By TIOL News Service

NEW DELHI, NOV 11, 2015: IN yet another bout of reforms the Modi Government yesterday further liberalised the FDI policy touching as many as 15 major sectors of the economy. And they are:

i. Limited Liability Partnerships, downstream investment and approval conditions.

ii. Investment by companies owned and controlled by Non-Resident Indians (NRIs)

iii. Establishment and transfer of ownership and control of Indian companies

iv. Agriculture and Animal Husbandry

v. Plantation

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

vii. Defence

viii. Broadcasting Sector

ix. Civil Aviation

x. Increase of sectoral cap

xi. Construction development sector

xii. Cash and Carry Wholesale Trading / Wholesale Trading (including sourcing from MSEs)

xiii. Single Brand Retail Trading and Duty free shops

xiv. Banking-Private Sector; and

xv. Manufacturing Sector

Further refining of foreign investments in key Sectors like Construction where 50 million houses for poor are to be built. Opening up the manufacturing Sector for wholesale, retail and E-Commerce so that the Industries are motivated to Make In India and sell it to the customers here instead of importing from other countries. The proposed reforms also enhance the limit of Foreign Investment Promotion Board (FIPB) from current Rs 3000 crores to Rs 5000 crores.

The proposal also contains many other long pending corrections including those being felt by the limited liability partnerships as well as NRI owned Companies who seem motivated to invest in India. Few other proposals seek to enhance the sectoral Caps so that foreign investors do not have to face fragmented ownership issues and get motivated to deploy their resources and technology with full force.

As per the FDI policy, in wholesale cash & carry activities, 100% foreign investment is permitted under the automatic route. FDI policy on this sector further provides that a wholesale/cash & carry trader cannot open retail shops to sell to the consumer directly. It has now been decided that a single entity will be permitted to undertake both the activities of single brand retail trading (SBRT) and wholesale with the condition that conditions of FDI policy on wholesale/ cash & carry and SBRT have to be complied by both the business arms separately. 100% FDI is now permitted under automatic route in Duty Free Shops located and operated in the Customs bonded areas.

It has been decided by the Govt that a manufacturer will be permitted to sell its product through wholesale and/or retail, including through e-commerce without Government approval.

Radical Changes in FDI Regime in Construction Development Sector

i. Conditions of area restriction of floor area of 20,000 sq. mtrs in construction development projects and minimum capitalization of US $ 5 million to be brought in within the period of six months of the commencement of business, have been removed.

ii. Each phase of the construction development project would be considered as a separate project for the purposes of FDI policy.

iii. A foreign investor will be permitted to exit and repatriate foreign investment before the completion of project under automatic route, provided that a lock-in-period of three years, calculated with reference to each tranche of foreign investment has been completed. Further, transfer of stake from one non-resident to another non-resident, without repatriation of investment will neither be subject to any lock-in period nor to any government approval. Nonetheless, exit is permitted at any time if project or trunk infrastructure is completed before the lock-in period.

iv. FDI is not permitted in an entity which is engaged or proposes to engage in real estate business, construction of farm houses and trading in transferable development rights (TDRs). Real Estate Business will mean as 'dealing in land and immovable property with a view to earning profit therefrom and does not include development of townships, construction of residential/ commercial premises, roads or bridges, educational institutions, recreational facilities, city and regional level infrastructure, townships. Further, earning of rent/ income on lease of the property, not amounting to transfer, will not amount to real estate business.’

v. Condition of lock-in period will not apply to Hotels &Tourist Resorts, Hospitals, Special Economic Zones (SEZs), Educational Institutions, Old Age Homes and investment by NRIs.

vi. 100% FDI under automatic route is permitted in completed projects for operation and management of townships, malls/ shopping complexes and business centres. Consequent to foreign investment, transfer of ownership and/or control of the investee company from residents to non-residents is also permitted. However, there would be a lock-in-period of three years, calculated with reference to each tranche of FDI, and transfer of immovable property or part thereof is not permitted during this period.

vii. "Transfer", in relation to FDI policy on the 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 shares in a company or by way of any agreement or any arrangement or in any other manner whatsoever, which has the effect of transferring, or enabling the enjoyment of, any immovable property.

New Sectoral Caps & Entry Routes in Broadcasting Sector

FDI policy on Broadcasting sector has also been amended. New sectoral caps and entry routes are as under: