FDI GUIDELINES

CONTINUED......................

Ministry of Industry
Department of Industrial Policy & Promotion
Guidelines for the consideration of Foreign Direct Investment (FDI) 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 up before the FIPB 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 of IM/CCFI or rejection as the case may be)
3. In cases in which either the proposals 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, FIPB should keep in mind the sectoral requirements and the sectoral policies vis-a-vis the proposal(s).
5. FIPB would consider each proposal in totality (i.e. if it includes apart from foreign investment, technical collaboration/industrial licence) for composite approval or otherwise. However, the FIPB's recommendation would relate only to the approval for foreign financial and technical collaboration and the foreign investor will need to take other prescribed clearances 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 technical collaboration 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.
7. While considering proposals the following may be prioritised.
(a) Items falling within Annexure-III 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.

TO BE CONTINUED...................................