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TMI BlogPermitted sectors, entry routes and sectoral caps for total foreign investmentX X X X Extracts X X X X X X X X Extracts X X X X ..... iance of sectoral conditions as the case may be, if such investment does not result in transfer of ownership and control of the resident Indian company from resident Indian citizens or transfer of ownership or control to persons resident outside India. Other investments by a person resident outside India will be subject to conditions of Government approval and compliance of sectoral conditions as laid down in these regulations. B. Sectoral Caps SECTOR-SPECIFIC POLICY FOR TOTAL FOREIGN INVESTMENT (1) Sectoral cap for the following sectors/ activities is the limit indicated against each sector. The total foreign investment shall not exceed the sectoral/ statutory cap. (2) Foreign investment in the following sectors/ activities is, subject to applicable laws/ regulations, security and other conditionalities (3) In sectors/ activities not listed below or not prohibited under regulation 15 of these Regulations, foreign investment is permitted up to 100 percent on the automatic route, subject to applicable laws/ regulations, security and other conditionalities. Provided foreign investment in financial services other than those indicated under serial number F below ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ns; (b) Development and production of seeds and planting material; (c) Animal Husbandry (including breeding of dogs), Pisciculture, Aquaculture and Apiculture; and (d) Services related to agro and allied sectors. Note: Other than the above, foreign investment is not allowed in any other agricultural sector/ activity. 100% Automatic 1.2 Other Conditions The term under controlled conditions covers the following: Cultivation under controlled conditions for the categories of Floriculture, Horticulture, Cultivation of vegetables and Mushrooms is the practice of cultivation wherein rainfall, temperature, solar radiation, air humidity and culture medium are controlled artificially. Control in these parameters may be effected through protected cultivation under green houses, net houses, poly houses or any other improved infrastructure facilities where micro-climatic conditions are regulated anthropogenically. 2. Plantation ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... stment for separation of titanium bearing minerals ores will be subject to the following conditions: (i) Value addition facilities are set up within India along with transfer of technology; (ii) 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. (b) Foreign investment will not be allowed in mining of prescribed substances listed in the Notification No. S.O. 61(E), dated 18.1.2006, issued by the Department of Atomic Energy. Clarification: (i) For titanium bearing ores such as Ilmenite, Leucoxene and Rutile, manufacture of titanium dioxide pigment and titanium sponge constitutes value addition. Ilmenite can be processed to produce Synthetic Rutile or Titanium Slag as an intermediate value added product. (ii) The objective is to ensure that the raw material available in the country is utilized for setting up downstream industries and the technology available internationally is also made available for setting up such ind ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... recorded. 6.2 Other Conditions (a) Fresh foreign investment within the permitted automatic route, in a company not seeking industrial license, resulting in change in the ownership pattern or transfer of stake by existing investor to new foreign investor, will require Government approval. (b) Licence applications will be considered and licences will be given by the Department of Industrial Policy Promotion, Ministry of Commerce Industry, in consultation with Ministry of Defence and Ministry of External Affairs. (c) Foreign investment in this sector is subject to security clearance and guidelines of the Ministry of Defence. (d) Investee company should be structured to be self-sufficient in areas of product design and development. The investee/ joint venture company along with manufacturing facility, should also have maintenance and life cycle support facility of the product being manufactured in India. 7. Broadcasting 7.1 Broadcasting Carriage Services ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (c) Licensee shall ensure that broadcasting service installation carried out by it should not become a safety hazard and is not in contravention of any statute, rule or regulations and public policy. In the l B sector where the sectoral cap is up to 49 percent, the company should be owned and controlled by resident Indian citizens or Indian companies which are owned and controlled by resident Indian citizens. (i) For this purpose, the equity held by the largest Indian shareholder shall be at least 51 percent 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 or Section 2 (72) of the Companies Act, 2013, as the case may be. The term `largest Indian shareholder' used in this clause, will include any or a combination of the following: (1) In the case of an individual shareholder, (aa) The individual shareholder, (bb) A relative of the shareholder within the meaning of Section 2 (77) of Companies Act, 2013. (cc) A company/group of companies in which the individual shareholder/HUF to which he be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... owner of the original foreign newspapers whose facsimile edition is proposed to be brought out in India. (b) 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, 2013. (c) 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. 9. Civil Aviation 9.1 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. For the purposes of the Civil Aviation sector: (a) Airport means a landing and taking off area for aircrafts, usually with runways and aircraft maintenance and passenger facilities and includes aerodrome as d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... atic (b) Existing projects 100% Automatic 9.3 Air Transport Services 3 [ (a) (i) Scheduled Air Transport Service/ Domestic Scheduled Passenger Airline (ii) Regional Air Transport Service 100% Automatic up to 49% Government route beyond 49% (Automatic up to 100% for NRIs and OCIs) ] (b) Non-Scheduled Air Transport Service 100% Automatic (c) Helicopter services/ seaplane services requiring DGCA approval 100% Automatic 9.4 Other Services under Civil Aviation sector (a) Ground Handling Services subject to sectoral regulations and security clearance 100% Automatic (b) Maintenance and Repair organizations; flying training institutes and technical training institutions 100% ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... The dispensation for NRIs and OCIs regarding foreign investment up to 100% shall also be applicable in respect of the investment regime specified at 9.5(c) above. 5 [ ******* ] (4) The investee company additionally shall have to follow guidelines issued by the concerned ministry of the Central Government. 10 Construction Development: Townships, Housing, Built-up infrastructure 10.1 Construction-development projects (which would include development of townships, construction of residential/ commercial premises, roads or bridges, hotels, resorts, hospitals, educational institutions, recreational facilities, city and regional level infrastructure, townships) 100% Automatic 10.2 Other Conditions 10.2 (a) Each phase of the construction development project would be considered as a separate project. (b) The investor will be permitted to exit on completion of the project or after development of trunk infrastructure i.e. roads, water supply, street ligh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... under automatic route is permitted in completed projects for operating and managing townships, malls/ shopping complexes and business centres. Consequent to such foreign investment, transfer of ownership and/ or control of the investee company from persons resident in India to persons resident outside India is also permitted. However, there would be a lock-in-period of three years, calculated with reference to each tranche of foreign investment and transfer of immovable property or part thereof is not permitted during this period. (5) Transfer , in relation to this sector, includes,- a. the sale, exchange or relinquishment of the asset; or b. the extinguishment of any rights therein; or c. the compulsory acquisition thereof under any law; or d. any transaction involving the allowing of the possession of any immovable property to be taken or retained in part performance of a contract of the nature referred to in section 53A of the Transfer of Property Act, 1882 (4 of 1882) ; or e. any transaction, by acquiring capital instruments in a company or by way of any agreement or any arrangement or in any other manner whatsoever, which has the effect of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... line/ sidings including electrified railway lines and connectivity to the main railway line, water supply and sewerage, common effluent treatment facility, telecom network, generation and distribution of power, air conditioning. (c) 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), railway line/ sidings including electrified railway lines and connectivity to the main railway line, 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 centre, ambulance and other safety services, training facilities and such other facilities meant for common use of the units located in the Industrial Park. (d) Allocable area in the Industrial Park means- (i) in the case of plots of developed land - the net site area available for allocation to the units, excluding the area for common facilities. (ii) in the case of built up space - the floor area and built-up space utilized fo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ity services, Infrastructure Provider Category-I (providing dark fibre, right of way, duct space, tower) except Other Service Providers. 100% Automatic up to 49%; Government route beyond 49% 14.2 Other Conditions The licensing and security conditions as notified by the Department of Telecommunications (DoT) from time to time, shall be observed by licensee as well as investors except for foreign investment in Other Service Providers , which is allowed up to 100 percent under the automatic route. 15. Trading 15.1 Cash and Carry Wholesale Trading/ Wholesale Trading (including sourcing from MSEs) 100% Automatic 15.1.1 Definition: (a) Cash and Carry Wholesale trading (WT)/ Wholesale trading, shall mean sale of goods/ merchandise to retailers, industrial, commercial, institutional or other professional business users or to other wholesalers and related su ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hall be permitted among companies of the same group. However, such WT to group companies taken together shall not exceed 25 percent 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 and carry trader can undertake single brand retail trading, subject to the conditions mentioned in para 15.3. An entity undertaking wholesale/ cash and carry as well as retail business will be mandated to maintain separate books of accounts for these two arms of the business and duly audited by the statutory auditors. Conditions under these Regulations for wholesale/ cash and carry business and for retail business have to be separately complied with by the respective business arms. 15.2 E-Commerce 15.2.1 B2B E-commerce activities 100% Automatic Such companies would engage only in Business to Business (B2B) e-commerce and not in retail trading, inter alia imply ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mpanies, will not be permitted to sell its products on the platform run by such marketplace entity. ] (j) Goods/ services made available for sale electronically on website should clearly provide name, address and other contact details of the seller. Post sales, delivery of goods to the customers and customer satisfaction will be responsibility of the seller. (k) Payments for sale may be facilitated by the e-commerce entity in conformity with the guidelines issued by the Reserve Bank in this regard. (l) Any warranty/ guarantee of goods and services sold will be the responsibility of the seller. 20 [ (m) E-commerce entities providing marketplace will not, directly or indirectly, influence the sale price of any goods or services and shall maintain level playing field. Services should be provided by e-commerce marketplace entity or other entities in which e-commerce marketplace entity has direct or indirect equity participation or common control, to vendors on the platform at arm s length and in a fair and non-discriminatory manner. Explanation: Such services will include but not limited to fulfilment, logistics, warehousing, advertisement/marketi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... le brand retail trading and the brand owner. ] (e) In respect of proposals involving foreign investment beyond 51 percent, sourcing of 30 percent of the value of goods purchased, will be done from India, preferably from MSMEs, village and cottage industries, artisans 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. The procurement requirement is to be met in the first instance as an average of five years total value of goods purchased beginning 1 st April of the year of the commencement of the business. Thereafter it shall 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 foreign investment for the purpose of carrying out single brand product retail trading. (f) Subject to the conditions mentioned in this Para, a single brand retail trading entity operating through brick and mortar stores, is permitted to undertake retail trading through e-commerce. 9 [ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt would be USD 100 million. (c) At least 50 percent of the total foreign investment brought in the first tranche of USD 100 million, shall be invested in 'back-end infrastructure' within three years, where 'back-end infrastructure' will include capital expenditure on all activities, excluding that on front-end units; for instance, back-end infrastructure will include investment made towards processing, manufacturing, distribution, design improvement, quality control, packaging, logistics, storage, warehouse, agriculture market produce infrastructure etc. Expenditure on land cost and rentals, if any, will not be counted for purposes of back-end infrastructure. Subsequent investment in the back-end infrastructure would be made by the MBRT retailer as needed, depending upon its business requirements. (d) At least 30 percent of the value of procurement of manufactured/ processed products purchased shall be sourced from Indian micro, small and medium industries, which have a total investment in plant machinery not exceeding USD2 million. This valuation refers to the value at the time of installation, without providing for depreciation. The 'small indus ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tions, such as the Shops and Establishments Act etc. (i) Retail trading, in any form, by means of e-commerce, would not be permissible, for companies with foreign investment engaged in multi-brand retail trading. (j) Applications would be processed in the Department of Industrial Policy and Promotion, to determine whether the proposed investment satisfies the notified guidelines, before being considered for Government approval. 15.4.2 States/ Union Territories are Andhra Pradesh, Assam, Delhi, Haryana, Himachal Pradesh, Jammu Kashmir, Karnataka, Maharashtra, Manipur, Rajasthan, Uttarakhand, Daman Diu and Dadra and Nagar Haveli (Union Territories) 15.5 Duty Free Shops 100% Automatic 15.5.1 Other Conditions: (a) Duty Free Shops would mean shops set up in custom bonded area at International Airports/ International Seaports and Land Custom Stations where there is transit of international passengers. (b) Foreign investment in Duty Free Shops is s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... estment into the investee company. (iv) The administrative Ministry (s) i.e. Ministry of Health and Family Welfare, Department of Pharmaceuticals or any other regulatory Agency/Development as notified by Central Government from time to time, will monitor the compliance of conditionalities. Note : (1) Foreign investment up to 100% under the automatic route is permitted for manufacturing of medical devices. The abovementioned conditions will, therefore, not be applicable to greenfield as well as brownfield projects of this industry. (2) Medical device means :- (a) Any instrument, apparatus, appliance, implant, material or other article, whether used alone or in combination, including the software, intended by its manufacturer to be used specially for human beings or animals for one or more of the specific purposes of:- (aa) Diagnosis, prevention, monitoring, treatment or alleviation of any disease or disorder; (ab) diagnosis, monitoring, treatment, alleviation of, or assistance for, any injury or 13 [ disability ] ; (ac) investigation, replacement or modification or support of the anatomy or of a physiological process ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ntenance facilities, (v) Railway Electrification, (vi) Signalling systems, (vii) Freight terminals, (viii) Passenger terminals, (ix) Infrastructure in industrial park pertaining to railway line/ sidings including electrified railway lines and connectivity to main railway line and (x) Mass Rapid Transport Systems. 100% Automatic 17.2 Other Conditions (a) Foreign investment in this sector open to private-sector participation is subject to sectoral guidelines of Ministry of Railways. (b) Proposals involving foreign investment beyond 49 percent sensitive areas from security point of view, will be brought by the Ministry of Railways before the Cabinet Committee on Security (CCS) for consideration on a case to case basis. F FINANCIAL SERVICES Investment in financial services, other than those indicated below, would require prior Government approval. F.1 Asset Reconstruction Companies 100% Automatic F ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ribed by RBI and other institutions such as Securities and Exchange Board of India, Ministry of Corporate Affairs and IRDAI on these matters will apply. (f) RBI guidelines relating to acquisition by purchase or otherwise of capital instruments of a private bank, if such acquisition results in any person owning or controlling 5 percent or more of the paid up capital of the private bank will apply to foreign investment as well. (g) Setting up of a subsidiary by foreign banks (i) Foreign banks will be permitted to either have branches or subsidiaries but not both. (ii) Foreign banks regulated by banking supervisory authority in the home country and meeting Reserve Bank's licensing criteria will be allowed to hold 100 percent paid-up capital to enable them to set up a wholly-owned subsidiary in India. (iii) A foreign bank may operate in India through only one of the three channels viz., (i) branches (ii) a wholly-owned subsidiary (iii) a subsidiary with aggregate foreign investment up to a maximum of 74 percent in a private bank. (iv) A foreign bank will be permitted to establish a wholly-owned subsidiary either through conversion of existing bra ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ation) Act, 1956 (42 of 1956) or the Securities and Exchange Board of India Act, 1992 (15 of 1992) or the Depositories Act, 1996 (22 of 1996) or in the concerned Regulations issued by Securities and Exchange Board of India shall have the same meanings respectively assigned to them in those Acts/ Regulations. F.5 Commodities Spot Exchange 49% Automatic F.5.1 Investment shall be subject to guidelines prescribed by the Central/ State Government F.6 Power Exchanges Power Exchanges under the Central Electricity Regulatory Commission (Power Market) Regulations, 2010 49% Automatic F.6.1 Other conditions 16 [ ******* ] (b) A person resident outside India including persons acting in concert should not hold more than 5 percent. (c) The investment would be in compliance with Sec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , subject to the condition that the revenues of such entities from their primary (i.e., non-insurance related) business must remain above 50 percent of their total revenues in any financial year. (d) The provisions of paragraphs F.2.1 relating to 'Banking-Private Sector', shall be applicable in respect of bank promoted insurance companies. (e) Terms 'Control', 'Equity Share Capital', 'Foreign Direct Investment' (FDI), 'Foreign Investors', 'Foreign Portfolio Investment', 'Indian Insurance Company', 'Indian Company', 'Indian Control of an Indian Insurance Company', 'Indian Ownership', 'Non-resident Entity', 'Public Financial Institution', 'Resident Indian Citizen', 'Total Foreign Investment' will have the same meaning as provided in Notification No. G.S.R 115 (E), dated 19th February, 2015 issued by Department of Financial Services and regulations issued by Insurance Regulatory and Development Authority of India from time to time. F.9 Pension Sector 49% Automatic F.9 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hose levels/ limit that may be specified in that Act, if so mentioned. (e) Downstream investments by any of these entities engaged in Other Financial Services will be subject to these Regulations. 2 [ (8) Wherever the person resident outside India who has made foreign investment specifies a particular auditor/ audit firm having international network for the audit of the Indian investee company, then audit of such investee company shall be carried out as joint audit wherein one of the auditors is not part of the same network ] [F. No. 1/22/EM/2016] SHEKHAR BHATNAGAR, Chief General Manager-in-Charge *********** Notes : 1. Substituted vide Notification No. FEMA. 20(R) (1)/2018-RB dated 26-03-2018 before it was read as Foreign investment into an Indian company, engaged only in the activity of investing in the capital of other Indian company/ies, will require prior approval of the Government. A core investment company (CIC) will have to additionally follow the Reserve Bank s regulatory framework for CICs. 2. Inserted vide Notification No. FEMA. 20(R) (1)/2018-RB dated 26-03-2018 3. Substituted vide Not ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... st of products/ product categories proposed to be sold except food products shall be provided to the Reserve Bank. (h) Applications would be processed in the Department of Industrial Policy and Promotion, to determine whether the proposed investment satisfies the notified guidelines, before being considered for Government approval. 10. Inserted vide Notification No. FEMA. 20(R) (1)/2018-RB dated 26-03-2018 11. Omitted vide Notification No. FEMA. 20(R) (1)/2018-RB dated 26-03-2018 before it was read as (2) An Indian manufacturer is permitted to sell its own branded products in any manner i.e. wholesale, retail, including through e-commerce platforms. (3) Indian manufacturer would be the investee company, which is the owner of the Indian brand and which manufactures in India, in terms of value, at least 70 percent of its products in house, and sources, at most 30 percent from Indian manufacturers. 12. Substituted vide Notification No. FEMA. 20(R) (1)/2018-RB dated 26-03-2018 before it was read as Sourcing norms will not be applicable up to three years from commencement of the business i.e. opening of the first store for entities undertaking singl ..... X X X X Extracts X X X X X X X X Extracts X X X X
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