27
Mar2019

Revised Guidelines on FDI – Sector Specific condition for Foreign Investors

CONTENTS

 

S. No. Sector/Activity Page No.
A Prohibited Sectors 3
B Permitted Sectors 4
1 Agriculture 4
1.1 Agriculture & Animal Husbandry 4
1.2 Plantation Sector 4
2 Mining and Petroleum & Natural Gas 5
2.1 Mining 5
2.2 Petroleum & Natural Gas 6
3 Manufacturing 6
3.1 Manufacturing 6
3.2 Defence 6
4 Services Sector 7
4.1 Broadcasting 7
4.2 Print Media 8
4.3 Civil Aviation 8
4.4 Construction Development: Townships, Housing, Built-up Infrastructure 9
4.5 Industrial Parks 9
4.6 Satellites- establishment and operation 9
4.7 Private Security Agencies 10
4.8 Telecom Services 10
4.9 Trading 10
4.10 Railway Infrastructure 11
5 Financial Services 12
5.1 Asset Reconstruction Companies 12
5.2 Banking- Private Sector 12
5.3 Banking- Public Sector 12
5.4 Credit Information Companies (CIC) 12
5.5 Infrastructure Company in the Securities Market 13
5.6 Insurance 13
5.7 Pension Sector 13
5.8 Power Exchanges 13
5.9 White Label ATM Operations 13
5.10 Non-Banking Finance Companies (NBFC) 14
6 Others 14
6.1 Pharmaceuticals 14

 

 

Introduction

The Department of Industrial Policy and Promotion (DIPP), Ministry of Commerce and Industry, Government of India recently released the new consolidated foreign direct investment (FDI) policy (New FDI Policy). The New FDI Policy has been made effective immediately from the date of its publication, i.e., 4th January 2018 updated up to 8th March, 2019.

The Union Government has “radically liberalised” the FDI regime and opened up multiple sectors for 100 per cent FDI. Most of the sectors would be under automatic approval route, except a small negative list. With these changes, India is now the most open economy in the world for FDI.

Details of Sector wise condition on FDI are here-in-below;

 

  1. Prohibited Sectors

FDI is prohibited in:

  1. Lottery Business including Government/private lottery, online lotteries, etc.
  2. Gambling and Betting including casinos etc.
  3. Chit funds
  4. Nidhi company
  5. Trading in Transferable Development Rights (TDRs)
  6. Real Estate Business or Construction of Farm Houses – ‘Real estate business’ shall not include development of townships, construction of residential /commercial premises, roads or bridges and Real Estate Investment Trusts (REITs) registered and regulated under the SEBI (REITs) Regulations 2014.
  7. Manufacturing of cigars, cheroots, cigarillos and cigarettes, of tobacco or of tobacco substitutes
  8. Activities/sectors not open to private sector investment e.g.(I) Atomic Energy and (II) Railway operations(other than permitted activities mentioned in para 5.2).

Foreign technology collaboration in any form including licensing for franchise, trademark, brand name, management contract is also prohibited for Lottery Business and Gambling and Betting activities.

  1. Permitted Sectors

In the following sectors/activities, FDI up to the limit indicated against each sector/activity is allowed, subject to applicable laws/regulations; security and other conditionality. In sectors/activities not listed below, FDI is permitted up to100% on the automatic route, subject to applicable laws/regulations; security and other conditionality.

       2. Agriculture

  • Agriculture & Animal Husbandry

 

Sector/Activity % of Equity/

FDI Cap

Entry Route
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, under controlled conditions; and

d) Services related to agro and allied sectors

 

Note: Besides the above, FDI is not allowed in any other agricultural sector/activity

100% Automatic

 

  •   Plantation Sector
Sector/Activity % of Equity/

FDI Cap

Entry Route
Tea sector including tea plantations

(ii) Coffee plantations

(iii) Rubber plantations

(iv) Cardamom plantations

(v) Palm oil tree plantations

(vi) Olive oil tree plantations

Note: Besides the above, FDI is not allowed in any other plantation sector/activity.

100% Automatic

 

 3. Mining and Petroleum & Natural Gas

  • Mining

 

Sector/Activity % of Equity/

FDI Cap

Entry Route
Mining and Exploration of metal and non-metal ores including diamond, gold, silver and precious ores but excluding titanium bearing minerals and its ores; subject to the Mines and Minerals (Development & Regulation) Act, 1957. 100%

 

Automatic

 

Coal & Lignite

(1)  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 (Nationalization) Act, 1973.

(2)  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.

100% Automatic
Mining and mineral separation of titanium bearing minerals and ores, its value addition and integrated activities.

 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).

100% Government
  • Petroleum & Natural Gas

 

Sector/Activity % of Equity/

FDI Cap

Entry Route
Exploration activities of oil and natural gas fields, infrastructure related to marketing of petroleum products and natural gas, marketing of natural gas and petroleum products, petroleum product pipelines, natural gas/pipelines, LNG Regasification infrastructure, market study and formulation and Petroleum refining in the private sector, 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.

 

100% Automatic
Petroleum refining by the Public Sector Undertakings (PSU), without any disinvestment or dilution of domestic equity in the existing PSUs. 49% Automatic

4. Manufacturing

  • Manufacturing

 Subject to the provisions of the FDI policy, foreign investment in ‘manufacturing’ sector is under automatic route. Further, a manufacturer is permitted to sell its products manufactured in India through wholesale and/or retail, including through e-commerce without Government approval.

  • Defence 
Sector/Activity % of Equity/

FDI Cap

Entry Route
Defence Industry subject to Industrial license under the Industries (Development & Regulation) Act, 1951

 

100% Automatic up to 49%

 

Above 49% under Government route on case to case basis, wherever it is likely to result in access to modern and ‘state-of-art’ technology in the country.

5. Services Sector

  1. Broadcasting
  • Broadcasting Carriage Services

 

Sector/Activity % of Equity/

FDI Cap

Entry Route
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)

100% Automatic up to 49%

Government route beyond 49%

 

Cable Networks(Other MSOs not undertaking upgradation of networks towards digitalization and addressability and Local Cable Operators (LCOs))

 

100% Automatic up to 49%

Government route beyond 49%

  • Broadcasting Content Services 
Sector/Activity % of Equity/

FDI Cap

Entry Route
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 49% Government
Up-linking of ‘News & Current Affairs’ TV Channels 49% Government
Up-linking of Non-‘News & Current Affairs’ TV Channels/ Down-linking of TV Channels 100% Automatic
  • Print Media 
Sector/Activity % of Equity/ FDI Cap Entry Route
Publishing of newspaper and periodicals dealing with news and current affairs 26% Government
Publication of Indian editions of foreign magazines dealing with news and current affairs 26% Government
  • Civil Aviation
  • Airports 
Sector/Activity % of Equity/ FDI Cap Entry Route
(a) Greenfield projects 100% Automatic
(b) Existing projects 100% Automatic up to 74%

Government route beyond 74%

  • Air Transport Services 
Sector/Activity % of Equity/

FDI Cap

Entry Route
(1) (a) Scheduled Air Transport Service/ Domestic Scheduled Passenger Airline

(b) Regional Air Transport Service

49% FDI

(100% for NRIs and OCI’s)

Automatic
(2)Non-Scheduled Air Transport Service 100% Automatic
(3)Helicopter services/seaplane services requiring DGCA approval 100% Automatic
  • Other services under Civil Aviation sector 
Sector/Activity % of Equity/

FDI Cap

Entry Route
(1)Ground Handling Services subject to sectoral regulations and security clearance 100% Automatic
(2)Maintenance and Repair organizations; flying training institutes; and technical training institutions. 100% Automatic
  •  Construction Development: Townships, Housing, Built-up Infrastructure
Sector/Activity %% of Equity/

FDI Cap

Entry Route
5.2.10.1

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
  • Industrial Parks 
Sector/Activity % of Equity/

FDI Cap

Entry Route
Industrial Parks -new and existing 100% Automatic
  • Satellites- establishment and operation 
Sector/Activity % of Equity/

FDI Cap

Entry Route
Satellites- establishment and operation, subject to the sectoral guidelines of Department of Space/ISRO 100% Government
  • Private Security Agencies 
Sector/Activity % of Equity/

FDI Cap

Entry Route
Private Security Agencies 49% Government
  • Telecom Services 
Sector/Activity % of Equity/

FDI Cap

Entry Route
Telecom Services

(including Telecom Infrastructure Providers Category-I)

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 licenses, 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 up to 49%

Government route beyond 49%

  • Trading
  • Cash & Carry Wholesale Trading/ Wholesale 
Sector/Activity % of Equity/

FDI Cap

Entry Route
Cash & Carry Wholesale Trading/Wholesale Trading (including sourcing from MSEs) 100% Automatic
  • E-commerce activities 
Sector/Activity % of Equity/FDI Cap Entry Route
E-commerce activities 100% Automatic
  • Single Brand product retail trading 
Sector/Activity % of Equity/

FDI Cap

Entry Route
Single Brand product retail trading 100% Automatic up to 49%

Government route beyond 49%

  • Multi Brand Retail Trading 
Sector/Activity % of Equity/

FDI Cap

Entry Route
Multi Brand Retail Trading 51% Government
  • Duty Free Shops 
Sector/Activity % of Equity/

FDI Cap

Entry Route
Duty Free Shops 100% Automatic

 

  • Railway Infrastructure 
Sector/Activity % of Equity/

FDI Cap

Entry Route
Railway Infrastructure

Construction, operation and maintenance of the following:

(i) Suburban corridor projects through PPP, (ii) High speed train projects, (iii) Dedicated freight lines, (iv) Rolling stock including train sets, and locomotives/coaches manufacturing and maintenance facilities, (v) Railway Electrification, (vi) Signaling 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
  1. Financial Services 
  • Asset Reconstruction Companies
Sector/Activity % of Equity/

FDI Cap

Entry Route
5.2.17.1‘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). 100% Automatic
  • Banking- Private Sector 
Sector/Activity % of Equity/ FDI Cap Entry Route
Banking- Private Sector 74% Automatic up to 49%

Government route beyond 49% and up to 74%.

  • Banking- Public Sector
Sector/Activity % of Equity/

FDI Cap

Entry Route
5.2.19.1 Banking- Public Sector subject to Banking Companies (Acquisition & Transfer of Undertakings) Acts 1970/80. This ceiling (20%) is also applicable to the State Bank of India and its associate Banks. 20% Government

 

  • Credit Information Companies (CIC) 
Sector/Activity % of Equity/ FDI Cap Entry Route
5.2.20.1

Credit Information Companies

100% Automatic
  • Infrastructure Company in the Securities Market 
Sector/Activity % of Equity/ FDI Cap Entry Route
5.2.21.1Infrastructure companies in Securities Markets, namely, stock exchanges, commodity exchanges, depositories and clearing corporations, in compliance with SEBI Regulations 49% Automatic
  • Insurance 
Sector/Activity % of Equity/ FDI Cap Entry Route
 (i) Insurance Company

(ii) Insurance Brokers

(iii) Third Party Administrators

(iv) Surveyors and Loss Assessors

(v)Other Insurance Intermediaries appointed under the provisions of Insurance Regulatory and Development Authority Act, 1999 (41 of 1999)

49% Automatic
  • Pension Sector 
Sector/Activity % of Equity/ FDI Cap Entry Route
Pension Sector 49% Automatic
  • Power Exchanges 
Sector/Activity % of Equity/ FDI Cap Entry Route
5.2.24.1

Power Exchanges registered under the Central Electricity Regulatory Commission (Power Market) Regulations, 2010.

49% Automatic
  • White Label ATM Operations 
Sector/Activity % of Equity/

FDI Cap

Entry Route
White Label ATM Operations 100% Automatic

 

  • Non-Banking Finance Companies (NBFC) 
Sector/Activity % of Equity/

FDI Cap

Entry Route
5.2.26.1

Foreign investment in NBFC is allowed under the automatic route in only 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

100% Automatic

 

  1. Others 
  • Pharmaceuticals 
Sector/Activity % of Equity/ FDI Cap Entry Route
Greenfield 100% Automatic
Brownfield 100% Government

 

Our Corporate Professional Team is ever willing to provide assistance on any issue concerning GST, Insolvency and Bankruptcy Law, Business Model Advisory in India and Abroad, Customs Law, Corporate & Commercial Advisory, IPRs. Secretarial Compliances, Agreement Drafting & Negotiations etc. you may write us on connect@legallands.com, contact@legale-services.com

 

Leave your comment

Please enter your name.
Please enter comment.
 

Disclaimer

 

As per the rules of the Bar Council of India, we are not permitted to solicit work and advertise. By clicking “I agree” below, you acknowledge the following:

 

  • There has been no advertisement, personal communication, solicitation, invitation or inducement of any sort whatsoever from us or any of our members to solicit any work through this website;

  • The user wishes to gain more information about us for his/her own information and use;

  • The information about us is provided to the user only on his/her specific request and any information obtained or materials downloaded from this website is completely at the user’s volition and any transmission, receipt or use of this site would not create any lawyer-client relationship.

The information provided under this website is solely available at your request for informational purposes only, should not be interpreted as soliciting or advertisement. We are not liable for any consequence of any action taken by the user relying on material/information provided under this website. In cases where the user has any legal issues, he/she in all cases must seek independent legal advice.