Western India Regional Council of
The Institute of Chartered Accountants of India

(Setup by an Act of Parliament)

September 24, 2019

CA. Manoj Shah, CA. Sudha G. Bhushan, CA. Mitesh Majithia

Review of Foreign Direct Investment (FDI) Policy on various sectors

Press Release dated August 28, 2019 issued by the Government of India; and Press Note No. 4 (2019 Series) vide DPIIT File No.: 5/3/2019-FDI Policy, dated September 18, 2019 issued by Department for Promotion of Industry and Internal Trade (DPIIT)

The Union Cabinet chaired by Prime Minister Shri Narendra Modi has on August 28, 2019 approved the proposal for review of FDI in Various Sectors. Consequently DPIIT has issued Press Note 4 (2019 Series) dated September 18, 2019 to give effect to the decision of Union Cabinet. Major changes in FDI Policy are as under:

Sector

Existing Policy

Revised Policy

Coal Mining

• 100% FDI under automatic route is allowed in coal & lignite mining for captive consumption by power projects, iron & steel and cement units and other eligible activities permitted under and subject to provisions of Coal Mines (nationalization) Act, 1973.

• Further, 100% FDI under automatic route is permitted 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.

• In addition to existing policy, 100% FDI shall also be allowed under automatic route for sale of coal, coal mining activities including associated processing infrastructure subject to provisions of Coal Mines (Special Provisions) Act, 2015 and the Mines and Minerals (Development and Regulation) Act, 1957 as amended from time to time, and other relevant acts on the subject.

• “Associated Processing Infrastructure” would include coal washery, crushing, coal handling, and separation (magnetic and non-magnetic)

Contract Manufacturing

• The extant FDI policy provides for 100% FDI under automatic route in manufacturing sector. a manufacturer is permitted to sell its products manufactured in India through wholesale and/or retail, including through e-commerce, without Government approval. There is no specific provision for Contract Manufacturing in the Policy.

• In order to provide clarity on contract manufacturing, it has been decided to allow 100% FDI under automatic route in contract manufacturing in India as well. 

• Manufacturing activities may be conducted either by the investee entity or through contract manufacturing in India under a legally tenable contract, whether on Principal to Principal or Principal to Agent basis

Single Brand Retail Trading (SBRT)

• The extant FDI Policy provides that 30% of value of goods has to be procured from India if SBRT entity has FDI of more than 51%. Further, local sourcing requirement are required to be met as an average during the first 5 years, and thereafter annually towards its India operations.

• It has now been decided that -

– All procurements made from India by the SBRT entity for that single brand shall be counted towards local sourcing, irrespective of whether the goods procured are sold in India or exported.

– Sourcing of goods from India for global operations can now be done directly by the entity undertaking SBRT or its group companies (resident or non-resident}or indirectly by them through a third party under a legally tenable agreement.

– Entire sourcing from India (instead of incremental sourcing) for global operations shall be considered towards local sourcing requirement.

– Retail trading through e-commerce is now allowed to be undertaken prior to opening of brick and mortar stores, subject to the condition that the entity opens brick and mortar stores within 2 years from date of start of online retail.

Digital Media

• The extant FDI policy provides for 49% FDI under approval route in Up-linking of ‘News & Current Affairs’ TV Channels

• In addition, 26% FDI under government route is allowed for uploading/ streaming of News & Current Affairs through Digital Media, on the lines of print media.

Please refer aforesaid Press Release at https://pib.gov.in/indexd.aspx and Press Note at https://dipp.gov.in/policies-rules-and-acts/press-notes-fdi-circular

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