29 August 2019

India relaxes FDI policy for single brand retail, coal mining and contract manufacturing

29th August

Indian Union Cabinet has on 28-8-2019 approved major proposals for relaxation in Foreign Direct Investments (FDI) policy relating to Single Brand Retail Trading (SBRT), coal mining and sale, contract manufacturing in India, and for uploading specific content through digital media.

According to the press release issued for this purpose, the changes will result in making India a more attractive FDI destination, leading to benefits of increased investments, employment and growth.

Single Brand Retail Trading (SBRT)
  • All procurements made from India by the SBRT entity for that single brand will be counted towards local sourcing, irrespective of whether the goods procured are sold in India or exported.
  • Earlier exports in such case were only factored in for off-setting the local sourcing norms for the first 5 years, the cap of 5 years is proposed to be removed.
  • The entire sourcing from India for global operations, and not merely incremental from the preceding year, will be counted towards local sourcing requirement.
  • In order to satisfy the 30% local sourcing norms, sourcing may be either through the investee entity, i.e. the entity directly undertaking SBRT, or its group companies (resident or non-resident), or even indirectly by the investee entity or its group company(ies) through a third party under a legally tenable agreement.
  • SBRT entities can undertake retail trading through online retail prior to opening brick and mortar stores. The condition is that brick and mortar stores are opened by the SBRT entity within 2 years from the date of start of online retail.
Coal mining and sale
  • 100% FDI is proposed to be allowed under the automatic route for sale of coal and for coal mining activities including ‘associated processing infrastructure’ subject to certain provisions.
  • ‘Associated Processing Infrastructure’ in this context would include coal washery, crushing, coal handling and separation (magnetic and non-magnetic).
Contract manufacturing
  • 100% FDI has been decided to be allowed in contract manufacturing under the automatic route.
  • In the manufacture sector, which already allows 100% FDI under the automatic route, the manufacturing activities may be conducted either by the investee entity or through contract manufacturing in India under a legally tenable contract, whether on a principal to principal basis or principal to agent basis.
Uploading through digital media
  • The Union Cabinet has also cleared the proposal to permit 26% FDI under government route for uploading/streaming of news & current affairs through digital media.

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