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TMI BlogForeign Exchange Management (Transfer or Issue of Security by a Person Resident outside India) (Twelfth Amendment) Regulations, 2013X X X X Extracts X X X X X X X X Extracts X X X X ..... son Resident Outside India) (Twelfth Amendment) Regulations, 2013. (ii) They shall be deemed to have come into force from August 22, 2013. 2. Amendment to Regulation 14 In the Foreign Exchange Management (Transfer or Issue of Security by a Person Resident outside India) Regulations, 2000 , ( Notification No. FEMA 20/2000-RB dated 3rd May 2000 ), in Regulation 14, in sub-regulation 1, a. in clause (i), in sub-clause a, the words, Company shall be considered Controlled' by resident Indian citizens if the residents Indian citizens and Indian companies, which are owned and controlled by resident Indian citizens, have the power to appoint a majority of its directors in that company shall be deleted. b. in clause (i), in sub-clause b, the words, Company Controlled by non-residents means an Indian company where non-residents have the power to appoint a majority of its directors in that company shall be deleted; c. after clause (i),the following shall be added, namely; (ia) Control shall include the right to appoint a majority of the directors or to control the management or policy decisions including by virtue of their shareholding or management right ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pplicable laws/regulations; security and other conditionalities. In sectors/activities not listed below, FDI is permitted upto 100% on the automatic route, subject to applicable laws/regulations; security and other conditionalities. Wherever there is a requirement of minimum capitalization, it shall include share premium received alongwith the face value of the share, only when it is received by the company upon issue of the shares to the non-resident investor. Amount paid by the transferee during post-issue transfer of shares beyond the issue price of the share, cannot be taken into account while calculating minimum capitalization requirement. Sl.No. Sector/Activity % of Cap/Equity Entry Route AGRICULTURE 1. Agriculture Animal Husbandry ( a ) Floriculture, Horticulture, Apiculture and Cultivation of Vegetables Mushrooms under controlled conditions; ( b ) Development and production of Seeds and planting material; ( c ) Animal Husbandry (including breeding of dogs), Pisciculture, Aquaculture, un ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 675; Poultry breeding farms and hatcheries where micro-climate is controlled through advanced technologies like incubators, ventilation systems etc. In the case of pisciculture and aquaculture, scope of the term 'under controlled conditions' covers - ○ Aquariums ○ Hatcheries where eggs are artificially fertilized and fry are hatched and incubated in an enclosed environment with artificial climate control. In the case of apiculture, scope of the term ''under controlled conditions covers - ○ Production of honey by bee-keeping, except in forest/wild, in designated spaces with control of temperatures and climatic factors like humidity and artificial feeding during lean seasons. 2 Tea Plantation 2.1 Tea sector including tea plantations Note: Besides the above, FDI is not allowed in any other plantation sector/activity 100% Government 2.2 Other Condition : Prior approval of the State Government concerned in case of any future land use ch ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 22 dated 6 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). Vide 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/concentrates including Zircon, were removed from the list of 'prescribed substances'. ( i ) FDI for separation of titanium bearing minerals ores will be subject to the following additional conditions viz.: (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 regulations framed by the Atomic Energy Regulatory Board such as Atomic Energy (Radiation Protection) Rules, 2004 and the Atomic Energy (Safe Disposal of Radioacti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... manufactures items reserved for the MSE sector would require Government route where foreign investment is more than 24% in the 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 and in accordance with the provisions of section 11 of the Industries (Development Regulation) Act, 1951. 6 DEFENCE 6.1 Defence Industry subject to Industrial license under the Industries (Development Regulation) Act, 1951 26% Up to 26% Government. Above 26% to Cabinet Committee on Security (CCS) on case to case basis, which ensure access to modern and 'state-of-art' technology in the country. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... applicant company would be permitted. ( xi ) 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. ( xii ) 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. ( xiii ) Purchase preference and price preference may be given to the Public Sector organizations as per guidelines of the Department of Public Enterprises. ( xiv ) Arms and ammunition produced by the private manufacturers w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 7.1 Broadcasting Carriage Services 7.1.1 (1) Teleports (setting up of up-linking HUBs/Teleports); (2) Direct to Home (DTH); (3) Cable Networks (Multi System operators (MSOs) operating at National or State or District level and undertaking upgradation of networks towards digitalization and addressability); (4) Mobile TV ; (5) Headend-in-the Sky Broadcasting Service (HITS) 74% Automatic up to 49% Government route beyond 49% and up to 74% 7.1.2 Cable Networks (Other MSOs not undertaking upgradation of networks towards digitalization and addressability and Local Cable Operators (LCOs). 49% Automatic 7.2 Broadcasting Content Services 7.2.1 Terrestrial Broadcasting FM (FM Radio), subject to such terms and conditions, as specified from time to time, by Ministry of Information Broadcasting, for grant of permission for setting up of FM Radio stations. 26% Government ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or /Chief Executive Officer, Chief Financial Officer (CFO), Chief Security Officer (CSO), Chief Technical Officer (CTO), Chief Operating Officer (COO), etc., as may be specified by the Ministry of Information and Broadcasting from time to time, prior permission of the Ministry of Information and Broadcasting shall have to be obtained. It shall be obligatory on the part of the company to also take prior permission from the Ministry of Information and Broadcasting before effecting any change in the Board of Directors. ( iv ) The Company shall be required to obtain security clearance of all foreign personnel likely to be deployed for more that 60 days in a year by way of appointment, contract, and consultancy or in any other capacity for installation, maintenance, operation or any other services prior to their deployment. The security clearance shall be required to be obtained every two years. Permission vis-a-vis Security Clearance ( v ) The permission shall be subject to permission holder/licensee remaining security cleared throughout the currency of permission. In case the security clearance is withdrawn the permission granted is liable to be terminated ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ctivities and operations. Continuous monitoring, however, will be confined only to security related aspects, including screening of objectionable content. ( xiv ) The inspection will ordinarily be carried out by the government of India, Ministry of Information Broadcasting or its authorized representative after reasonable notice, except in circumstances where giving such a notice will defeat the very purpose of the inspection. ( xv ) The company shall submit such information with respect to its services as may be required by the Government or its authorized representative, in the format as may be required, from time to time. ( xvi ) The permission holder/licensee shall be liable to furnish the Government of India or its authorized representative or TRAI or its authorized representative, such reports, accounts, estimates, returns or such other relevant information and at such periodic intervals or such times as may be required. ( xvii ) The service providers should familiarize/train designated officials of the government or officials of TRAI or its authorized representative(s) in respect of relevant operations/features of their systems. National Secu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h the legal framework as applicable and guidelines issued in this regard from time to time by Ministry of Information and Broadcasting. 100% Government 8.4 Publication of facsimile edition of foreign newspapers 100% Government 8.4.1 Other Conditions: ( i ) FDI should be made by the owner of the original foreign newspapers 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. 9 Civil Aviation 9.1 The Civil ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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. 9.2 Airports ( a ) Greenfield projects 100% Automatic ( b ) Existing projects 100% Automatic upto 74% Government route beyond 74% 9.3 Air Transport Services (1) Scheduled Air Transport Service/Domestic Scheduled Passenger Airline 49% FDI (100% for NRIs) Automatic (2) Non-Scheduled Air Transport Service 74% FDI (100% for NRIs) Automatic upto 49% Government route beyond 49% and upto 74% (3) Helicopter services /seaplane services requiring DGCA approval 100% Automatic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 00% for NRIs) Automatic upto 49% Government route beyond 49% and upto 74% (2) Maintenance and Repair organizations; flying training institutes; and technical training institutions 100% Automatic 10 Courier services for carrying packages, parcels and other items which do not come within the ambit of the Indian Post Office Act, 1898 and excluding the activity relating to the distribution of letters. 100% Automatic 11 Construction Development: Townships, Housing, Built-up infrastructure 11.1 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) 100% Automatic 11.2 Investment will be subject to the following conditions : (1) Minimum area to be developed under each ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rules/bye-laws/regulations of the State Government/Municipal/Local Body concerned. (7) The State Government/Municipal/Local Body concerned, which approves the building/development plans, would monitor compliance of the above conditions by the developer. Note: ( i ) The conditions at (1) to (4) above would not apply to Hotels Tourism, Hospitals, Special Economic Zones (SEZs), Education Sector, Old age Homes and investment by NRIs. ( ii ) FDI is not allowed in Real Estate Business. 12 Industrial Parks new and existing 100% Automatic 12.1 ( i ) Industrial Park is a project in which quality infrastructure 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, ge ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ubject to the sectoral guidelines of Department of Space /ISRO 74% Government 14 Private Security Agencies 49% Government 15 Telecom services (including Telecom Infrastructure Providers Category-l) All telecom services including Telecom Infrastructure Providers Category-I, viz. Basic, Cellular, United Access Services, Unified license (Access services), Unified License, National/International Long Distance, Commercial V-Sat, Public Mobile Radio Trunked Services (PMRTS), Global Mobile Personal Communications Services (GMPCS), All types of ISP licences, Voice Mail/Audiotex/UMS, Resale of IPLC, Mobile Number Portability Services, Infrastructure Provider Category-I (providing dark fibre, right of way, duct space, tower) except Other Service Providers. 100% Automatic upto 49% Above 49% Government. 15.1.1 Other condition : FDI upto 100% with 49% under automatic route and beyond 49% through FIPB route subject to observance of lic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tehbazari and similar license for hawkers) from Government Authorities /Local Self Government Bodies; or (IV) Institutions having certificate of incorporation or registration as a society or registration as public trust for their self consumption. Note: An Entity, to whom WT is made, may fulfill any one of the 4 conditions. ( c ) Full records indicating all the details of such sales like name of entity, kind of entity, registration/license/permit etc. number, amount of sale etc. should be maintained on a day to day basis. ( d ) WT of goods would be permitted among companies of the same group. However, such WT to group companies taken together should not exceed 25% of the total turnover of the wholesale venture. ( e ) WT can be undertaken as per normal business practice, including extending credit facilities subject to applicable regulations. ( f ) A Wholesale /Cash carry trader cannot open retail shops to sell to the consumer directly. 16.2 E-commerce activities 100% Automatic E-commerce activities refer to the activity of buying and selling ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tisans and craftsmen in all sectors. The quantum of domestic sourcing will be self-certified by the company, to be subsequently checked, by statutory auditors from the duly certified accounts which the company will be required to maintain. This procurement requirement would have to be met, in the first instance, as an average of five years; total value of the goods purchased, beginning 1st April of the year during which the first tranche of FDI is received, Thereafter, it would have to be met on an annual basis. For the purpose of ascertaining the sourcing requirement, the relevant entity would be the company, incorporated in India, which is the recipient of FDI for the purpose of carrying out single-brand product retail trading. ( f ) Retail trading, in any form, by means of e-commerce, would not be permissible for companies with FDI, engaged in the activity of single brand retail trading. (3) Applications seeking permission of the Government for FDI exceeding 49% in a company which proposes to undertake single brand retail trading in India would be made to the Secretariat for Industrial Assistance (SIA) in the Department of Industrial Policy Promotion. The applicati ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ntinue to qualify as a 'small industry' for this purpose, even if it outgrows the said investment of US $ 2.00 million, during the course of its relationship with the said retailer. Sourcing from agricultural co-operatives and farmers' co-operatives would also be considered in this category. The procurement requirement would have to be met, in the first instance, as an average of five years' total value of the manufactured/processed products purchased, beginning 1st April of the year during which the first tranche of FDI is received. Thereafter, it would have to be met on an annual basis. ( v ) Self-certification by the company, to ensure compliance of the conditions at serial nos. (ii), (iii) and (iv) above, which could be cross-checked, as and when required. Accordingly, the investors shall maintain accounts, duly certified by statutory auditors. ( vi ) Retail sales outlets may be set up only in cities with a population of more than 10 lakh as per the 2011 Census or any other cities as per the decision of the receptive State Governments, and may also cover an area of 10 kms. around the municipal/urban agglomeration limits of such cities; retail locatio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Act). Upto 100% of paid-up capital of ARC (FDI FII) Upto 49% Automatic Above 49% Government 17.2 Other conditions: ( i ) Persons resident outside India, can invest in the capital of Asset Reconstruction Companies (ARCs) registered with Reserve Bank, upto 49% under the Automatic Route and beyond 49% under the Government Route. Such investments have to be strictly in the nature of FDI. Investments by FIIs are not permitted in the equity capital of ARCs. ( ii ) No sponsor shall be permitted to hold more than 50% of the shareholding in an ARC either by way of FDI or by routing through an FII. The foreign investment in ARCs are required to comply with entry route conditionality and sectoral caps. However, the total shareholding of an individual FII shall not exceed 10% of the total paid-up capital of the ARC. ( iii ) FIIs registered with SEBI can invest in the Security Receipts (SRs) issued by ARCs registered with Reserve Bank. FIIs can invest upto 74 per cent of the paid-up value each tranche of scheme of Security Receipts issued by the ARCs. ( iv ) Any individual in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fect in the General Body. ( c ) Applications for foreign direct investment 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 RBI and Government as per para 3.6.2 of DIPP's Circular 1 of 2012 as applicable. ( 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 non-resident investors as well. ( ii ) Setting up of a subsidiary by foreign banks ( a ) Foreign banks will be permitted to either have b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y 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. 2. For the purposes of this chapter, ( 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 ) 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 ( iii ) 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. ( iv ) Forward contract means a contract for the delivery of goods and which is not a ready delivery contract. ( v ) Commodity derivative means- a contract for delivery of goods, which is not a ready delivery contract; or a contract for differences which derives its ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... compliance with SEBI Regulations 49% (FDI FII) [FDI limit of 26 per cent and an FII limit of 23 per cent of the paid-up capital] Automatic 22.2 Other Conditions: 22.2.1 FII can invest only through purchases in the secondary market 23 Insurance 23.1 Insurance 26% Automatic 23.2 Other Conditions: (1) FDI in the Insurance sector, as prescribed in the Insurance Act, 1938, is allowed under the automatic route. (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. 24 Non-Banking Finance Companies (NBFC) 24.1 Foreign investment in NBFC is allowed under the automatic route in only the following activities: ( i ) Merchant Banking ( ii ) Under Writing ( iii ) Portfo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... c ) Forex Broking ( d ) Money Changing Business ( e ) Credit Rating Agencies ( vii ) This will be subject to compliance with the guidelines of RBI. Note: (i) Credit Card business includes issuance, sales, marketing design of various payment products such as credit cards, charge cards, debit cards, stored value cards, smart card, value added cards etc. ( ii ) Leasing Finance covers only financial leases and not operating leases. (2) The NBFC will have to comply with the guidelines of the relevant regulator/s, as applicable 25 Pharmaceuticals 25.1 Greenfield 100% Automatic 25.2 Existing Companies 100% Government 26 Power Exchanges 26.1 Power Exchanges under the Central Electricity Regulatory Commission (Power Market) Regulations, 2010 49% (FDI FII) Automatic 26.2 Other conditions: ..... X X X X Extracts X X X X X X X X Extracts X X X X
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