairs, Foreign Investment Promotion Board, the Forward Market Commission and SEBI. 5. Non-compliance of the conditions of Press Note 2(2008) after 30.9.2009 would be a violation of the Foreign Exchange Management Act, 1999.

(Gopal Krishna) Joint Secretary to the Government of India. D/o IPP F.No. 12(58)/2005-FC dated 14th May 2009 Copy forwarded to: 1. Press Information Officer, Press Information Bureau- for giving wide publicity to the above Press Note. 2. F.No. 5/10/2006-FC

Government of India Ministry of Commerce & Industry Department of Industrial Policy & Promotion (FC Section)

Press Note No.6 (2009)

Foreign Direct Investment (FDI) into a Small Scale Industrial Undertaking (SSI)/ Micro & Small Enterprises (MSE) and in Industrial Undertaking manufacturing items reserved for SSII MSE - clarification.

Subject:

1.0

FDI into SSIIMSE

1.1

A Small Scale industrial undertaking (SSI) was defined in terms of: (i) investment in

fixed assets in plant and machinery and (ii) equity participation (both domestic and foreign) in the SSI, by other industrial undertakings prior to 2006. 1.2

Vide Press Note

collaborations,

18 (1997),

it was further notified

that, for cases of foreign

since the maximum equity participation allowed for in small scale units was

24%, proposals

for induction of foreign equity more than 24% would be subject to the

condition that: (i) the company would get itself de-registered obtain industrial

licence or file Industrial

Entrepreneur

as a small scale unit and (ii)

Memorandum

with SIA, as per

prescribed policy and procedure. 1.3

With the promulgation

of the Micro, Small and Medium Enterprises

Development

(MSMED) Act, 2006, the ceiling for equity participation (both domestic and foreign) in the micro and small enterprises, Enterprises

(MSE) (earlier

by other enterprises,

was removed

and Micro and Small

small scale industries)

were defined

solely on the basis of

investment in plant & machinery (for micro and small enterprise engaged in manufacturing) and equipment

(for micro and small enterprise

engaged

in providing

or rendering

of

services). Accordingly, this change was notified by Notification No. S.O. 563(E) dated 27th February 2009 of Department

of Industrial Policy & Promotion, Ministry of Commerce &

Industry. 1.4

Thus the present policy on FDI in MSE permits FDI subject only to the sectoral

equity caps, entry routes and other relevant sectoral regulations. 1.5

Press Note 18 (1997 series) stands modified to the above extent.

Page 1 of2

2.0

FDI in Industrial Undertaking manufacturing items reserved for SSIIMSE

2.1

Vide Press Note

14 (1997), it was notified that Industrial Undertakings

manufacturing items reserved for small scale sector were not eligible for automatic approval for induction of foreign investment. 2.2

Accordingly, the FDI policy notified vide Press Note 2 (2000) prescribed prior

approval of Government where foreign investment was more than 24% in the equity capital of units manufacturing items reserved for small scale industries. This was reiterated in the Annex to Press Note 4 (2006) and at Para III (ii) of Annex to Press Note 7 (2008). 2.3

Thus, any industrial undertaking, with or without FDI, which is not a MSE,

manufacturing items reserved for manufacture in the MSE sector (presently 21 items) as per the Industrial Policy, would require an Industrial License under the Industries (Development & Regulation) Act, 1951, for such manufacture. The issue of the Industrial Licence will be

subject to a few general conditions and the specific condition that the undertaking shall undertake to 'export a minimum of 50% of the new or additional annual production of the MSE reserved items to be achieved within a maximum period of three years. The export obligation would be applicable from the date of commencement of commercial production'. Such an industrial undertaking would also require prior approval of the Government (FIPB) where foreign investment is more than 24% in the equity capital.

",'ri '"4/1'"

(GOPAL KRISHNA) Joint Secretary to the Government of India F. No. 5(10)/2009-FC

Dated 04/09/2009

Copy forwarded to: 1. 2.

Press Information Bureau- with a request that the above Press Note may be given wide publicity. BE Section- for uploading the Press Note on DIPP's website.

3.

IP Section

4.

PRO Section

Page 2 of2

Government of India Ministry of Commerce & Industry Department of Industrial Policy & Promotion SIA(FC Section) Press Note No.7 (2009) Subject: Guidelines for Foreign investment in Commodity Exchanges Government of India had laid the guidelines for foreign investment in Commodity Exchanges vide Press Note 2(2008) dated 12th March 2008. As per the guidelines, a composite ceiling for foreign investment of 49% was allowed with prior Government approval, subject to the condition that investment under the Portfolio Investment Scheme will be limited to 23% and that under the FDI Scheme will be limited to 26%. Further, no foreign investor/entity including persons acting in concert will hold more than 5% of the equity in these companies. 2. It had been brought to the notice of the Government that some of the existing Commodity Exchanges had foreign investment above the permitted level, as on the date of issue of the said Press Note and, consequently, the Commodity Exchange(s) would be required to divest foreign equity, equal to the amount by which the cap was being exceeded, in accordance with Press Note 2(2008). Commodity Exchanges were permitted to avail of transition/complying/correction time for this purpose, up to 30.06.2009, vide Press Note 8 of 2008 dated 19 August, 2008. This time limit was further extended up to 30.09.2009, vide Press Note 5(2009) dated 14 May, 2009. 3. Difficulties have been brought to the notice of the government in complying with the provisions of the Press Note within the stipulated time frame. The Government, on consideration and in order to facilitate the existing Commodity Exchanges to comply with the guidelines notified vide Press Note 2(2008), has now decided to allow a further transition / complying/correction time to the existing Commodity exchange(s) beyond 30.09.2009. Accordingly, all such Commodity Exchanges are hereby advised to adhere to the conditions of Press Note 2(2008) by 31.03.2010. This would comprise the last opportunity for such compliance. 4. All Commodity Exchanges shall furnish a status report informing the foreign investment in the Commodity Exchange as on 30.09.2009, along with details of equity structure, as well as the steps already taken/proposed to be taken with regard to compliance with the guidelines notified vide Press Note 2(2008), to the Department of Industrial Policy & Promotion, Department of Consumer Affairs, Foreign Investment Promotion Board, the Forward Market Commission and SEBI. 5. Non-compliance of the conditions of Press Note 2(2008) after 31.03.2010 would be a violation of the Foreign Exchange Management Act, 1999.

\I ,I rI "'1••,,.,,

(Gopal ~hna' t Joint Secretary to the Government of India. D/o IPP F.No. 12(58)/2005-FC dated 26.09.2009 Copy forwarded to: 1. Press Information Officer, Press Information Bureau- for giving wide publicity to the above Press Note. 2. BE Section for uploadingthe PressNote on DlPP's website. 3. F.No.5/10/2006-FC

r! i i i

r

Government of India Ministry of Commerce & Industry Department of Industrial Policy & Promotion (FC Section)

~ ~ ~ .

Press Note No.8 (2009 Series)

Subject: Liberalization of Foreign Technology Agreement policy The existing policy of Government of India on the payment of royalties under Foreign Technology Collaboration provides for automatic approval for foreign technology transfers involving payment of lumpsum fee of US$ 2 million and payment of royalty of 5% on domestic sales and 8% on exports. In addition, where there is no technology transfer involved, royalty up to 2% for exports and 1% for domestic sales is allowed under automatic route on use of trademarks and brand names of the foreign collaborator. Separate norms are available for the hotel sector vide Press Note 18 (1991 Series) and Press Note 1 (1995 Series). Technology transfers involving payments above these limits required prior permission of the Government of India (Project Approval Board, Department of Industrial Policy and Promotion). 2. The Government of India has reviewed the extant policy and it has been decided to permit, with immediate effect, payments for royalty, lumpsum fee for transfer of technology and payments for use of trademark/brand name on the automatic route i.e. without any approval of the Government of India. All such payments will be subject to Foreign Exchange Management (Current Account Transactions) Rules, 2000 as amended from time to time. 3. A suitable post-reporting system for technology transfer/ collaborations and use of trade mark/ brand name will be notified by the Government separately. 4. These guidelines issue in modification of provisions relating to foreign technology proposals/approvals contained in paragraph 3 of Press Note 10 (1991), para 7 of Press Note 11 (1991), para 4 & 5 (a) of Press Note 12 (1991), para 2-6 of Press Note 20 (1991), para 2 of Press Note 5 (1992), para 4 of Press Note 4 (1994), para 3 of Press Note 18 (1997) and paragraphs III and IV of Press Note 9 (2000). These guidelines will issue in supersession of provisions of Press Note 18 (1991), Press Note 4 (1992), Press Note 1 (1995), Press Note 4 (1996), Press Note 1 (2002) and Press Note 2 (2003).

\fll~

/,1",/,."

(Gopal K~hn~) Joint Secretary to the Government of India 0/0 IPP F. No. 5(6)/2008-FC Dated 16.12.2009

Copy forwarded to: 1. Press Information Officer, Press Information Bureau- for giving wide publicity to the above Press Note. 2. BE Section for uploading the Press Note on 01PP's website. 3. PAB Section,DIPP

Department of Industrial Policy and Promotion Ministry of Commerce and Industry Government of India

DRAFT PRESS NOTE NO._(2010)_

SUBJECT:

FDI REGULATORY FRAMEWORK.

1.0

INTENT AND OBJECTIVE

1.1

‘Investment’ is usually understood as financial contribution to the equity capital

of an enterprise or purchase of shares in the enterprise. ’Foreign investment’ is investment in an enterprise by a Non-Resident irrespective of whether this involves new equity capital or re-investment of earnings. Foreign investment is of two kinds – (i) Foreign Direct Investment (FDI) and (ii) Foreign Portfolio Investment. 1.2

FDI is a category of cross border investment made by a resident in one economy

(the direct investor) with the objective of establishing a ‘lasting interest’ in an enterprise (the direct investment enterprise) i.e. resident in an economy other than that of the direct investor. The motivation of the direct investor is a strategic long term relationship with the direct investment enterprise to ensure the significant degree of influence by the direct investor in the management of the direct investment enterprise. In India the ‘lasting interest’ is not evinced by any minimum holding of percentage of equity capital/shares/voting rights in the investment enterprise. Direct investment allows the direct investor to gain to the access of direct investment enterprise which it might otherwise be unable to do. The objectives of direct investment are different from those of portfolio investment whereby investors do not generally expect to influence the management of the enterprise. 1.3

It is the policy of the Government of India to attract and promote productive FDI

from non-residents in activities which significantly contribute to industrialization and socio-economic development. FDI is encouraged in enterprises to significantly expand employment and livelihood opportunities, enhance economic value of products, promote welfare of consumers, increase exports and/or transfer technologies in all economic activities. FDI supplements the domestic capital and technology.

1

1.4

The Legal basis: Foreign Direct Investments by non-resident in resident entities

through transfer or issue of security to person resident outside India is a ‘Capital account transaction’ and Government of India and Reserve bank of India regulate this under the FEMA 1999 and its various regulations. Keeping in view the current requirements, the Government comes up from time to time with new regulation, amends/changes in existing one through order/allied rules, Press Notes, etc. . The regulatory framework over a period of time thus consists of Acts, Regulations, Press Notes, Press Releases, Clarifications, etc. 1.5

This Press Note consolidates into one document all the prior regulations on FDI

and reflects the current ‘regulatory framework’ on FDI. It is clarified that this is a consolidation/compilation and comprehensive listing of most matters on FDI and is not intended to make changes in the extant regulations. While attempt has been made to deal with the subject comprehensively, if some aspect(s) has been left out then that will continue to be dealt in the current way where it is listed. 1.6

It is the intent and objective of the Government to have a regulatory framework

which is transparent, predictable, understandable, simple and clear to reduce the regulatory burden and promote foreign direct investment. The new system of continuous consolidation and updation is primarily evinced as a measure of investor and investment friendliness. 1.7

This Press Note will have a sunset clause of six months and will automatically

lapse on 30th September, 2010. A new press Note on Regulatory Framework would be issued every six months which will incorporate and reflect all the changes in the regulations during the last intervening period of six months. Thus the Government will issue Press Note on FDI Regulatory Framework twice a year in April and October which would be the current regulatory framework on that date. 1.8

All earlier Press Notes on FDI issued by Department of Industrial Policy and

Promotion, Government of India stand rescinded. 1.9

Notwithstanding the rescindment of earlier Press Notes, anything done or any

action taken or purported to have been done or taken under the resinded Press Notes shall in so far as it is not inconsistent with this Press Note be deemed to have been done or taken under the corresponding provisions of this Press Note. (Gopal Krishna) Joint Secretary to the Government of India _______________________________________________________________________ 2

CHAPTER 1: DEFINITIONS 2.0

DEFINITIONS: The various definitions of terms used in this Press Note are as

follows :2.1

‘FEMA’ means the Foreign Exchange management Act 1999 (42 of 1999)

(FEMA). 2.2

‘Asset Reconstruction Company’ (ARC) means a company registered with the

Reserve Bank of India under Section 3 of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (SARFAESI Act). 2.3

‘Authorised Bank’ means a bank including a co-operative bank (other than an

authorized dealer) authorized by the Reserve Bank to maintain an account of a person resident outside India. 2.4

‘Authorised Dealer’ means a person authorized as an authorized dealer under

sub-section (1) of section 10 of FEMA 2.5

‘AD Category-I Bank’ means a Bank( commercial, State or urban cooperative)

which is an Authorized Dealer and allowed to deal in all current and capital account transactions by RBI from time to time. 2.6

‘Authorised person’ means a authorized dealer, money changer, offshore banking

unit or any other person for the time being authorized under Sub-section (a) of Section 10 of FEMA 2.7

‘B2B e-commerce’ means business entities buying from and selling to each other

online. 2.8

‘Capital’ means equity shares, compulsorily and mandatorily convertible

preference shares and compulsorily and mandotarily convertible debentures.Preference shares i.e. non-convertible, optionally convertible or partially convertible for issue of which funds have been received on or after May 1, 2007 are considered as debt. Accordingly all norms applicable for ECB’s viz eligible borrowers, recognized lenders, amount and maturity, end-use stipulations, etc. shall apply. Since these instruments would be denominated in Rupees, the rupee interest rate will be based on the swap equivalent of London Interbank offered Rate (LIBOR) plus the spread as permissible for ECB’s of corresponding maturity. ‘Capital’ also includes ‘Depository Receipts (DRs)/FCCB’. 3

‘FCCB’ means bonds issued in accordance with the Foreign Currency Convertible Bonds and ordinary shares (through depository receipt mechanism) Scheme 1993 and subscribed by non-resident in foreign currency and convertible with ordinary shares of the issuing company in any manner, either in whole, or in part, on the basis of any equity related warrants attached to debt instruments. ‘DR’ is negotiable securities issued outside India by a Depository bank, on behalf of an Indian company, which represent the local Rupee denominated equity shares of the company held as deposit by a Custodian bank in India. DRs are traded on Stock Exchanges in the US, Singapore, Luxembourg, etc. DRs listed and traded in the US markets are known as American Depository Receipts (ADRs) and those listed and traded elsewhere are known as Global Depository Receipts (GDRs). In the Indian context, FCCB/DRs are treated as FDI. 2.9

‘Capital account transaction’ means a transaction which alters the assets or

liabilities, including contingent liabilities, outside India of persons resident in India or assets or liabilities in India of persons resident outside India, and includes transactions referred to in sub-section (3) of section 6 of FEMA. 2.10

‘Foreign Institutional Investor’(FII) means an entity established or incorporated

outside India which proposes to make investment in India and which is registered as a FII in accordance with the SEBI (FII) Regulations 1995. 2.11

‘Foreign Venture Capital Investor’ means an investor incorporated and

established outside India which propose to make investment in Venture Capital Fund(s) or Venture Capital Undertaking(s) in India and in registered with SEBI under SEBI (Foreign Venture Capital Investors) Regulations 2000’. 2.12

‘FIPB’ means the Foreign Investment Promotion Board constituted by the

Government of India. 2.13

‘FDI’ means foreign investment in the paid up capital of the Indian company not

being Foreign Portfolio Investment. 2.14

‘Government route’ means that investment in resident entities by non-resident

entities can be made only with the prior approval from FIPB, Ministry of Finance or SIA, DIPP as the case may be. 2.15

‘Government of India’ means Department of Economic Affairs, Ministry of

Finance or Department of IPP, Ministry of Commerce & Industry. 2.16

‘Indian Company’ means a company registered or incorporated in India as per the

Indian Companies Act, 1956. 4

2.17

Investment on repatriable basis means investment the sale proceeds of which are

net or taxes eligible to be repatriated out of India and the expression ‘investment are on repatriable basis’ shall be construed accordingly. 2.18

‘Joint Venture’ (JV) means an Indian entity formed, registered or incorporated in

accordance with the laws and regulations in India in which a foreign entity makes a foreign investment 2.19

‘Wholly owned subsidiary’ means an Indian entity form, registered or

incorporated in accordance with the laws and regulations in India whose entire capital is held by non-resident entity. 2.20

‘Non Resident Indian’ (NRI) means a person resident outside India who is a

citizen of India or is a person of Indian origin. 2.21

‘Owned and Controlled’ by resident Indian citizens means

• “owned” by resident Indian citizens and Indian companies, which are

owned and

controlled by resident Indian citizens, if more than 50% of the equity interest in it is beneficially owned by resident Indian citizens and Indian companies, which are owned and controlled ultimately by resident Indian citizens; • “controlled” by resident Indian citizens and Indian companies, which are owned and controlled by resident Indian citizens, if the resident Indian citizens and Indian companies, which are owned and controlled by resident Indian citizens, have the power to appoint a majority of its directors . 2.22

‘Owned and Controlled’ by ‘non-resident entities’ means

• “owned” by ‘non resident entities’, if more than 50% of the equity interest in it is beneficially owned by non-residents • “controlled” by ‘non resident entities’, if non-residents have the power to appoint a majority of its directors 2.21

‘Person of Indian origin’ (PIO) means a citizen of any country other than

Bangladesh or Pakistan, if (i) he at any time held Indian Passport (ii) he or either of his parents or any of his grandparents was a citizen of India by virtue of the Constitution of India or the Citizenship Act 1955 (57 of 1955); or (iii)the person is a spouse of an Indian citizen or a person referred to in sub-clause (i) or (ii). 2.22‘Person resident in India’ means -

5

(i) a person residing in India for more than one hundred and eighty-two days during the course of the preceding financial year but does not include – (A) A person who has gone out of India or who stays outside India, in either case(a) for or on taking up employment outside India, or (b) for carrying on outside India a business or vocation outside India, or (c) for any other purpose, in such circumstances as would indicate his intention to stay outside India for an uncertain period; (B) A person who has come to or stays in India, in either case, otherwise than – (a) for or on taking up employment in India; or (b) for carrying on in India a business or vocation in India, or (c) for any other purpose, in such circumstances as would indicate his intention to stay in India for an uncertain period; (ii) any person or body corporate registered or incorporated in India, (iii) an office, branch or agency in India owned or controlled by a person resident outside India, (iv) an office, branch or agency outside India owned or controlled by a person resident in India. 2.23‘Person resident outside India’ means a person who is not resident in India. 2.24‘Previous Venture/tie-up condition’ means that the investor has previous/existing venture or tie-up in India as on January 12, 2005, through investment / technology collaboration agreement in the same field in which the Indian company, whose shares are being issued, is engaged, he has to obtain prior permission of Foreign Investment Promotion Board (FIPB), to acquire the shares.

This restriction is, however, not

applicable to the issue of shares for investments to be made by : (i) Venture Capital Funds registered with the Securities and Exchange Board of India (SEBI).

(b) or Investments by International/Multinational Financial

Institutions like Asian Development Bank(ADB), International Finance Corporation(IFC), Commonwealth Finance Corporation (CDC), Deutsche Entwicklungs Gescelschaft (DEG) etc.; (ii) or where in the existing joint venture, investment by either of the parties is less than 3 per cent; (iii)or where the existing joint venture / collaboration is defunct or sick (iv) or for issue of shares of an Indian company engaged in Information Technology sector or in the mining sector, if the existing joint venture or technology transfer / 6

trade mark agreement of the person to whom the shares are to be issued are also in the Information Technology sector or in the mining sector for same area/mineral. Note: For the purposes of ‘Same field’ would be 4 digit NIC 1987 Code. 2.25

‘Overseas Corporate Body’ (OCB) means a company, partnership firm, society

and other corporate body owned directly or indirectly to the extent of at least sixty percent by non-resident Indian and includes overseas trust in which not less than sixty percent beneficial interest is held by non-resident Indian directly or indirectly but irrevocably. 2.26

‘RBI’ means Reserve Bank of India.

2.27

‘SIA’ means Secretariat of Industrial Assistance in DIPP, Ministry of Commerce

& Industry, Government of India. 2.28

‘SEBI’ means the Securities and Exchange Board of India established under the

Securities and Exchange Board of India Act 1992. 2.29

‘SEZ’ means a Special Economic Zone as defined in Special Economic Zone Act

2006. 2.30

‘Venture Capital Fund’ means a fund established in the form of a trust, a

company including a body incorporated and registered under the Securities and Exchange Board of India (Venture Capital Fund) Regulation, 1996 which has a dedicated pool of capital raised in a manner specified under the regulations and which invests in venture capital undertakings in accordance with the said regulations. 2.31 ‘Resident Indian Citizen’ shall be interpreted in line with the definition of ‘person resident in India’ as per FEMA, 1999, read in conjunction with the Indian Citizenship Act. 2.32 ‘Non resident entity’ means a ‘person resident outside India’ as defined under FEMA 2.33 ‘Holding Company’ would have the same meaning as defined in Indian Companies Act 1956.

7

CHAPTER

2:

SOURCE,

TYPE,

ELIGIBILITY,

CONDITIONS AND ISSUE/TRANSFER OF INVESTMENT 3.0

SOURCE OF INVESTMENT IN INDIA

3.1 A non-resident entity (other than a citizen of Pakistan) or an entity incorporated outside India, (other than an entity incorporated in Pakistan) can invest in India, subject to the FDI Regulation of the Government of India. A person who is a citizen of Bangladesh or an entity incorporated in Bangladesh can invest in India under the FDI Regulation, under the Government route. 3.2 Investments from Nepal & Bhutan: NRI’s, resident in Nepal and Bhutan as well as citizens of Nepal and Bhutan are permitted to invest in shares and convertible debentures of Indian companies on repatriation basis, subject to the condition that the amount of consideration for such investment shall be paid only by way of inward remittance in free foreign exchange through normal banking channels. 3.3 OCBs have been derecognized as a class of Investors in India with effect from September 16, 2003. Erstwhile OCBs which are incorporated outside India and are not under the adverse notice of RBI can make fresh investments under FDI Regulation as incorporated non-resident entities, with the prior approval of Government of India if the investment is through Government route; and with the prior approval of RBI if the investment is through Automatic route. 3.4 (i) An FII may invest in a particular share issue of an Indian company either under the FDI Scheme or the Portfolio Investment Scheme. (ii)

The Indian company

which has issued shares to FIIs under the FDI Regulation for which the payment has been received directly into company’s account should report these figures separately under item no. 5 of Form FC-GPR (Annex) (Post-issue pattern of shareholding)

so

that

the

details

could

be

suitably

reconciled

for

statistical/monitoring purposes. (ii) A daily statement in respect of all transactions (except derivative trade) have to be submitted by the custodian bank in floppy / soft copy in the prescribed format directly to RBI to monitor the overall ceiling/sectoral cap/statutory ceiling. 3.5

A Foreign venture capital Investor (FCVI) may contribute upto 100% of the

capital of a domestic venture capital fund (VCF/VCC) and may also set up a domestic asset management company to manage the fund. They are also allowed to invest in other

8

companies subject to FDI Regulations. All investment are allowed under the Government route subject to SEBI and RBI regulations.

4.0

TYPES OF INSTRUMENTS.

4.1

Indian entities can issue equity shares, fully and mandatorily convertible

debentures and fully and mandatorily convertible preference shares subject to pricing guidelines/valuation norms prescribed under FEMA Regulations. 4.2

Issue of other types of preference shares such as non-convertible, optionally

convertible or partially convertible, have to be in accordance with the guidelines applicable for External Commercial Borrowings (ECBs). Since these instruments are denominated in Rupees, the rupee interest rate will be based on the swap equivalent of London Interbank offered Rate (LIBOR) plus the spread permissible for ECBs of corresponding maturity. 4.3

As far as debentures are concerned, only those which are fully and mandatorily

convertible into equity, within a specified time would be reckoned as part of equity under the FDI Policy. 4.4

Issue of shares by Indian Companies under FCCB/ADR/GDR (i) Indian companies can raise foreign currency resources abroad through the issue of FCCB/DR(ADRs/GDRs), in accordance with the Scheme for issue of Foreign Currency Convertible Bonds and Ordinary Shares (Through Depository Receipt Mechanism) Scheme, 1993 and guidelines issued by the Government of India thereunder from time to time. (ii) A company can issue ADRs / GDRs if it is eligible to issue shares to persons resident outside India under the FDI Regulations. However, an Indian listed company, which is not eligible to raise funds from the Indian Capital Market including a company which has been restrained from accessing the securities market by the Securities and Exchange Board of India (SEBI) will not be eligible to issue ADRs/GDRs. (iii) Unlisted companies, which have not yet accessed the ADR/GDR route for raising capital in the international market, would require prior or simultaneous listing in the domestic market, while seeking to issue such overseas instruments. Unlisted companies, which have already issued ADRs/GDRs in the international market, have to list in the domestic market on making profit or within three years of such issue of ADRs/GDRs, whichever is earlier. ADRs / GDRs are issued on 9

the basis of the ratio worked out by the Indian company in consultation with the Lead Manager to the issue. The proceeds so raised have to be kept abroad till actually required in India. Pending repatriation or utilisation of the proceeds, the Indian company can invest the funds in:(a) Deposits with or Certificate of Deposit or other instruments offered by banks who have been rated by Standard and Poor, Fitch, IBCA or Moody's, etc. and such rating not being less than the rating stipulated by Reserve Bank from time to time for the purpose; (b) Deposits with branch/es of Indian Authorised Dealers outside India; and (c) Treasury bills and other monetary instruments with a maturity or unexpired maturity of one year or less. (iv) There are no end-use restrictions except for a ban on deployment / investment of such funds in real estate or the stock market. There is no monetary limit up to which an Indian company can raise ADRs / GDRs. (v) The ADR / GDR proceeds can be utilised for first stage acquisition of shares in the disinvestment process of Public Sector Undertakings / Enterprises and also in the mandatory second stage offer to the public in view of their strategic importance. (vi) Voting rights on shares issued under the Scheme shall be as per the provisions of Companies Act, 1956 and in a manner in which restrictions on voting rights imposed on ADR/GDR issues shall be consistent with the Company Law provisions. Voting rights in the case of banking companies will continue to be in terms of the provisions of the Banking Regulation Act, 1949 and the instructions issued by the Reserve Bank from time to time, as applicable to all shareholders exercising voting rights. (vii) Erstwhile OCBs who are not eligible to invest in India and entities prohibited to buy, sell or deal in securities by SEBI will not be eligible to subscribe to ADRs / GDRs issued by Indian companies. (viii)The pricing of ADR / GDR issues should be made at a price determined under the provisions of the Scheme of issue of Foreign Currency Convertible Bonds and Ordinary Shares (Through Depository Receipt Mechanism) Scheme, 1993 and guidelines issued by the Government of India and directions issued by the Reserve Bank, from time to time.

10

(ix) The pricing of sponsored ADRs/GDRs would be determined under the provisions of the Scheme of issue of Foreign Currency Convertible Bonds and Ordinary Shares (Through Depository Receipt Mechanism) Scheme, 1993 and guidelines issued by the Government of India and directions issued by the Reserve Bank, from time to time. 4.5 (i) Two-way Fungibilty Scheme:A limited two-way Fungibility scheme has been put in place by the Government of India for ADRs / GDRs. Under this Scheme, a stock broker in India, registered with SEBI, can purchase shares of an Indian company from the market for conversion into ADRs/GDRs based on instructions received from overseas investors. Re-issuance of ADRs / GDRs would be permitted to the extent of ADRs / GDRs which have been redeemed into underlying shares and sold in the Indian market. (ii) Sponsored ADR/GDR issue:An Indian company can also sponsor an issue of ADR / GDR. Under this mechanism, the company offers its resident shareholders a choice to submit their shares back to the company so that on the basis of such shares, ADRs / GDRs can be issued abroad. The proceeds of the ADR / GDR issue is remitted back to India and distributed among the resident investors who had offered their Rupee denominated shares for conversion. These proceeds can be kept in Resident Foreign Currency (Domestic) accounts in India by the resident shareholders who have tendered such shares for conversion into ADRs / GDRs.

5.0 ELIGIBILITY OF INVESTMENTS IN RESIDENT ENTITIES 5.1

Investment in an Indian Company

5.1 (i) Indian companies including those which are micro and small enterprises can issue capital. 5.2

Investment in Partnership Firm / Proprietary Concern:

5.2 (i) A Non-Resident Indian (NRI) or a Person of Indian Origin (PIO) resident outside India can invest by way of contribution to the capital of a firm or a proprietary concern in India on non-repatriation basis provided; (a) Amount is invested by inward remittance or out of NRE/FCNR(B)/NRO account maintained with Authorised Dealers / Authorised banks.

11

(b) The firm or proprietary concern is not engaged in any agricultural/plantation or real estate business (i.e. dealing in land and immovable property with a view to earning profit or earning income there from) or print media sector. (c) Amount invested shall not be eligible for repatriation outside India. (ii) Investments with repatriation benefits: NRIs/PIO may seek prior permission of Reserve Bank for investment in sole proprietorship concerns/partnership firms with repatriation benefits. The application will be decided in consultation with the Government of India. (iii)Investment by non-residents other than NRIs/PIO: A person resident outside India other than NRIs/PIO may make an application and seek prior approval of Reserve Bank for making investment by way of contribution to the capital of a firm or a proprietorship concern or any association of persons in India. The application will be decided in consultation with the Government of India. (iv)Restrictions: An NRI or PIO is not allowed to invest in a firm or proprietorship concern engaged in any agricultural/plantation activity or real estate business (i.e. dealing in land and immovable property with a view to earning profit or earning income there from) or engaged in Print Media. 5.3

Investment in Trusts: Investment in the units of a Venture Capital Fund which

is a Trust incorporated under the India Trusts Act 1882 can be allowed upto 100% under the Government route with the condition that such Fund are registered with the Securities and Exchange Board of India(SEBI) under SEBI(Venture Capital Fund) Regulations 1996. Investment in other Trusts is not permitted. 5.4 Investment in other Entities: Investment in any other resident entities is not permitted. 6.0 CONDITIONS ON ISSUE/TRANSFER OF SHARES 6.1 The equity instruments should be issued within 180 days from the date of receipt of the inward remittance or by debit to the NRE/FCNR (B) account of the non-resident investor. In case, the equity instruments are not issued within 180 days from the date of receipt of the inward remittance or date of debit to the NRE/FCNR (B) account, the amount of consideration so received should be refunded immediately to the non-resident investor by outward remittance through normal banking channels or by credit to the NRE/FCNR (B) account, as the case may be. Non-compliance with the above provision would be reckoned as a contravention under FEMA and could attract penal provisions.

12

In exceptional cases, refund of the amount of consideration outstanding beyond a period of 180 days from the date of receipt may be considered by the RBI, on the merits of the case. 6.2 Issue price of shares – price of shares issued to persons resident outside India under the FDI Regulations, shall be on the basis of SEBI guidelines in case of listed companies. In case of unlisted companies, valuation of shares has to be done by a Chartered Accountant in accordance with the guidelines issued by the erstwhile Controller of Capital Issues (CCI). 6.3 Foreign Currency Account – Indian companies which are eligible to issue shares to persons resident outside India under the FDI Regulations will be allowed to retain the share subscription amount in a Foreign Currency Account, with the prior approval of RBI. 6.4 Transfer of shares and convertible debentures – (i) Foreign investors can also invest in Indian companies by purchasing/acquiring existing shares from Indian shareholders or from other non-resident shareholders. General permission has been granted to non-residents/NRIs for acquisition of shares by way of transfer subject to the following: (a) A person resident outside India (other than NRI and OCB) may transfer by way of sale or gift, the shares or convertible debentures to any person resident outside India (including NRIs). (b) NRIs may transfer by way of sale or gift the shares or convertible debentures held by them to another NRI. In both the above, cases, the previous/existing venture/tie-up condition would apply. (c) A person resident outside India can transfer any security to a person resident in India by way of gift. (d) A person resident outside India can sell the shares and convertible debentures of an Indian company on a recognized Stock Exchange in India through a stock broker registered with stock exchange or a merchant banker registered with SEBI. (e) A person resident in India can transfer by way of sale, shares/convertible debentures (including transfer of subscriber’s shares), of an Indian company in sectors other than financial services sectors (i.e. Banks, NBFC, Insurance, ARCs, CICs, infrastructure companies in the securities market viz. Stock Exchanges, Clearing Corporations, and Depositories, Commodity Exchanges, 13

etc.) under private arrangement to a person resident outside India, subject to the guidelines given in Annex. (f) General permission is also available for transfer of shares/convertible debentures, by way of sale under private arrangement by a person resident outside India to a person resident in India, subject to the guidelines given in Annex-3. (g) The above General Permission also covers transfer by a resident to a nonresident of shares/convertible debentures of an Indian company, engaged in an activity earlier covered under the Government Route but now falling under Automatic Route of RBI, as well as transfer of shares by a non-resident to an Indian company under buyback and/or capital reduction scheme of the company.

However, this General Permission is not available in case of

transfer of shares / debentures, from a Resident to a Non-Resident/NonResident India, of an entity engaged in any activity in the financial services sector (i.e. Banks, NBFCs, ARCs, CICs, Insurance, infrastructure companies in the securities market such as Stock Exchanges, Clearing Corporations, and Depositories, Commodity Exchanges, etc.). (ii) The sale consideration in respect of equity instruments purchased by a person resident outside India, remitted into India through normal banking channels, shall be subjected to a Know Your Customer(KYC) check by the remittance receiving AD Category – I bank at the time of receipt of funds. In case, the remittance receiving AD Category – I bank is different from the AD Category – I bank handling the transfer transaction, the KYC check should be carried out by the remittance receiving bank and the KYC report be submitted by the customer to the AD Category – I bank carrying out the transaction along with the Form FCTRS. (iii)Escrow: AD Category – I banks have been given general permission to open Escrow account and Special account of non-resident corporate for open offers / exit offers and delisting of shares. The relevant SEBI (SAST) Regulations or any other applicable SEBI Regulations/ provisions of the Companies Act, 1956 will be applicable. 6.5

Prior permission of RBI in certain cases for transfer of security – (i) The following instances of transfer of shares from resident to non-residents by way of sale require Reserve Bank approval: 14

(a) Transfer of shares or convertible debentures of an Indian company engaged in financial services sector (i.e. Banks, NBFCs, Asset Reconstruction Companies, CICs, Insurance companies, infrastructure companies in the securities market such as Stock Exchanges, Clearing Corporations, and Depositories, Commodity Exchanges, etc.). (b) Transactions which attract the provisions of SEBI (Substantial Acquisition of Shares & Takeovers) Regulations, 1997. (c) The activity of the Indian company whose securities are being transferred falls outside the automatic route and the approval of the FIPB has been obtained for the said transfer. (d) The transfer is to take place at a price which falls outside the pricing guidelines specified by the Reserve Bank from time to time. (e) Transfer of equity instruments where the non-resident acquirer proposes deferment of payment of the amount of consideration, prior approval of the Reserve Bank would be required. Further, in case approval is granted for a transaction, the same should be reported in Form FC-TRS, duly certified by AD Category – I bank, within 60 days from the date of receipt of the full and final amount of consideration. (ii) The following instances of transfer of shares from residents to non-residents by way of sale or otherwise requires Government approval followed by permission from RBI: (a) Transfer of shares of companies engaged in sectors falling under the Government Route. (b) Transfer of shares resulting in foreign investments in the Indian company, breaching the sectoral cap applicable. (iii)A person resident in India, who intends to transfer any security, by way of gift to a person resident outside India, has to obtain prior approval from Reserve Bank. While forwarding applications to Reserve Bank for approval for transfer of shares by way of gift, the documents mentioned in Annex-4 should be enclosed. Reserve Bank considers the following factors while processing such applications: (a) The proposed transferee (donee) is eligible to hold such security under Schedules 1, 4 and 5 of Notification No. FEMA 20/2000-RB dated May 3, 2000, as amended from time to time.

15

(b) The gift does not exceed 5 per cent of the paid-up capital of the Indian company/each series of debentures/each mutual fund scheme. (c) The applicable sectoral cap limit in the Indian company is not breached. (d) The transferor (donor) and the proposed transferee (donee) are close relatives as defined in Section 6 of the Companies Act, 1956, as amended from time to time. The current list is reproduced in Annex . (e) The value of security to be transferred together with any security already transferred by the transferor, as gift, to any person residing outside India does not exceed the rupee equivalent of USD 25,000 during the calendar year. (f) Such other conditions as stipulated by Reserve Bank in public interest from time to time. 6.6

Conversion of ECB/Lumpsum Fee/Royalty/Import of capital goods by SEZs into Equity. (i) Indian companies have been granted general permission for conversion of External Commercial Borrowings (ECB)( excluding those deemed as ECB) in convertible foreign currency due for payment/repayment into shares/preference shares, subject to the following conditions and reporting requirements. (a) The activity of the company is covered under the Automatic Route for FDI or the company has obtained Government approval for foreign equity in the company; (b) The foreign equity after conversion of ECB into equity is within the sectoral cap, if any; (c) Pricing of shares is as per SEBI regulations or erstwhile CCI guidelines in the case of listed or unlisted companies respectively; and (d) Compliance with the requirements prescribed under any other statute and regulation in force. (e) The conversion facility is available for ECBs availed under the Automatic or Government Route and is applicable to ECBs, due for payment or not, as well as secured/unsecured loans availed from non-resident collaborators. (ii) General permission is also available for issue of shares/preference shares against lumpsum technical know-how fee, royalty, under automatic route or SIA/FIPB route, subject to pricing guidelines of SEBI/CCI and compliance with applicable tax laws.

16

(iii)Units in Special Economic Zones (SEZs) are permitted to issue equity shares to non-residents against import of capital goods subject to the valuation done by a Committee consisting of Development Commissioner and the appropriate Customs officials.

7.0 ISSUE OF INSTRUMENTS. 7.1

Issue of Rights/Bonus Shares – FEMA provisions allow Indian companies to

freely issue Rights/Bonus shares to existing non-resident shareholders, subject to adherence to sectoral cap, if any. However, such issue of bonus / rights shares has to be in accordance with other laws/statutes like the Companies Act, 1956, SEBI (Disclosure and Investor Protection) Guidelines (in case of listed companies), etc. The price of shares offered on rights basis by the Indian company to non-resident shareholders shall not be lower than the price at which such shares are offered to resident shareholders. 7.2

Prior permission of RBI for Rights issue to erstwhile OCBs- OCBs have been

de-recognised as a class of investors from September 16, 2003. Therefore companies desiring to issue rights share to such erstwhile OCBs will have to take specific prior permission from RBI. As such, entitlement of rights share is not automatically available to OCBs. However bonus shares can be issued to erstwhile OCBs without the approval of RBI. 7.3

Additional allocation of rights share by residents to non-residents – Existing

non-resident shareholders are allowed to apply for issue of additional shares/convertible debentures/preference shares over and above their rights share entitlements.

The

investee company can allot the additional rights share out of unsubscribed portion, subject to the condition that the overall issue of shares to non-residents in the total paidup capital of the company does not exceed the sectoral cap. 7.4

Acquisition of shares under Scheme of Merger/Amalgamation – Mergers and

amalgamations of companies in India are usually governed by an order issued by a competent Court on the basis of the Scheme submitted by the companies undergoing merger/amalgamation. Once the scheme of merger or amalgamation of two or more Indian companies has been approved by a Court in India, the transferee company or new company is allowed to issue shares to the shareholders of the transferor company resident outside India, subject to the conditions that: (i) the percentage of shareholding of persons resident outside India in the transferee or new company does not exceed the sectoral cap, and 17

(ii) the transferor company or the transferee or the new company is not engaged in activities which are prohibited under the FDI policy . 7.5

Issue of shares under Employees Stock Option Scheme (ESOPs) – (i) Listed Indian companies are allowed to issue shares under the Employees Stock Option Scheme (ESOPs), to its employees or employees of its joint venture or wholly owned subsidiary abroad who are resident outside India, other than to the citizens of Pakistan. Citizens of Bangladesh can invest with the prior approval of FIPB. Shares under ESOPs can be issued directly or through a Trust subject to the condition that: (a) The scheme has been drawn in terms of relevant regulations issued by the SEBI, and (b) The face value of the shares to be allotted under the scheme to the nonresident employees does not exceed 5 per cent of the paid-up capital of the issuing company. (ii) Unlisted companies have to follow the provisions of the Companies Act, 1956. The Indian company can issue ESOPs to employees who are resident outside India, other than to the citizens of Pakistan. ESOPs can be issued to the citizens of Bangladesh with the prior approval of the FIPB. (iii)The issuing company is required to report the details of such issues to the Regional Office concerned of the Reserve Bank, within 30 days from the date of issue of shares.

18

CHAPTER 3: CALCULATION, ENTRY ROUTE, CAPS, CONDITIONS, ETC. OF INVESTMENT 8.0 CALCULATION OF TOTAL FOREIGN INVESTMENT I.E. DIRECT AND INDIRECT FOREIGN INVESTMENT IN INDIAN COMPANIES. 8.1

Investment in Indian companies can be made both by non-resident as well as

resident Indian entities. Any non-resident investment in an Indian company is direct foreign investment. Investment by resident Indian entities could again comprise of both resident and non-resident investment. Thus, such an Indian company would have indirect foreign investment if the Indian investing company has foreign investment in it. The indirect investment can be a cascading investment i.e. through multi-layered structure also. 8.2 For the purpose of computation of indirect Foreign investment, Foreign Investment in Indian company shall include all types of foreign investments i.e. FDI, investment by FIIs(holding as on March 31), NRIs, ADRs, GDRs, Foreign Currency Convertible Bonds (FCCB) and convertible preference shares, convertible Currency Debentures regardless of whether the said investments have been made under Schedule 1, 2, 3 and 6 of FEMA (Transfer or Issue of Security by Persons Resident Outside India) Regulations. 8.3 Guidelines for calculation of total foreign investment i.e. direct and indirect foreign investment in an Indian company. (i) Counting the Direct Foreign Investment: All investment directly by a nonresident entity into the Indian company would be counted towards foreign investment. (ii) Counting of indirect foreign Investment: (a) The foreign investment through the investing Indian company would not be considered for calculation of the indirect foreign investment in case of Indian companies which are ‘owned and controlled’ by resident Indian citizens and/or Indian Companies which are owned and controlled by resident Indian citizens . (b) For cases where condition (a) above is not satisfied or if the investing company is owned or controlled by ‘non resident entities’, the entire investment by the investing company into the subject Indian Company would be considered as indirect foreign investment,

19

(1) Provided that, as an exception, the indirect foreign investment in only the 100% owned subsidiaries of operating-cum-investing/investing companies, will be limited to the foreign investment in the operating-cum-investing/ investing company. For the purposes of explanation, it is clarified that this exception is being made since the downstream investment of a 100% owned subsidiary of the holding company is akin to investment made by the holding company and the downstream investment should be a mirror image of the holding company. (2) Illustration To illustrate, if the indirect foreign investment is being calculated for Company A which has investment through an investing company B having foreign investment, the following would be the method of calculation: (A) where Company B has foreign investment less than 50%- Company A would not be taken as having any indirect foreign investment through Company B. (B) where Company B has foreign investment of say 75% and: (I) invests 26% in Company A, the entire 26% investment by Company B would be treated as indirect foreign investment in Company A; (II) Invests 80% in Company A, the indirect foreign investment in Company A would be taken as 80% (III) where Company A is a wholly owned subsidiary of Company B (i.e. Company B owns 100% shares of Company A), then only 75% would be treated as indirect foreign equity and the balance 25% would be treated as resident held equity. The indirect foreign equity in Company A would be computed in the ratio of 75: 25 in the total investment of Company B in Company A. (iii)The total foreign investment would be the sum total of direct and indirect foreign investment. (iv) The above methodology of calculation would apply at every stage of investment in Indian Companies and thus to each and every Indian Company. (v)Additional conditions: (a) The full details about the foreign investment including ownership details etc. in Indian company(s) and information about the control of the company(s) would be furnished by the Company(s) to the Government of India at the time of seeking approval. 20

(b) In any sector/activity, where Government approval is required for foreign investment

and

in

cases

where

there

are

any

inter-se

agreements

between/amongst share-holders which have an effect on the appointment of the Board of Directors or on the exercise of voting rights or of creating voting rights disproportionate to shareholding or any incidental matter thereof, such agreements will have to be informed to the approving authority. The approving authority will consider for determining ownership and control such inter-se agreements when considering the case for granting approval for foreign investment. (c) In all sectors attracting sectoral caps, the balance equity i.e. beyond the sectoral foreign investment cap, would specifically be beneficially owned by/held with/in the hands of resident Indian citizens and Indian companies, owned and controlled by resident Indian citizens. (d) In the I& B and Defense sectors where the sectoral cap is less than 49%, the company would need to be ‘owned and controlled’ by resident Indian citizens and Indian companies, which are owned and controlled by resident Indian citizens. (1) For this purpose, the equity held by the largest Indian shareholder would have to be at least 51% of the total equity, excluding the equity held by Public Sector Banks and Public Financial Institutions, as defined in Section 4A of the Companies Act, 1956. The term ‘largest Indian shareholder’, used in this clause, will include any or a combination of the following: (A)

In the case of an individual shareholder, (I) The individual shareholder, (II) A relative of the shareholder within the meaning of Section 6 of the Companies Act, 1956. (III) A company/ group of companies in which the individual shareholder/HUF to which he belongs has management and controlling interest.

(B) In the case of an Indian company, (I) The Indian company (II) A group of Indian companies under the same management and ownership control.

21

(2) For the purpose of this Clause, “Indian company” shall be a company which must have a resident Indian or a relative as defined under Section 6 of the Companies Act, 1956/ HUF, either singly or in combination holding at least 51% of the shares. (3) Provided that, in case of a combination of all or any of the entities mentioned in Sub-Clauses (i) and (ii) of clause 8.3(v)(d)(1) above, each of the parties shall have entered into a legally binding agreement to act as a single unit in managing the matters of the applicant company. (e) If a declaration is made by persons as per section 187C of the Indian Companies Act about a beneficial interest being held by a non resident entity, then even though the investment may be made by a resident Indian citizen, the same shall be counted as foreign investment. (vi)The above mentioned policy and the methodology would be applicable for determining the total foreign investment in all sectors, excepting in sectors where it is governed specifically under any statutes or rules thereunder. Thus, for the present purposes this methodology will not be applicable in the Insurance Sector where it will continue to be governed by the relevant Regulation. 8.4 Any foreign investment already made in accordance with the guidelines in existence prior to February 13, 2009( date of issue of Press Note 2 of 2009) would not require any modification to conform with these guidelines. All other investments, past and future, would come under the ambit of these new guidelines.

9.0 ENTRY ROUTES FOR INVESTMENT: (i)

Investments can be made by non-residents in the shares/convertible

debentures/preference shares of an Indian company, through two routes; the Automatic Route and the Government Route. Under the Automatic Route, the foreign investor or the Indian company does not require any approval from the Reserve Bank or Government of India for the investment. Under the Government Route, prior approval of the Government of India through Foreign Investment Promotion Board (FIPB) is required. (ii)

Investment would be subject to the ‘Previous/existing venture/tie-up condition’.

22

(iii)

Guidelines for transfer of ownership or control of Indian companies in

sectors with caps from resident Indian citizens to non-resident entities in sectors with caps: (a)

In sectors with caps, including interalia defence production, air transport

services, ground handling services, asset reconstruction companies, private sector banking, broadcasting, commodity exchanges, credit information companies, insurance, print media, telecommunications and satellites, Government approval/FIPB approval would be required in all cases where: (b) An Indian company is being established with foreign investment and is owned by a non-resident entity or (c) An Indian company is being established with foreign investment and is controlled by a non-resident entity or (d) The control of an existing Indian company, currently owned or controlled by resident Indian citizens and Indian companies, which are owned or controlled by resident Indian citizens, will be/is being transferred/passed on to a non-resident entity as a consequence of transfer of shares to non-resident entities through amalgamation, merger, acquisition etc. or (e) The ownership of an existing Indian company, currently owned or controlled by resident Indian citizens and Indian companies, which are owned or controlled by resident Indian citizens, will be/is being transferred/passed on to a non-resident entity as a consequence of transfer of shares to non-resident entities through amalgamation, merger, acquisition etc. (f) It is clarified that these guidelines will not apply for sectors/activities where there are no foreign investment caps, that is, 100% foreign investment is permitted under the automatic route. (g)It is also clarified that Foreign investment shall include all types of foreign investments i.e. FDI, investment by FIIs, NRIs, ADRs, GDRs, Foreign Currency Convertible Bonds (FCCB) and convertible preference shares, regardless of whether the said investments have been made under Schedule 1, 2, 3 and 6 of FEMA (Transfer or Issue of Security by Persons Resident Outside India) Regulations.

10.0 CAPS ON INVESTMENTS 10.1

Investments can be made by non-residents in the capital of an Indian entity only

to the extent of the percentage of the total capital. Thus investment can be prohibited in 23

some sectors/activities or their can be a restriction through a CAP on the investment for other sector/activities ,while in others there may not be any restrictions and the total 100% capital can be held by non resident entities. The caps in various sector(s)/activity are detailed out later in this regulation.

11.0 ENTRY CONDITIONS ON INVESTMENT 11.1

Investments can be allowed by non-residents in the capital of an Indian entity in

certain sectors/activity with entry conditions. These entry conditions are then only applicable for investment by non-resident entities. The usual conditions are about minimum capital that is to be inducted/brought in, etc. The ENTRY CONDITIONS in various sector(s)/activity are detailed out later in this regulation.

12.0

OTHER

CONDITIONS

ON

INVESTMENT

BESIDES

ENTRY

CONDITIONS 12.1

Besides the entry conditions on foreign investment, the investment/investors have

to also comply with all relevant sectoral laws, regulations, conditions like obtaining of licence etc. 12.2

The security related conditions as contained in specific statutes will also have to

be complied with. 12.3

The State Governments/Union Territories have regulations in relations to the

subjects in their legislative domain. These conditions also have to be met/complied with.

13.0 DOWNSTREAM INVESTMENT BY INDIAN COMPANIES 13.1 The Policy for downstream investment by Indian companies seeks to lay down and clarify about compliance with the Foreign investment norms on entry route, conditionalities and sectoral caps. The ‘guiding principle’ is that downstream investment by companies ‘owned’ or ‘controlled’ by non resident entities would require to follow the same norms as a direct foreign investment i.e. only as much can be done by way of indirect foreign investment through downstream investment in Para 8 as can be done through direct foreign investment and what can be done directly can be done indirectly under same norms. 13.2 The Guidelines for calculation of total foreign investment, both direct and indirect in an Indian company, at every stage of investment, including downstream investment, have

24

been detailed in Para 8 which enables determination of total foreign investment in any/all Indian Companies. 13.3 Definitions: (i) ‘Operating Company’ is an Indian company which is undertaking operations in various economic activities and sectors. (ii) ‘Downstream investment’ means indirect foreign investment by one Indian company into another Indian company by way of subscription or acquisition in terms of Para 8. Para 8.3 provides the guidelines for calculation of indirect foreign investment with conditions specified in para 8.5 (iii) ‘Investing Company’ means an Indian Company holding only investments in another Indian company, directly or indirectly, other than for trading of such holdings/securities. (iv) ‘Foreign Investment’ would have the same meaning as in Para 8 13.4 Guidelines for downstream investment by Investing Indian Companies ‘owned or controlled by non resident entities’ as per Para 8: (i) The Policy on downstream investment comprises policy for (a) only operating companies (b) operating-cum-investing companies (c) only investing companies as below: (ii) Only operating companies: Foreign investment in such companies would have to comply with the relevant sectoral conditions on entry route, conditionalities and caps with regard to the sectors in which such companies are operating. (iii) Operating-cum-investing companies: Foreign investment into such companies would have to comply with the relevant sectoral conditions on entry route, conditionalities and caps with regard to the sectors in which such companies are operating. Further, the subject Indian companies into which downstream investments are made by such companies would have to comply with the relevant sectoral conditions on entry route, conditionalities and caps in regard of the sector in which the subject Indian companies are operating. (iv) Investing companies: Foreign Investment in Investing Companies will require the prior Government/FIPB approval, regardless of the amount or extent of foreign investment. The Indian companies into which downstream investments are made by such investing companies would have to comply with the relevant sectoral conditions on entry route, conditionalities and caps in regard of the sector in which the subject Indian companies are operating. 25

13.5 For companies which do not have any operations and also do not have any downstream investments, for infusion of foreign investment into such companies, Government/FIPB approval would be required, regardless of the amount or extent of foreign investment. Further, as and when such company commences business(s) or makes downstream investment it will have to comply with the relevant sectoral conditions on entry route, conditionalities and caps. 13.6. For Operating-cum- investing companies and investing companies (Para 14.4) and for companies as per para 14.5 above, downstream investments can be made subject to the following conditions: (i) Such company is to notify SIA, DIPP and FIPB of its downstream investment within 30 days of such investment even if equity shares/CCPS/CCD have not been allotted along with the modality of investment in new/existing ventures (with/without expansion programme); (ii) downstream investment by way of induction of foreign equity in an existing Indian Company to be duly supported by a resolution of the Board of Directors supporting the said induction as also a shareholders Agreement if any; (iii) issue/transfer/pricing/valuation of shares shall be in accordance with applicable SEBI/RBI guidelines; (iv) Investing companies would have to bring in requisite funds from abroad and not leverage funds from domestic market for such investments. This would, however, not preclude downstream operating companies to raise debt in the domestic market.

14.0

GUIDELINES FOR CONSIDERATION OF FDI PROPOSALS BY FIPB:

14.1

The following guidelines are laid down to enable the FIPB to consider the

proposals for FDI and formulate its recommendations. 14.2

All applications should be put up before the FIPB by the Secretariat within 15

days and it should be ensured that comments of the administrative ministries are placed before the Board either prior to/or in the meeting of the Board. 14.3

Proposals should be considered by the Board keeping in view the time frame of

thirty (30) days for communicating Government decision .

26

14.4

In cases in which either the proposal is not cleared or further information is

required in order to obviate delays presentation by applicant in the meeting of the FIPB should be resorted to. 14.5

While considering cases and making recommendations, FIPB should keep in

mind the sectoral requirements and the sectoral policies vis-à-vis the proposal (s). 14.6

FIPB would consider each proposal in totality

14.7

The Board should examine the following while considering proposals submitted

to it for consideration. (i) whether the items of activity involve industrial licence or not and if so the considerations for grant of industrial licence must be gone into; (ii) whether the proposal involves any export projection and if so the items of export and the projected destinations. (iii)Whether the proposal has any strategic or defence related considerations. 14.8

While considering proposals the following may be priortised.

(i) Items falling in infrastructure sector. (ii) Items which have an export potential. (iii)Items which have large scale employment potential and especially for rural people. (iv) Items which have a direct or backward linkage with agro business/farm sector. (v) Items which have greater social relevance such as hospitals, human resource development, life saving drugs and equipment. (vi) Proposals which result in induction of technology or infusion of capital. 14.9

The following should be especially considered during the scrutiny and

consideration of proposals. (i) The extent of foreign equity proposed to be held (keeping in view sectoral caps if any (ii) Extent of equity from the point of view whether the proposed project would amount to a holding company/wholly owned subsidiary/a company with dominant foreign investment (i.e. 76% or more) joint venture. (iii)Whether the proposed foreign equity is for setting up a new project (joint venture or otherwise) or whether it is for enlargement of foreign/NRI equity or whether it is for fresh induction of foreign equity/NRI equity in an existing Indian company. (iv) In the case of fresh induction offerings/NRI equity and/or in cases of enlargement of foreign/NRI equity, in existing Indian companies whether there is a resolution 27

of the Board of Directors supporting the said induction/enlargement of foreign/NRI equity and whether there is a shareholders agreement or not. (v) In the case of induction of fresh equity in the existing Indian companies and/or enlargement of foreign equity in existing Indian companies, the reason why the proposal has been made and the modality for induction/enhancement (i.e. whether by increase of paid up capital/authorized capital, transfer of shares (hostile or otherwise) whether by rights issue, or by what modality. (vi) Issue/transfer/pricing of shares will be as per SEBI/RBI guidelines. (vii) Whether the activity is an industrial or a service activity or a combination of both. (viii) Whether the items of activity involves any restriction by way of reservation for the small scale sector. (ix) Whether there are any sectoral restrictions on the activity (x) Whether the proposal involves import of items which are either hazardous, banned or detrimental to environment (e.g. import of plastic scrap or recycled plastics). 14.10 No condition specific to the letter of approval issued to a foreign investor would be changed or additional condition imposed subsequent to the issue of a letter of approval. This would not prohibit changes in general policies and, regulations applicable to the industrial sector. 14.11 Where in case of a proposal (not being 100% subsidiary) foreign direct investment has been approved upto a designated percentage of foreign equity in the joint venture company, the percentage of resident entities would not be reduced while permitting induction of additional capital subsequently. Also in the case of approved activities, if the foreign investor(s) concerned wishes to bring in additional capital on later dates keeping the investment to such approved activities, FIPB would recommend such cases for approval on an automatic basis. 14.12 As regards proposal for private sector banks, the application would be considered only after “in principle” permission is obtained from the Reserve Bank of India (RBI).

15.0

CONSTITUTION OF FIPB :

FIPB comprises of the following Core Group of Secretaries to the Government of India:

28

(i) Secretary to Government, Department of Economic Affairs, Ministry of Finance – Chairperson (ii) Secretary to Government, Department of Industrial Policy & Promotion, Ministry of Commerce & Industry (iii)Secretary to Government, Department of Commerce, Ministry of Commerce & Industry (iv) Secretary to Government, Economic Relations, Ministry of External Affairs (v) Secretary to Government, Ministry of Overseas Indian Affairs. The Board would be able to co-opt other Secretaries to the Government of India and top officials of financial institutions, banks and professional experts of Industry and Commerce, as and when necessary.

29

CHAPTER

4:

POLICY

ON

ROUTE,

CAPS

AND

CONDITIONS: 16.0

PROHIBITION ON INVESTMENT IN INDIA.

(i) Foreign investment in any form is prohibited in a company or a partnership firm or a proprietary concern or any entity, whether incorporated or not (such as Trusts) which is engaged or proposes to engage in the following activities: (a) Business of chit fund, or (b) Nidhi company, or (c) Agricultural or plantation activities, or (d) Real estate business, or construction of farm houses, or (e) Trading in Transferable Development Rights (TDRs) (f) Lottery Business, Gambling and Betting including Government /private lottery, online lotteries, casinos etc. (ii) It is clarified that “real estate business” does not include development of townships, construction of residential/commercial premises, roads or bridges educational institutions, recreational facilities, city and regional level infrastructure,

townships.

It

is

further

clarified

that

partnership

firms/proprietorship concerns having investments as per FEMA regulations are not allowed to engage in print Media sector. (iii)In addition to the above, investment in the form of FDI is also prohibited in certain sectors such as (Annex-2) : (a) Retail Trading (except single brand product retailing) (b) Atomic Energy (c) Lottery Business including Government /private lottery, online lotteries,etc. (d) Gambling and Betting including casinos etc. (e) Business of chit fund (f) Nidhi company (g) Trading in Transferable Development Rights (TDRs) (h) Activities / sectors not opened to private sector investment. (iv)

Besides

foreign

investment

in

any

form,

foreign

technology

collaboration in any form including licencing for franchise, trademark, brand

30

name, management contract is also completely prohibited for Lottery Business and Gambling and Betting activities.

AGRICULTURE

17.0

Agriculture & Animal Husbandry

17.1 100% FDI is allowed under automatic route in Floriculture, Horticulture, Development of Seeds, Animal Husbandry, Pisciculture, Aquaculture and Cultivation of Vegetables & Mushrooms under controlled conditions and services related to agro and allied sectors. Note: Besides the above, FDI is not allowed in any other agricultural sector/activity. 17.2

Plantation - including tea plantation.

17.3 100% FDI is allowed in the Tea sector including tea plantations under Government route subject to the conditions of : (i) Compulsory divestment of 26% equity of the company in favour of an Indian partner/Indian public within a period of 5 years (ii) Prior approval of the State Governemnt concerned in case of any future land use change. Note: Besides the above, FDI is not allowed in any other plantation sector/activity.

INDUSTRY

18.0

MINING

18.1

100% FDI is allowed under the automatic route in Mining and Exploration of

:metal and non-metal ores including diamond, gold, silver and precious ores but excluding titanium bearing minerals and its ores; all other minerals subject to the Mines and Minerals( Development & Regulation) Act 1957. 18.2

Coal and Lignite

(i)

100% FDI is allowed under the automatic route in Coal & Lignite mining for

captive consumption by power projects, iron & steel and cement units and other eligible activities permitted under and subject to the provisions of Coal Mines (Nationalisation) Act, 1973.

31

(ii)

100% FDI is allowed for setting up coal processing plants like washeries subject

to the condition that the company shall not do coal mining and shall not sell washed coal or sized coal from its coal processing plants in the open market and shall supply the washed or sized coal to those parties who are supplying raw coal to coal processing plants for washing or sizing. 18.3

Mining and mineral separation of titanium bearing minerals and ores, its

value addition and integrated activities. 18.3(i) India has large reserves of beach sand minerals in the coastal stretches around the country. Titanium bearing minerals viz. Ilmenite, rutile and leucoxene, and Zirconium bearing minerals including zircon are some of the beach sand minerals which have been classified as “prescribed substances” under the Atomic Energy Act, 1962. (ii)

Under the Industrial Policy Statement 1991, mining and production of minerals

classified as “prescribed substances” and specified in the Schedule to the Atomic Energy (Control of Production and Use) Order, 1953 were included in the list of industries reserved for the public sector. Vide Government of India Resolution No. 8/1(1)/97PSU/1422 dated 6th October 1998 issued by the Department of Atomic Energy laying down the policy for exploitation of beach sand minerals, private participation including Foreign Direct Investment (FDI), was permitted in mining and production of Titanium ores (Ilmenite, Rutile and Leucoxene) and Zirconium minerals (Zircon). FDI up to 74% was permitted with prior approval of the Government in pure value addition projects without mining and mineral separation as well as integrated projects comprising both mining & mineral separation and value addition. (iii)

Vide Government of India Notification No. S.O.61(E) dated 18.1.2006, the

Department of Atomic Energy re-notified the list of “prescribed substances” under the Atomic Energy Act 1962. Titanium bearing ores and concentrates (Ilmenite, Rutile and Leucoxene) and Zirconium, its alloys and compounds and minerals/cpmcentrates including Zircon, were removed from the list of “prescribed substances”. (iv)

FDI up to 100% will be allowed under Government route in mining and mineral

separation of titanium bearing minerals & ores, its value addition and integrated activities subject to sectoral regulations and the Mines and Minerals (Development and Regulation Act 1957). (v) (a) FDI for separation of titanium bearing minerals & ores will be subject to the following additional conditions viz.:

32

(A) value addition facilities are set up within India along with

transfer of

technology; (B) disposal of tailings during the mineral separation shall be carried out in accordance with disposal of tailings during the mineral separation shall be carried out in accordance with regulations framed by the Atomic Energy Regulatory Board such as Atomic Energy (Radiation Protection) Rules, 2004 and the Atomic Energy (Safe Disposal of Radioactive Wastes) Rules, 1987. (vi)

FDI will not be allowed in mining of “prescribed substances” listed in the

Government of India Notification No. S.O. 61(E) dated 18.1.2006 issued by the Department of Atomic Energy.

MANUFACTURING 19.0 Manufacture of items reserved for production in Small Scale Sector 19.1

Any industrial undertaking, with or without FDI, which is not a Medium or Small

Scale Enterprise as defined in the Micro, Small and Medium Enterprises Development Act, 2006, manufacturing items reserved for manufacture in the MSE sector (presently 21 items) as per the Industrial Policy, would require Government route where foreign investment is more than 24% in the equity capital. Such an undertaking would also require an Industrial License under the Industries (Development & Regulation) Act 1951, for such manufacture. The issue of Industrial License is subject to a few general conditions and the specific condition that the Industrial Undertaking shall undertake to ‘Export a minimum of 50% of the new or additional annual production of the MSE reserved items to be achieved within a maximum period of three years. The export obligation would be applicable from the date of commencement of commercial production’. 20.0 Cigars & Cagarettes Manufacture: 100% FDI is allowed under Government route and subject to the of Industrial licence under the Industries(Development & Regulation) Act 1951. 21.0 Coffee & Rubber processing and warehousing : 100% FDI is allowed under the automatic route. 22.0

Defence Industry

22.1

FDI is permissible up to 26%, under Government route subject to Industrial

license under the Industries (Development & Regulation) Act 1951 and the following conditions: 33

(i) Licence applications will be considered and licences given by the Department of Industrial Policy & Promotion, Ministry of Commerce & Industry, in consultation with Ministry of Defence. (ii) Cases involving FDI will be considered by the FIPB and licences given by the Department of Industrial Policy & Promotion in consultation with Ministry of Defence. (iii)The applicant should be an Indian company / partnership firm. (iv) The management of the applicant company / partnership should be in Indian hands with majority representation on the Board as well as the Chief Executives of the company / partnership firm being resident Indians. (v) Full particulars of the Directors and the Chief Executives should be furnished along with the applications. (vi) The Government reserves the right to verify the antecedents of the foreign collaborators and domestic promoters including their financial standing and credentials in the world market. Preference would be given to original equipment manufacturers or design establishments, and companies having a good track record of past supplies to Armed Forces, Space and Atomic energy sections and having an established R & D base. (vii) There would be no minimum capitalization for the FDI. A proper assessment, however, needs to be done by the management of the applicant company depending upon the product and the technology. The licensing authority would satisfy itself about the adequacy of the net worth of the foreign investor taking into account the category of weapons and equipment that are proposed to be manufactured. (viii) There would be a three-year lock-in period for transfer of equity from one foreign investor to another foreign investor (including NRIs & OCBs with 60% or more NRI stake) and such transfer would be subject to prior approval of the FIPB and the Government. (ix) The Ministry of Defence is not in a position to give purchase guarantee for products to be manufactured. However, the planned acquisition programme for such equipment and overall requirements would be made available to the extent possible.

34

(x) The capacity norms for production will be provided in the licence based on the application as well as the recommendations of the Ministry of Defence, which will look into existing capacities of similar and allied products. (xi) Import of equipment for pre-production activity including development of prototype by the applicant company would be permitted. (xii) Adequate safety and security procedures would need to be put in place by the licensee once the licence is granted and production commences. These would be subject to verification by authorized Government agencies. (xiii) The standards and testing procedures for equipment to be produced under licence from foreign collaborators or from indigenous R & D will have to be provided by the licensee to the Government nominated quality assurance agency under appropriate confidentiality clause. The nominated quality assurance agency would inspect the finished product and would conduct surveillance and audit of the Quality Assurance Procedures of the licensee. Self-certification would be permitted by the Ministry of Defence on case to case basis, which may involve either individual items, or group of items manufactured by the licensee. Such permission would be for a fixed period and subject to renewals. (xiv) Purchase preference and price preference may be given to the Public Sector organizations as per guidelines of the Department of Public Enterprises. (xv) Arms and ammunition produced by the private manufacturers will be primarily sold to the Ministry of Defence.

These items may also be sold to other

Government entities under the control of the Ministry of Home Affairs and State Governments with the prior approval of the Ministry of Defence. No such item should be sold within the country to any other person or entity. The export of manufactured items would be subject to policy and guidelines as applicable to Ordnance Factories and Defence Public Sector Undertakings. Non-lethal items would be permitted for sale to persons / entities other than the Central of State Governments with the prior approval of the Ministry of Defence. Licensee would also need to institute a verifiable system of removal of all goods out of their factories. Violation of these provisions may lead to cancellation of the licence. (xvi) Government decision on applications to FIPB for FDI in defence industry sector will be normally communicated within a time frame of 10 weeks from the date of acknowledgement by the Secretariat for Industrial Assistance in the Department of Industrial Policy & Promotion. 35

23.0

POWER

23.1 Electric Generation, Transmission, Distribution and Trading: FDI upto 100% is permitted under automatic route for: 23.2 Generation and transmission of electric energy produced in-hydro electric, coal/lignite based thermal, oil based thermal and gas based thermal power plants. 23.3 Non-Conventional Energy Generation and Distribution. 22.4 Distribution of electric energy to households, industrial, commercial and other users. 23.5 This does not include generation, transmission and distribution of electricity produced in atomic power plant/atomic energy since private investment in this sector/activity is prohibited and is reserved for public sector. 23.6 Power Trading 23.7

The above would be subject to the provisions of the Electricity Act 2003.

SERVICES SECTOR.

24.0

Advertising and Films

24.1 100% FDI under the automatic route is allowed in Advertising sector 24.2 100% FDI under the automatic route is allowed in Film Industry including film financing, production, distribution, exhibition, marketing and associated activities related to film industry. 25.0

Civil Aviation Sector

25.1 The Civil Aviation sector includes Airports, Scheduled and Non-Scheduled domestic passenger airlines, Helicopter services / Seaplane services, Ground Handling Services, Maintenance and Repair organizations; Flying training institutes; and Technical training institutions. 25.2

For the purposes of the Civil Aviation sector:

(i) “Airport” means a landing and taking off area for aircrafts, usually with runways and aircraft maintenance and passenger facilities and includes aerodrome as defined in clause (2) of section 2 of the Aircraft Act, 1934; (ii) "Aerodrome" means any definite or limited ground or water area intended to be used, either wholly or in part, for the landing or departure of aircraft, and includes 36

all buildings, sheds, vessels, piers and other structures thereon or appertaining thereto; (iii)"Air transport service" means a service for the transport by air of persons, mails or any other thing, animate or inanimate, for any kind of remuneration whatsoever, whether such service consists of a single flight or series of flights. (iv) "Air Transport Undertaking" means an undertaking whose business includes the carriage by air of passengers or cargo for hire or reward. (v) "Aircraft component" means any part, the soundness and correct functioning of which, when fitted to an aircraft, is essential to the continued airworthiness or safety of the aircraft and includes any item of equipment; (vi) "Helicopter" means a heavier-than -air aircraft supported in flight by the reactions of the air on one or more power driven rotors on substantially vertical axis; (vii) "Scheduled air transport service", means an air transport service undertaken between the same two or more places and operated according to a published time table or with flights so regular or frequent that they constitute a recognisably systematic series, each flight being open to use by members of the public. (viii) “Non-Scheduled Air Transport service” means any service which is not a scheduled air transport service and will include Chartered and Cargo airlines. (ix) “Chartered” and “Cargo” airlines would mean such airlines which meet the conditions as given in the Civil Aviation Requirements issued by the Ministry of Civil Aviation. (x) "Seaplane" means an aeroplane capable normally of taking off from and alighting solely on water; (xi) “Ground Handling” means (i) ramp handling , (ii) traffic handling both of which shall include the activities as specified by the Ministry of Civil Aviation through the Aeronautical Information Circulars from time to time, and (iii) any other activity specified by the Central Government to be a part of either ramp handling or traffic handling. 25.3

Policy for FDI in Civil Aviation sector

(i) Airports: (a) Greenfield projects- FDI upto 100% is allowed under the automatic route. (b) Existing projects- FDI upto 100% is allowed under Government route for FDI beyond 74%. (ii) Air Transport Services: 37

(a) Air Transport Services would include Domestic Scheduled Passenger Airlines; Non-Scheduled Airlines; Chartered Airlines; Cargo Airlines; helicopter and seaplane services. (b) No foreign airlines would be allowed to participate directly or indirectly in the equity of an Air Transport Undertaking engaged in operating Scheduled, NonScheduled, and Chartered airlines. (c) Foreign airlines are allowed to participate in the equity of companies operating Cargo airlines, helicopter and seaplane services. (iii)FDI ceilings in Air Transport Services: (a) Scheduled Air Transport Service/ Domestic Scheduled Passenger Airline - FDI up to 49% and investment by Non-resident Indians (NRI) up to 100% allowed on the automatic route. (b) Non-Scheduled Air Transport Service/ Non-Scheduled airlines, Chartered airlines, and Cargo airlines- FDI up to 74% and investment by Non-resident Indians (NRI) up to 100% allowed. FDI in on the automatic route upto 49% and on the Government route beyond 49% and upto 74%. (c) Helicopter services/seaplane services requiring DGCA approval- FDI up to 100% allowed on the automatic route. (iv) FDI ceilings in other services under Civil Aviation sector (d) (a)

Ground Handling Services- FDI up to 74% and investment by Non-

resident Indians (NRI) up to 100% allowed. FDI in on the automatic route upto 49% and on the Government route beyond 49% and upto 74%. This will be subject to sectoral regulations and security clearance. (b) Maintenance and Repair organizations; flying training institutes; and technical training institutions - FDI up to 100% allowed on the automatic route. 25.4

The policy for FDI in the Civil Aviation Sector would be subject to the Aircraft

Rules, 1934 as amended from time to time, Civil Aviation Requirements, and Aeronautical Information Circulars as notified by the Ministry of Civil Aviation.

26.0

Asset Reconstruction Companies:

26.1

Persons resident outside India [other than Foreign Institutional Investors (FIIs)],

can invest in the equity capital of Asset Reconstruction Companies (ARCs) registered with Reserve Bank only under the Government Route. Automatic Route is not available

38

for such investment.

Such investments have to be strictly in the nature of FDI.

Investments by FIIs are not permitted in the equity capital of ARCs and FDI is restricted to 49 per cent of the paid-up capital of the ARC. 26.2

However, FIIs registered with SEBI can invest in the Security Receipts (SRs)

issued by ARCs registered with Reserve Bank. FIIs can invest upto 40 per cent of each tranche of scheme of SRs, subject to the condition that investment by a single FII in each tranche of SRs shall not exceed 10 per cent of the issue. 26.3

Any individual investment of more than 10% would be subject to provisions of

section 3(3) (f) of Securitization and Reconstruction of Financial Assests and Enforcement of Security Interest Act, 2002. 27.0

Banking –Private sector

27.1 FDI limit in Private Sector Banks is 74 % including investment by FIIs. This will include FDI investment under the Portfolio Investment Scheme (PIS) by FIIs, NRIs and shares acquired prior to September 16, 2003 by OCBs, and continue to include IPOs, Private placements, GDR/ADRs and acquisition of shares from existing shareholders. FDI as above upto 49% is under the automatic route and beyond that upto 74% on the Government route. 27.2

The aggregate foreign investment in a private bank from all sources will be

allowed up to a maximum of 74 per cent of the paid up capital of the Bank. At all times, at least 26 per cent of the paid up capital will have to be held by residents, except in regard to a wholly-owned subsidiary of a foreign bank. 27.3

The stipulations as above will be applicable to all investments in existing private

sector banks also. 27.4

The permissible limits under portfolio investment schemes through stock

exchangers for FIIs and NRIs will be as follows: (i) In the case of FIIs, as hitherto, individual FII holding is restricted to 10 per cent, aggregate limit for all FIIs cannot exceed 24 per cent, which can be raised to 49 per cent by the bank concerned passing a resolution by its Board of Directors followed by passing of a special resolution to that effect by its General Body. (a) Thus, the FII investment limit will continue to be within 49 per cent. (b) In the case of NRIs, as hitherto, individual holding is restricted to 5 per cent and aggregate limit cannot exceed 10 per cent. However, NRI holding can be allowed up to 24 per cent provided the banking company passes a special resolution to the effect in the General Body. 39

(c) Applications for foreign direct investment (FDI route) in private banks having joint venture/subsidiary in insurance sector may be addressed to the Reserve Bank of India (RBI) for consideration in consultation with the Insurance Regulatory and Development Authority (IRDA) in order to ensure that the 26 per cent limit of foreign shareholding applicable for the insurance sector is not being breached. (d) Transfer of shares under FDI from residents to non-residents will continue to require approval of Foreign Investment Promotion Board (FIPB) under Foreign Exchange Management Act (FEMA). (e) The policies and procedures prescribed from time to time by RBI and other institutions such as SEBI, D/o Company Affairs and IRDA on these matters will continue to apply. (f) RBI guidelines relating to acquisition by purchase or otherwise of shares of a private bank, if such acquisition results in any person owning or controlling 5 per cent or more of the paid up capital of the private bank will apply to foreign investors as well. (ii) Setting up of a subsidiary by foreign banks (a) Foreign banks will be permitted to either have branches or subsidiaries not both. (b) Foreign banks regulated by banking supervisory authority in the home country and meeting Reserve Bank’s licensing criteria will be allowed to hold 100 per cent paid up capital to enable them to set up a wholly-owned subsidiary in India. (c) A foreign bank may operate in India through only one of the three channels viz., (i) branches (ii) a wholly-owned subsidiary and (iii) a subsidiary with aggregate foreign investment up to a maximum of 74 per cent in a private bank. (d) A foreign bank will be permitted to establish a wholly-owned subsidiary either trough conversion of existing branches into a subsidiary or through a fresh banking license.

A foreign bank will be permitted to establish a

subsidiary through acquisition of shares of an existing private sector bank provided at least 26 per cent of the paid capital of the private sector bank is held by residents at all times consistent with para 1(b) above.

40

(e) A subsidiary of a foreign bank will be subject to the licensing requirements and conditions broadly consistent with those for new private sector banks. (f) Guidelines for setting up a wholly-owned subsidiary of a foreign bank will be issued separately by RBI. All applications by a foreign bank for setting up a subsidiary or for conversion of their existing branches to subsidiary in India will have to be made to the RBI. (iii) At present there is a limit of ten per cent on voting rights in respect of banking companies, and this should be noted by potential investor. Any change in the ceiling can be brought about only after final policy decisions and appropriate Parliamentary approvals. 28.0

Banking- Public Sector

28.1

FDI and Portfolio Investment in nationalized Banks are subject to overall statutory limit of 20% as per section 3(2D) of the Banking Companies (Acquisition & Transfer of Undertakings) Acts 1970/80. The same ceiling is also applicable to the State Bank of India and its associate Banks.

29.0

Broadcasting

29.1Terrestrial Broadcasting FM (FM Radio): Foreign investment, including FDI, NRI and PIO investments and portfolio investments are permitted up to 20% equity for FM Radio’s Broadcasting Services with prior approval of the Government subject to such terms and conditions as specified from time to time by Ministry of Information and Broadcasting for grant of permission for setting up of FM Radio Stations. 29.2 Cable Network: Foreign investment, including FDI, NRI and PIO investments and portfolio investments are permitted up to 49% for Cable Networks under Government route subject to Cable Television Network Rules, 1994 and other conditions as specified from time to time by Ministry of Information and Broadcasting. 29.3 Direct –to-Home: Foreign investment, including FDI, NRI and PIO investments and portfolio investments are permitted up to 49% for Direct to Home under Government route. Within the limit of 49% FDI will not exceed 20%. This will be subject to such guidelines/terms and conditions as specified from time to time by Ministry of Information and Broadcasting. 29.4 Setting up hardware facilities such as up-linking, HUB (i) FDI policy in the Up-linking of TV Channels is as under:

41

a) FDI (including investment by FII) up to 49% would be permitted under the Government route for setting up Up-linking HUB/ Teleports; b) FDI up to 100% would be allowed under the Government route for Up linking a Non-News & Current Affairs TV Channel; c) FDI (including investment by FII) up to 26% would be permitted under the Government route for Up-linking a News & Current Affairs TV Channel subject to the condition that the portfolio investment in the form of FII/ NRI deposits shall not be “persons acting in concert” with FDI investors, as defined in the SEBI(Substantial Acquisition of Shares and Takeovers) Regulations, 1997. (ii) The above will be further subject to the Company permitted to uplink the channel shall certifying the continued compliance of this requirement through the Company Secretary at the end of each financial year. (iii) FDI for Up-linking TV Channels will be subject to compliance with the Uplinking Policy of the Government of India notified by the Ministry of Information & Broadcasting from time to time. 30.0 Business Services- 100% FDI under the automatic route is allowed in Data processing, software development and computer consultancy services; Software supply services; Business and management consultancy services, Market Research Services, Technical testing& Analysis services. 31.0

Commodity Exchanges

31.1

Futures trading in commodities are regulated under the Forward Contracts

(Regulation) Act, 1952. Commodity Exchanges, like Stock Exchanges, are infrastructure companies in the commodity futures market. With a view to infuse globally acceptable best practices, modern management skills and latest technology, it was decided to allow foreign investment in Commodity Exchanges. 31.2

For the purposes of the Commodity Exchanges:

(i) “Commodity Exchange” is a recognized association under the provisions of the Forward Contracts (Regulation) Act, 1952, as amended from time to time, to provide exchange platform for trading in forward contracts in commodities. (ii) In terms of the Forward Contracts (Regulation) Act, 1952(a) ”recognized association” means an association to which recognition for the time being has been granted by the Central Government under Section 6 of the Forward Contracts (Regulation) Act, 1952. 42

(b) “Association” means any body of individuals, whether incorporated or not, constituted for the purposes of regulating and controlling the business of the sale or purchase of any goods and commodity derivative. (c) “Forward contract” means a contract for the delivery of goods and which is not a ready delivery contract. (d) “Commodity derivative” means•

a contract for delivery of goods, which is not a ready delivery contract; or

•

a contract for differences which derives its value from prices or indices of prices of such underlying goods or activities, services, rights, interests and events, as may be notified in consultation with the Forward Markets Commission by the Central Government, but does not include securities.

31.3

Policy for foreign investment in Commodity Exchanges

(i) Foreign investment will be allowed through a composite ceiling i.e. Foreign Direct Investment (FDI) under the FDI Scheme incorporated as Schedule 1 under regulation 5 (1) of the Foreign Exchange Management (Transfer or Issue of Security By a Person Resident Outside India) Regulations, 2000 (FEMA Regulations) + investment by registered Foreign Institutional Investors (FII) under the Portfolio Investment Scheme incorporated as Schedule 2 under Regulation 5(2) of the FEMA Regulations, is allowed up to 49%. (ii) FDI will be allowed under the Government route. (iii) Investment by registered FII under the Portfolio Investment Scheme will be limited to 23% and investment under the FDI Scheme will be limited to 26%. (iv) FII purchases shall be restricted to secondary market only. (v) No foreign investor/ entity, including persons acting in concert, will hold more than 5% of the equity in these companies. 32.0

Construction and maintenance

32.1

100% FDI is allowed in Construction and maintenance of-roads, rail-beds,

bridges, tunnels, pipelines, ropeways, ports, harbours and runways, waterways & water reservoirs, hydroelectric projects, power plants, industrial plant. 32.2

100 % FDI is permitted in construction and maintenance of Roads and highways

offered on BOT basis including collection of toll. 32.3

Ports and Harbours: 100% FDI is allowed in:

(i) Leasing of existing assets of ports

43

(ii) Construction/creation and maintenance of assets such as-container terminals bulk/break bulk/multipurpose and specialized cargo berths, warehousing, container freight stations, storage facilities and tank farms, cranage/ handling equipment, setting of captive power plants, dry docking and ship repair facilities. (iii) Leasing of equipment for port handling and leasing of floating crafts (iv) Captive facilities for port based industries. 33.0

Development

of

Townships,

Housing,

Built-up

infrastructure

and

Construction-development projects. 33.1 FDI up to 100% under the automatic route in townships, housing, built-up infrastructure and construction-development projects (which would include, but not be restricted to, housing, commercial premises, hotels, resorts, hospitals, educational institutions, recreational facilities, city and regional level infrastructure is allowed subject to the following guidelines: Minimum area to be developed under each project would be as under: (i) In case of development of serviced housing plots, a minimum land area of 10 hectares (ii) In case of construction-development projects, a minimum built-up area of 50,000 sq.mts (iii)In case of a combination project, any one of the above two conditions would suffice 33.2The investment would further be subject to the following conditions: (i) Minimum capitalization of US$10 million for wholly owned subsidiaries and US$ 5 million for joint ventures with Indian partners. The funds would have to be brought in within six months of commencement of business of the Company. (ii) Original investment cannot be repatriated before a period of three years from completion of minimum capitalization. However, the investor may be permitted to exit earlier with prior approval of the Government through the FIPB. 33.3 At least 50% of the project must be developed within a period of five years from the date of obtaining all statutory clearances. The investor would not be permitted to sell undeveloped plots. For the purpose of these guidelines, “undeveloped plots” will mean where roads, water supply, street lighting, drainage, sewerage, and other conveniences, as applicable under prescribed regulations, have not been made available. It will be necessary that the investor provides this infrastructure and obtains the completion

44

certificate from the concerned local body/service agency before he would be allowed to dispose of serviced housing plots. 33.4 The project shall conform to the norms and standards, including land use requirements and provision of community amenities and common facilities, as laid down in the applicable building control regulations, bye-laws, rules, and other regulations of the State Government/Municipal/Local Body concerned. 33.5 The investor shall be responsible for obtaining all necessary approvals, including those of the building/layout plans, developing internal and peripheral areas and other infrastructure facilities, payment of development, external development and other charges and complying with all other requirements as prescribed under applicable rules/bye-laws/regulations of the State Government/ Municipal/Local Body concerned. 33.6 The State Government/ Municipal/ Local Body concerned, which approves the building / development plans, would monitor compliance of the above conditions by the developer. 33.7

The conditions as at para 31.1, 31.2 and 31.3 would not apply to Hotels &

Tourism, Hospitals and SEZ’s. Note- FDI is not allowed in Real Estate Business. 34.0

Courier services for carrying packages, parcels and other items which do not

come within the ambit of the Indian Post Office Act, 1898. 34.1 100% FDI is allowed under the Government route. 34.2

This will be subject to existing Law i.e Indian Post Office Act 1998 and

exclusion of activity relating to the distribution of letters. 35.0 Credit Information Companies (CIC) 35.1

For the purposes of CIC and in terms of the Credit Information Companies

(Regulation) Act, 2005(i) “Credit information” means any information relating to— (a) the amounts and the nature of loans or advances, amounts outstanding under credit cards and other credit facilities granted or to be granted, by a credit institution to any borrower; (b) the nature of security taken or proposed to be taken by a credit institution from any borrower for credit facilities granted or proposed to be granted to him;

45

(c) the guarantee furnished or any other non-fund based facility granted or proposed to be granted by a credit institution for any of its borrowers; (d) the creditworthiness of any borrower of a credit institution; (e) any other matter which the Reserve Bank may, consider necessary for inclusion in the credit information to be collected and maintained by credit information companies, and, specify, by notification, in this behalf; (ii) “Credit information company” means a company formed and registered under the Companies Act, 1956 (1 of 1956) and which has been granted a certificate of registration under sub-section (2) of Section 5. 35.2

Policy for foreign investment in Credit Information Companies

(i) Foreign investment in Credit Information Companies is subject to the Credit Information Companies (Regulation) Act, 2005. (ii) Foreign investment i.e. Foreign Direct Investment (FDI) under the FDI Scheme incorporated as Schedule 1 under regulation 5 (1) of the Foreign Exchange Management (Transfer or Issue of Security By a Person Resident Outside India) Regulations, 2000 (FEMA Regulations) + investment by registered Foreign Institutional Investors (FII) under the Portfolio Investment Scheme incorporated as Schedule 2 under Regulation 5(2) of the FEMA Regulations, is allowed up to 49% under the Government route and regulatory clearance from RBI. (iii) Investment by a registered FII under the Portfolio Investment Scheme would be permitted up to 24% only in the CICs listed at the Stock Exchanges, within the overall limit of 49% for foreign investment. (iv) Such FII investment would be permitted subject to the conditions that: (a) No single entity should directly or indirectly hold more than 10% equity. (b)

Any acquisition in excess of 1% will have to be reported to RBI as a reporting requirement; and

(c)

FIIs investing in CICs shall not seek a representation on the Board of Directors based upon their shareholding.

36.0 Health and Medical Services: 100% FDI is allowed under the automatic route 37.1

Hotels and Tourism related Industry

37.2 100% Foreign Investment is allowed under automatic route. 37.3 The terms hotel includes restaurants, beach resorts and other tourism complexes providing accommodation and /or catering and food facilities to tourists. The term tourism related industry includes: 46

(i) Travel agencies, tour operating agencies and tourist transport operating agencies (ii) Units providing facilities for cultural, adventure and wildlife experience to tourists (iii)Surface, air and water transport facilities for tourists (iv) Convention/seminar units and organizations 38.0

Industrial Parks both setting up and in established Industrial Parks.

38.1 FDI up to 100% is permitted under the automatic route in Industrial Parks. 38.2 FDI up to 100% on the automatic route is allowed in Construction development projects, etc. prescribing therein, inter-alia, the conditions for minimum capitalization, minimum area requirements and lock-in of original investment as per para 20 above. 38.3 For the purposes of Industrial Park: (i) “Industrial Park” is a project in which quality infrastructure facilities in the form of plots of developed land or built up space or a combination with common facilities, is developed and made available to all the allottee units for the purposes of industrial activity. (ii) “Infrastructure” refers to facilities required for functioning of units located in the Industrial Park and includes roads (including approach roads), water supply and sewerage, common effluent treatment facility, telecom network, generation and distribution of power, air conditioning. (iii)“Common Facilities” refer to the facilities available for all the units located in the industrial park, and include facilities of power, roads (including approach roads), water supply and sewerage, common effluent treatment, common testing, telecom services, air conditioning, common facility buildings, industrial canteens, convention/conference halls, parking, travel desks, security service, first aid center, ambulance and other safety services, training facilities and such other facilities meant for common use of the units located in the Industrial Park. (iv) “Allocable area” in the Industrial Park means(a) in the case of plots of developed land- the net site area available for allocation to the units, excluding the area for common facilities.

47

(b) in the case of built up space- the floor area and built up space utilized for providing common facilities. (c) in the case of a combination of developed land and built-up space- the net site and floor area available for allocation to the units excluding the site area and built up space utilized for providing common facilities. (v) “Industrial Activity” means manufacturing, electricity, gas and water supply, post and telecommunications, software publishing, consultancy and supply, data processing, database activities and distribution of electronic content,

other

computer related activities, Research and experimental development on natural sciences and engineering, Business and management consultancy activities and Architectural, engineering and other technical activities. 38.4 FDI up to 100% under the automatic route is allowed both in setting up and in established industrial parks and would not be subject to the conditionalities applicable for construction development projects etc. spelt out in Para 20 above provided the Industrial Parks meet with the under-mentioned conditions: (i) it would comprise of a minimum of 10 units and no single unit shall occupy more than 50% of the allocable area; (ii) the minimum percentage of the area to be allocated for industrial activity shall not be less than 66% of the total allocable area. 39.0

Insurance

39.1

FDI up to 26% in the Insurance sector, as prescribed in the Insurance Act, 1999,

is allowed under the automatic route. 39.2 This will be subject to the condition that Companies bringing in FDI shall obtain necessary license from the Insurance Regulatory & Development Authority for undertaking insurance activities. 40.0

Infrastructure Company in the Securities Market:

40.1 Foreign investment is permitted in infrastructure companies in Securities Markets, namely, stock exchanges, depositories and clearing corporations, in compliance with SEBI Regulations and subject to the following conditions: (i) There is a composite ceiling of 49 per cent for Foreign Investment, with a FDI limit of 26 per cent and an FII limit of 23 per cent of the paid-up capital;

48

(ii) FDI will be allowed under the Government route; and (iii)FII can invest only through purchases in the secondary market. 41.0

Non-Banking Finance Companies

41.1

100% foreign investment in NBFC is allowed under the automatic route in the

following activities: (i) Merchant Banking (ii) Under Writing (iii)Portfolio Management Services (iv) Investment Advisory Services (v) Financial Consultancy (vi) Stock Broking (vii) Asset Management (viii) Venture Capital (ix) Custodian Services (x) Factoring (xi) Credit Rating Agencies (xii) Leasing & Finance (xiii) Housing Finance (xiv) Forex Broking (xv) Credit Card Business (xvi) Money Changing Business (xvii)Micro Credit (xviii)

Rural Credit

41.2 Investment would be subject to the following minimum capitalisation norms: (i) US $0.5 million for foreign equity capital upto 51% to be brought upfront (ii) US $ 5 million for foreign equity capital more than 51% and upto 75% to be brought upfront (iii)US $ 50 million for foreign equity capital more than 75% out of which US$ 7.5 million to be brought upfront and the balance in 24 months. (iv) 100% foreign owned NBFC’s with a minimum capitalisation of US$ 50 million can set up step down subsidiaries for specific NBFC activities, without any restriction on number of operating subsidiaries and without bringing in additional capital.

49

(v) Domestic equity in the step down subsidiaries of 100% foreign owned holding companies may be scheduled by bringing 10 % domestic equity upfront and the balance domestic equity over a period of 24 months. (vi) Joint Venture operating NBFC’s that have 75% or less than 75% foreign investment can also set up subsidiaries for undertaking other NBFC activities, subject to the subsidiaries also complying with the applicable minimum capitalisation norm mentioned in (i), (ii) and (iii) above and (vii) below. (vii) Non- Fund based activities : US $0.5 million for all permitted non-fund based NBFC’s irrespective of the level of foreign investment subject to the following condition: It would not be permissible for such a company to set up any subsidiary for any other activity, nor any equity it may contribute in an NBFC holding/operating company would be reckoned as domestic equity. 41.3 Credit Card business includes issuance, sales, marketing & design of various payment products such as credit card charge cards, debit cards, stored value cards, smart card, value added cards etc. 41.4 Venture Capital (Fund:

An Foreign venture capital Investor(FCVI) may

contribute upto 100% of the capital of a domestic venture capital fund(VCF/VCC) and may also set up a domestic asset management company to manage the fund. They are also allowed to invest in other companies subject to FDI Regulations. All investment are with prior approval of FIPB. Investment would be subject to SEBI and RBI regulations. 41.5

The NBFC will have to comply with the guidelines of the RBI.

42.0

Petroleum & Natural Gas Sector

42.1

FDI up to 100% under the automatic route is permitted in exploration activities of

oil and natural gas fields, infrastructure related to marketing of petroleum products, actual trading and marketing of petroleum products, petroleum product pipelines, Natural Gas/LNG pipelines, market study and formulation and Petroleum refining in the private sector. This will be subject to the existing sectoral policy and regulatory framework in the oil marketing sector and the policy of the Government on private participation in exploration of oil and the discovered fields of national oil companies. 42.2

FDI up to 49% is permitted under the Government route in petroleum refining by

the Public Sector Undertakings (PSU). This should not involve any divestment or dilution of domestic equity in the existing PSUs.

50

43.0

Print Media

43.1 Publishing of Newspaper and periodicals dealing with news and current affairs: Foreign investment, including FDI and investment by NRIs/PIOs/FII, up to 26%, is permitted under the Government route. 43.2 Publication of Indian editions of foreign magazines dealing with news and current affairs: (i) Foreign investment, including FDI and investment by NRIs/PIOs/FII, up to 26%, is permitted under the Government route. (ii) ‘Magazine’, for the purpose of these guidelines, will be defined as a periodical publication, brought out on non-daily basis, containing public news or comments on public news. (iii) Foreign investment would also be subject to the Guidelines for Publication of Indian editions of foreign magazines dealing with news and current affairs issued by the Ministry of Information & Broadcasting on 4.12.2008. 43.3

Publishing/printing of Scientific and Technical Magazines/specialty journals/

periodicals: 100% FDI is permitted under the Government route. (i) This will also be subject to compliance with the legal framework as applicable and guidelines issued in this regard from time to time by Ministry of Information and Broadcasting. 43.4 Publication of facsimile edition of foreign newspapers: (i) FDI up to 100% is permitted under Government route in publication of facsimile edition of foreign newspapers provided the FDI is by the owner of the original foreign newspaper(s) whose facsimile edition is proposed to be brought out in India. (ii) Publication of facsimile edition of foreign newspapers can be undertaken only by an entity incorporated or registered in India under the provisions of the Companies Act, 1956. (iii) Publication of facsimile edition of foreign newspaper would also be subject to the Guidelines for publication of newspapers and periodicals dealing with news and current affairs and publication of facsimile edition of foreign newspapers issued by Ministry of Information & Broadcasting on 31.3.2006, as amended from time to time.

51

44.0 Research and Development Services excluding basic Research and setting of R&D/ academic institutions which would award degrees/diplomas/certificates: 100% FDI is allowed under the automatic route 45.0 Security Agencies in Private sector The ‘Private Security Agencies (Regulation) Act, 2005’ regulates the operations of private security agencies. Under Section 6(2) of the above Act, “A company, firm or an association of persons shall not be considered for issue of a licence under this Act, if, it is not registered in India, or having a proprietor or a majority shareholder, partner or director, who is not a citizen of India”. As such, under the provisions of this Act: •

a foreign company cannot be considered for a license under the Act

•

only a firm registered in India can be eligible for a license

•

to be eligible for a license under the Act, a firm cannot have a foreign director/partner

•

majority shareholder cannot be a foreigner-i.e. foreign shareholding would be restricted to a maximum of 49% under the Government route.

46.0

Satellites – Establishment and operation: FDI upto 74% is allowed under

Government route. 46.1 This will be subject to the sectoral guidelines of Department of Space/ISRO. 47.0

Special Economic Zones and Free Trade Warehousing Zones: 100% FDI is

allowed under the automatic route without the conditionalities of Construction development project as per para 33 above. 47.1

This will be subject to the provisions of Special Economic Zones Act 2005 and

the Foreign Trade Policy of the Department of Commerce. 48.0

Storage and Warehouse Services: 100% FDI is allowed under the automatic

route in Storage and Warehousing including warehousing of agricultural products with refrigeration (cold storage). 49.0

Telecommunication

49.1 Telecom services: Foreign Direct Investment limit in telecom services is 74 percent subject to the following conditions: (i) This is applicable in case of Basic, Cellular, Unified Access Services, National/ International Long Distance, V-Sat, Public Mobile Radio Trunked Services (PMRTS), Global Mobile Personal Communications Services (GMPCS) and other value added Services.

52

(ii) Both direct and indirect foreign investment in the licensee company shall be counted for the purpose of FDI ceiling.

Foreign Investment shall include

investment by Foreign Institutional Investors (FIIs), Non-resident Indians (NRIs), Foreign Currency Convertible Bonds (FCCBs), American Depository Receipts (ADRs), Global Depository Receipts (GDRs) and convertible preference shares held by foreign entity. In any case, the `Indian’ shareholding will not be less than 26 percent. (iii) FDI up to 49 percent is on the automatic route and beyond that on the Government route. FDI in the licensee company/Indian promoters/investment companies including their holding companies shall require approval of the Foreign Investment Promotion Board (FIPB) if it has a bearing on the overall ceiling of 74 percent. While approving the investment proposals, FIPB shall take note that investment is not coming from countries of concern and/or unfriendly entities. (iv) The investment approval by FIPB shall envisage the conditionality that Company would adhere to licence Agreement. (v) FDI shall be subject to laws of India and not the laws of the foreign country/countries. 49.2

Security Conditions:

(i) The Chief Officer In-charge of technical network operations and the Chief Security Officer should be a resident Indian citizen. (ii) Details of infrastructure/network diagram (technical details of the network) could be provided on a need basis only to telecom equipment suppliers/manufacturers and the affiliate/parents of the licensee company. Clearance from the licensor (Department of Telecommunications, Government of India) would be required if such information is to be provided to anybody else. (iii)For security reasons, domestic traffic of such entities as may be identified /specified by the licensor shall not be hauled/routed to any place outside India. (iv) The licensee company shall take adequate and timely measures to ensure that the information transacted through a network by the subscribers is secure and protected.

53

(v) The officers/officials of the licensee companies dealing with the lawful interception of messages will be resident Indian citizens. (vi) The majority Directors on the Board of the company shall be Indian citizens. (vii) The positions of the Chairman, Managing Director, Chief Executive Officer (CEO) and/or Chief Financial Officer (CFO), if held by foreign nationals, would require to be security vetted by Ministry of Home Affairs (MHA). Security vetting shall be required periodically on yearly basis. In case something adverse is found during the security vetting, the direction of MHA shall be binding on the licensee. (viii) The Company shall not transfer the following to any person/place outside India:(a) Any accounting information relating to subscriber (except for international roaming/billing) (Note: it does not restrict a statutorily required disclosure of financial nature) ; and (b) User information (except pertaining to foreign subscribers using Indian Operator’s network while roaming). (ix) The Company must provide traceable identity of their subscribers. However, in case of providing service to roaming subscriber of foreign Companies, the Indian Company shall endeavour to obtain traceable identity of roaming subscribers from the foreign company as a part of its roaming agreement. (x) On request of the licensor or any other agency authorised by the licensor, the telecom service provider should be able to provide the geographical location of any subscriber (BTS location) at a given point of time. (xi) The Remote Access (RA) to Network would be provided only to approved location(s) abroad through approved location(s) in India. The approval for location(s) would be given by the Licensor (DOT) in consultation with the Security Agencies (IB). (xii) Under no circumstances, should any RA to the suppliers/manufacturers and affiliate(s) be enabled to access Lawful Interception System(LIS), Lawful Interception Monitoring(LIM), Call contents of the traffic and any such sensitive sector/data, which the licensor may notify from time to time.

54

(xiii) The licensee company is not allowed to use remote access facility for monitoring of content. (xiv) Suitable technical device should be made available at Indian end to the designated security agency/licensor in which a mirror image of the remote access information is available on line for monitoring purposes. (xv) Complete audit trail of the remote access activities pertaining to the network operated in India should be maintained for a period of six months and provided on request to the licensor or any other agency authorised by the licensor. (xvi) The telecom service providers should ensure that necessary provision (hardware/software) is available in their equipment for doing the Lawful interception and monitoring from a centralized location. (xvii)The telecom service providers should familiarize/train Vigilance Technical Monitoring (VTM)/security agency officers/officials in respect of relevant operations/features of their systems. (xviii) It shall be open to the licensor to restrict the Licensee Company from operating in any sensitive area from the National Security angle. (xix) In order to maintain the privacy of voice and data, monitoring shall only be upon authorisation by the Union Home Secretary or Home Secretaries of the States/Union Territories. (xx) For monitoring traffic, the licensee company shall provide access of their network and other facilities as well as to books of accounts to the security agencies. (xxi) The aforesaid Security Conditions shall be applicable to all the licensee companies operating telecom services covered under this Press Note irrespective of the level of FDI. (xxii)Other Service Providers (OSPs), providing services like Call Centres, Business Process Outsourcing (BPO), tele-marketing, tele-education, etc, and are registered with DoT as OSP. Such OSPs operate the service using the telecom infrastructure provided by licensed telecom service providers and 100% FDI is permitted for OSPs. As the security conditions are applicable to all licensed

55

telecom service providers, the security conditions mentioned above shall not be separately enforced on OSPs. 49.3

The conditions at para 49.2 above shall also be applicable to the existing

companies operating telecom service(s) with the FDI cap of 49%. 49.4

All the telecom service providers shall submit a compliance report on the

aforesaid conditions to the licensor on 1st day of July and January on six monthly basis. 49.5

FDI upto 74% is allowed in following activities

•

ISP with gateways

•

Radio paging

•

End-to-End bandwidth

(i) FDI upto 49% would be allowed under the automatic route and above that under the Government route. (ii) This will be subject to licensing and security requirements notified by the Ministry of Telecommunications. 49.6

FDI upto 100% under Government route is permitted for E-commerce activities.

Such companies would engage only in Business to Business (B2B) e-commerce and not in retail trading, inter-alia implying that existing restrictions on FDI in domestic trading would be applicable to e-commerce as well. 49.7

FDI upto 100% allowed for the following activities

(i) ISP’s not providing gateways i.e without gate-ways (both for satellite and marine cables) (ii) Infrastructure provider providing dark fibre, right of way, duct space, tower (IP Category I) (iii)Electronic Mail (iv) Voice Mail 49.8 (i) The investment upto 49% is under the automatic route and beyond 49% under the Government route. (ii) This will be subject to the condition that such companies will divest 26% of their equity in favour of Indian public in 5 years, if these companies are listed in other parts of the world. (iii) This will be subject to licensing and security requirements notified by the Ministry of Telecommunications.

56

50.0

Trading:

50.1

100% FDI is permitted under the automatic route for trading companies for the

following activities: (i) Wholesale/cash & carry trading. (ii) Trading for exports. 50.2

100% FDI is permitted under the Government route for trading companies for the following activities:

(i) Trading of items sourced from small scale sector. (ii) 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 facility commences simultaneously with test marketing. 50.3 Single Brand product trading: FDI up to 51%, under the Government route is allowed in retail trade of ‘Single Brand’ products. This is, inter alia, aimed at attracting investments in production and marketing, improving the availability of such goods for the consumer, encouraging increased sourcing of goods from India, and enhancing competitiveness of Indian enterprises through access to global designs, technologies and management practices. (i) FDI up to 51% in retail trade of ‘Single Brand’ products would be subject to the following conditions: (a) Products to be sold should be of a ‘Single Brand’ only. (b) Products should be sold under the same brand internationally. (c) ‘Single Brand’ product-retailing would cover only products which are branded during manufacturing. (ii) Application seeking permission of the Government for FDI in retail trade of ‘Single Brand’ products would be made to the Secretariat for Industrial Assistance (SIA) in the Department of Industrial Policy & Promotion.

The

application would specifically indicate the product/ product categories which are proposed to be sold under a ‘Single Brand’. Any addition to the product/ product categories to be sold under ‘Single Brand’ would require a fresh approval of the Government.

57

(iii) Applications would be processed in the Department of Industrial Policy & Promotion, to determine whether the products proposed to be sold satisfy the notified guidelines, before being considered by the FIPB for Government approval. 51.0 Transport and Transport Support Services: 100% FDI under the automatic route is allowed for: 51.1 Pipeline transport, ocean and water transport, inland water transport. 51.2 Transport Support Services: (i) Support services to land transport like operation of highway bridges, toll roads, and vehicular tunnels. (ii)Support services to water transport like operation and maintenance of piers, loading and discharging of vessels. (iii) Services incidental to transport like cargo handling incidental to land, water and air transport (iv) Rental and leasing of - motor vehicles without operator for passenger transport and freight transport, refrigerated/cold transport. (v) Renting of -transport equipment without operator, of other transport equipment.

52. In sectors/Activities not listed above, FDI is permitted upto 100% on the automatic route subject to sectoral rules/regulations applicable.

58

CHAPTER 5: REMITTANCE,REPORTING,VIOLATION AND ACQUITITION OF IMMOVABLE PROPERTY 53.0 REMITTANCE AND REPATRIATION 53.1 Remittance of sale proceeds/Remittance on winding up/Liquidation of Companies:AD Category – I bank can allow the remittance of sale proceeds of a security (net of applicable taxes) to the seller of shares resident outside India, provided the security has been held on repatriation basis, the sale of security has been made in accordance with the prescribed guidelines and NOC / tax clearance certificate from the Income Tax Department has been produced. 53.2

Repatriation of Dividend: Dividends are freely repatriable without any

restrictions. The repatriation is governed by the provisions of the Foreign Exchange Management (Current Account Transactions) Rules, 2000, as amended from time to time.

54.0

REPORTING OF FDI

54.1 Reporting of Inflow (i) An Indian company receiving investment from outside India for issuing shares / convertible debentures / preference shares under the FDI Scheme, should report the details of the amount of consideration to the Regional Office concerned of the Reserve Bank not later than 30 days from the date of receipt in the Advance Reporting Form enclosed in Annex. (ii) Indian companies are required to report the details of the receipt of the amount of consideration for issue of shares / convertible debentures, through an AD Category – I bank, together with a copy/ies of the FIRC/s evidencing the receipt of the remittance along with the KYC report (enclosed as Annex) on the nonresident investor from the overseas bank remitting the amount. The report would be acknowledged by the Regional Office concerned, which will allot a Unique Identification Number (UIN) for the amount reported. 54.2

Reporting of issue of shares

(i) After issue of shares (including bonus and shares issued on rights basis) and shares issued under ESOP)/fully and mandatorily convertible debentures / fully and mandatorily convertible preference shares, the Indian company has to file

59

Form FCGPR, enclosed in Annex, not later than 30 days from the date of issue of shares. (ii) Part A of Form FC-GPR has to be duly filled up and signed by Managing Director/Director/Secretary of the Company and submitted to the Authorized Dealer of the company, who will forward it to the Reserve Bank. The following documents have to be submitted along with Part A: (a) A certificate from the Company Secretary of the company certifying that: (A) all the requirements of the Companies Act, 1956 have been complied with; (B) terms and conditions of the Government’s approval, if any, have been complied with; (C) the company is eligible to issue shares under these Regulations; and (D) the company has all original certificates issued by authorized dealers in India evidencing receipt of amount of consideration. (b) A certificate from Statutory Auditor or Chartered Accountant indicating the manner of arriving at the price of the shares issued to the persons resident outside India. (c) The report of receipt of consideration as well as Form FC-GPR have to be submitted by the AD bank to the Regional Office concerned of the Reserve Bank under whose jurisdiction the registered office of the company is situated. (d) Part - B of Form FC-GPR should be filed on an annual basis by the Indian company, directly with the Reserve Bank6. This is an annual return to be submitted by 31st of July every year, pertaining to all investments by way of direct/portfolio investments/reinvested earnings/other capital in the Indian company made during the previous years (i.e. the information in Part B submitted by 31st July will pertain to all the investments made in the previous years up to March 31). The details of the investments to be reported would include all foreign investments made into the company which is outstanding as on the balance sheet date. The details of overseas investments in the company both under direct / portfolio investment may be separately indicated. (e) Issue of bonus/rights shares or stock options to persons resident outside India directly or on amalgamation / merger with an existing Indian company, as well as issue of shares on conversion of ECB / royalty / lumpsum technical 60

know-how fee / import of capital goods by units in SEZs has to be reported in Form FC-GPR. 54.3

Reporting of transfer of shares Reporting of transfer of shares between residents and non-residents and vice-

versa is to be done in Form FC-TRS (enclosed in Annex). The Form FC-TRS should be submitted to the AD Category – I bank, within 60 days from the date of receipt of the amount of consideration. The onus of submission of the Form FC-TRS within the given timeframe would be on the transferor / transferee, resident in India. The AD Category – I bank, would forward the same to its link office. The link office would consolidate the Form FC-TRS and submit a monthly report to the Reserve Bank. 54.4 Reporting of Non-Cash Details of issue of shares against conversion of ECB has to be reported to the Regional Office concerned of the Reserve Bank, as indicated below: (i) In case of full conversion of ECB into equity, the company shall report the conversion in Form FC-GPR to the Regional Office concerned of the Reserve Bank as well as in Form ECB-2 to the Department of Statistics and Information Management (DSIM), Reserve Bank of India, Bandra-Kurla Complex, Mumbai – 400 051, within seven working days from the close of month to which it relates. The words "ECB wholly converted to equity" shall be clearly indicated on top of the Form ECB-2. Once reported, filing of Form ECB-2 in the subsequent months is not necessary. (ii) In case of partial conversion of ECB, the company shall report the converted portion in Form FC-GPR to the Regional Office concerned as well as in Form ECB-2 clearly differentiating the converted portion from the non-converted portion. The words "ECB partially converted to equity" shall be indicated on top of the Form ECB-2. In the subsequent months, the outstanding balance of ECB shall be reported in Form ECB-2 to DSIM. (iii)The SEZ unit issuing equity as mentioned in para (iii) above, should report the particulars of the shares issued in the Form FC-GPR. 54.5 Reporting of FCCB/ADR/GDR Issues The Indian company issuing ADRs / GDRs has to furnish to the Reserve Bank, full details of such issue in the Form enclosed in Annex, within 30 days from the date of closing of the issue. The company should also furnish a quarterly return in the Form enclosed in Annex - 11, to the Reserve Bank within 15 days of the close of the calendar 61

quarter. The quarterly return has to be submitted till the entire amount raised through ADR/GDR mechanism is either repatriated to India or utilized abroad as per the extant Reserve Bank guidelines.

55.0

ACQUISITION/TRANSFER/SALE OF IMMOVABLE PROPERTY AND

REPATRIATION OF SALE PROCEEDS THEREOF 55.1

Acquisition and Transfer of Immovabe Property in India

(i) A person resident outside India who is a citizen of India (NRI13) can acquire by way of purchase, any immovable property in India other than agricultural land / plantation property / farm house. He can transfer any immovable property other than agricultural or plantation property or farm house to: (a) A person resident outside India who is a citizen of India, or (b) A person of Indian origin resident outside India, or (c) A person resident in India. (ii) He may transfer agricultural land / plantation property / farm house acquired by way of inheritance, only to Indian citizens permanently residing in India. (iii) Payment for acquisition of property can be made out of: (a) Funds received in India through normal banking channels by way of inward remittance from any place outside India, or (b) Funds held in any non-resident account maintained in accordance with the provisions of the Foreign Exchange Management Act, 1999 and the regulations made by Reserve Bank from time to time. (iv) Such payment cannot be made either by traveler’s cheque or by foreign currency notes or by other mode other than those specifically mentioned above. (v) A person resident outside India who is a person of Indian Origin (PIO) can acquire any immovable property in India other than agricultural land / farm house / plantation property: (a) By way of purchase out of funds received by inward remittance through normal banking channels or by debit to his NRE / FCNR (B) / NRO account. (b) Such payments cannot be made either by traveler’s cheque or by foreign currency notes or by other mode other than those specifically mentioned above. (c) By way of gift from a person resident in India or a NRI or a PIO.

62

(vi) A PIO may acquire any immovable property in India by way of inheritance from a person resident in India or a person resident outside India who had acquired such property in accordance with the provisions of the foreign exchange law in force or FEMA regulations at the time of acquisition of the property. (vii) A PIO may transfer agricultural land / plantation property / farmhouse in India acquired by way of inheritance, by way of sale or gift to person resident in India who is a citizen of India. (viii) A PIO may transfer any immovable property other than agricultural land / Plantation property / farmhouse in India: (a) By way of sale to a person resident in India. (b) By way of gift to a person resident in India or a Non-Resident Indian or a PIO. 55.2

Purchase / Sale of Immovable Property by Foreign Embassies / Diplomats / Consulate General Foreign Embassy / Consulate as well as Diplomatic personnel in India are

allowed to purchase/ sell immovable property in India other than agricultural land / plantation property / farm house provided (i) clearance from Government of India, Ministry of External Affairs is obtained for such purchase / sale, and (ii) the consideration for acquisition of immovable property in India is paid out of funds remitted from abroad through normal banking channels. 55.3 Acquisition of Immovable Property for carrying on a permitted activity A branch, office or other place of business, (excluding a liaison office) in India of a foreign company established with requisite approvals wherever necessary, is eligible to acquire immovable property in India which is necessary for or incidental to carrying on such activity provided that all applicable laws, rules, regulations or directions in force are duly complied with. The entity / person concerned is required to file a declaration in the Form IPI (Annex - 12) with the Reserve Bank, within ninety days from the date of such acquisition. The nonresident is eligible to transfer by way of mortgage the said immovable property to an AD Category – I bank as a security for any borrowing. 55.4 Repatriation of sale proceeds (i) In the event of sale of immovable property other than agricultural land / farm house / plantation property in India by NRI / PIO, the authorized dealer will allow repatriation of sale proceeds outside India provided:

63

(a) the immovable property was acquired by the seller in accordance with the provisions of the foreign exchange law in force at the time of acquisition by him or the provisions of FEMA Regulations; (b) the amount to be repatriated does not exceed (a) the amount paid for acquisition of the immovable property in foreign exchange received through normal banking channels or out of funds held in Foreign Currency NonResident Account or (b) the foreign currency equivalent as on the date of payment, of the amount paid where such payment was made from the funds held in Non-Resident (External) Rupee Account for acquisition of the property; and (c) In the case of residential property, the repatriation of sale proceeds is restricted to not more than two such properties. (ii) In the case of sale of immovable property purchased out of Rupee funds, AD Category – I banks may allow the facility of repatriation of funds out of balances held by NRIs / PIO in their Non-Resident Rupee (NRO) accounts up to USD 1 million per financial year, subject to production of undertaking by the remitter and a certificate from the Chartered Accountant in the formats prescribed by the CBDT. 55.5

Prior permission to citizens of certain countries for acquisition or transfer of immovable property in India

(i) No person being a citizen of Pakistan, Bangladesh, Sri Lanka, Afghanistan, China, Iran, Nepal or Bhutan, whether resident in India or outside India, shall acquire or transfer immovable property in India, other than lease, not exceeding five years without prior permission of the Reserve Bank. (ii) Foreign nationals of non-Indian origin resident outside India are not permitted to acquire any immovable property in India unless such property is acquired by way of inheritance from a person who was resident in India. Foreign nationals of nonIndian origin who have acquired immovable property in India by way of inheritance or purchase with the specific approval of the Reserve bank cannot transfer such property without prior permission of the Reserve Bank.

56.0

ADHERENCE TO GUIDELINES/ORDERS AND CONSEQUENCES OF VIOLATION

64

FDI is a current account transaction and thus any violation of FDI regulations are covered by the penal provisions of the FEMA 1999. Reserve Bank of India administers the FEMA 1999 and Directorate of Enforcement under the Ministry of Finance established by the Government of India is the authority for the enforcement of FEMA 1999. The Directorate takes up investigation in any contravention of FEMA 56.1

Penalties

56.1 (i) If any person contravenes any provision of FEMA 1999 vis-à-vis FDI Regulations violations, by way of contravening any rule, regulation, notification, direction or order issued in exercise of the powers under this Act or contravenes any conditions subject to which an authorization is issued by the Reserve Bank of India, he shall, upon adjudication, be liable to a penalty up to thrice the sum involved in such contraventions where such amount is quantifiable, or up to two lac Rupees where the amount is not quantifiable, and where such contraventions is a continuing one, further penalty which may extend to five thousand Rupees for every day after the first day during which the contraventions continues. (ii) Where a person committing a contravention of any provisions of this Act or of any rule, direction or order made there under is a company (company means any body corporate and includes a firm or other association of individuals as defined in the Companies Act), every person who, at the time the contravention was committed, was in charge of, and was responsible to, the company for the conduct of the business of the company as well as the company, shall be deemed to be guilty of the contravention and shall be liable to be proceeded against and punished accordingly. (iii) Any Adjudicating Authority adjudging any contraventions under 25.1.1, may, if he thinks fit in addition to any penalty which he may impose for such contravention direct that any currency, security or any other money or property in respect of which the contravention has taken place shall be confiscated to the Government of India. 56.2

Adjudication and Appeals

(i) For the purpose of adjudication of any contravention of FEMA, the Government of India as per the provisions contained in the Foreign Exchange Management (Adjudication Proceedings and Appeal) Rules, 2000 appoints officers of the Central Government as the Adjudicating Authorities for holding an enquiry in the manner prescribed. A reasonable opportunity has to be given to the person 65

alleged to have committed contraventions against whom a complaint has been made for being heard before imposing any penalty. (ii) The Government of India may appoint as per the provisions contained in the Foreign Exchange Management (Adjudication Proceedings and Appeal) Rules, 2000, an Appealing Authority/ Appellate Tribunal to hear appeals against the orders of the adjudicating authority. 56.3

Compounding Proceedings Under the Foreign Exchange (Compounding Proceedings) Rules 2000, the

Government of India may appoint ‘Compounding Authority’ an officer either from Enforcement Directorate or Reserve Bank of India for any person contravening any provisions of the Foreign Exchange Management Act 1999. The Compounding Authorities are authorized to compound the amount involved in the contravention to the Act made by the person. No contravention shall be compounded unless the amount involved in such contravention is quantifiable. Any second or subsequent contravention committed after the expiry of a period of three years from the date on which the contravention was previously compounded shall be deemed to be a first contravention. The Compounding Authority may call for any information, record or any other documents relevant to the compounding proceedings. The Compounding Authority shall pass an order of compounding after affording an opportunity of being heard to all the concerns as expeditiously and not latter than 180 days from the date of application made to the Compounding Authority. Compounding Authority shall issue order specifying the provisions of the Act or of the rules, directions, requisitions or orders made there under in respect of which contravention has taken place along with details of the alleged contraventions.

66