Lok Sabha Question No. 628 (UNSTARRED), answered on 2019-11-20
Subject: FDI Norms
Ministry: COMMERCE AND INDUSTRY
Asked by: K. Subbarayan, M. Selvaraj

## GOVERNMENT OF INDIA MINISTRY OF COMMERCE & INDUSTRY DEPARTMENT FOR PROMOTION OF INDUSTRY AND INTERNAL TRADE

## LOK SABHA

UNSTARRED QUESTION NO. 628 TO BE ANSWERED ON WEDNESDAY, THE 20 TH  NOVEMBER, 2019.

## FDI NORMS

## 628.   SHRI SUBBARAYAN K.: SHRI M. SELVARAJ:

Will the Minister of COMMERCE AND INDUSTRY be pleased to state:

वाणिज्य

## एवं उद्योग मंत्री

- (a) whether the Government has allowed Foreign Direct Investment (FDI) in coal mining, contract manufacturing and digital media and eased rules for single branded retail to make it attractive for global brands to invest in the country; and
- (b) if  so,  the  details  thereof  and  the  response  of  the  foreign  investors  in  this regard  and  the  details  of  the  proposals  coming  from  the  foreign  investors since the announcement was made in the last week  of August this year?

## ANSWER वाणिज ् य एवं उद्योग मंत्री श्री पीयूष गोयल

## ( ) THE MINISTER OF COMMERCE & INDUSTRY (SHRI  PIYUSH GOYAL)

## ANSWER

## THE MINISTER FOR COMMERCE & INDUSTRY (SHRI PIYUSH GOYAL)

- (a) & (b): Government  has  liberalized  FDI  policy  in  the  coal  mining,  contract manufacturing and digital media and eased rules for single branded retail vide Press Note 4(2019) issued by Department for Promotion of Industry & Internal Trade on 18.09.2019, which is annexed. Further, the amendments  made  in  FDI  Policy  under  Press  Note  4(2019)  will  take effect after notification under Foreign Exchange Management Act, 1999, which is yet to be issued.

*****

## ANNEXURE REFERRED TO IN REPLY TO PARTS (a) & (b) OF THE LOK SABHA UNSTARRED QUESTION NO. 628 FOR ANSWER ON 20 TH  NOVEMBER, 2019.

## Government of India Ministry of Commerce & Industry Department for Promotion of Industry and Internal Trade FDI Policy Section

## Press Note No. 4 (2019 Series)

Subject: Review  of  Foreign  Direct  Investment  (FDI)  policy  on  various sectors

The  Government  of  India  has  reviewed  the  extant  FDI  policy  on  various sectors and has made following amendments in the Consolidated FDI Policy Circular of 2017 (FDI Policy) , effective from August 28, 2017, and as amended from time to time.

## 2. Coal Mining:

Para 5.2.3.2 of FDI Policy is amended to be read as under:

| Sector/Activity                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       | %of Equity/ FDI Cap   | Entry Route   |
|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|-----------------------|---------------|
| 5.2.3.2 (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 (Special Provisions) Act, 2015 and the Mines and Minerals (Development and Regulation) Act, 1957. (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     |
| (3) For sale of coal, coal mining activities including associated processing infrastructure subject to the 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.                                                                                                                                                                                                                                                                                                                                                             | 100%                  | Automatic     |

Following  new  Clause  5.2.3.3.2  (iii)  is  added  under  other  conditions  of  Para 5.2.3.3.2 of FDI Policy:

'Associated  Processing  Infrastructure'  as  contained  at  Para  5.2.3.2  above includes coal washery, crushing, coal handling, and separation (magnetic and non-magnetic).'

## 3. Contract Manufacturing:

Para 5.2.5.1 of FDI Policy is amended to be read as under:

'Subject to the provisions of the FDI policy, foreign investment in 'manufacturing' sector is under automatic route. Manufacturing activities may be either self manufacturing by the investee entity or contract manufacturing in India through a legally tenable contract, whether on Principal to Principal or Principal  to  Agent  basis.  Further,  a  manufacturer  is  permitted  to  sell  its products  manufactured  in  India  through  wholesale  and/  or  retail,  including through e-commerce, without Government approval.'

## 4. Single Brand Retail Trading

Para 5.2.15.3 of FDI Policy is amended to read as under:

| Sector/Activity                     | %of Equity/ FDI Cap   | Entry Route   |
|-------------------------------------|-----------------------|---------------|
| Single Brand Product retail trading | 100%                  | Automatic     |

- (1)  Foreign  Investment  in  Single  Brand  Product  retail  trading  is  aimed  at  attracting investments in production and marketing, improving the availability of such goods for the consumer,  encouraging  increased  sourcing  of  goods  from  India,  and  enhancing competitiveness  of  Indian  enterprises  through  access  to  global  designs,  technologies and management practices.
- (2)  FDI  in  Single  Brand  Product  retail  trading  would  be  subject  to  the  following conditions:
3. (a)  Products to be sold should be of a 'Single Brand' only.
4. (b)  Products  should  be  sold  under  the  same  brand  internationally  i.e.  products should  be  sold  under  the  same  brand  in  one  or  more  countries  other  than India.
5. (c)  'Single  Brand'  product-retail  trading  would  cover  only  products  which  are branded during manufacturing.
6. (d)  A    non-resident  entity  or  entities,  whether  owner  of  the  brand  or  otherwise, shall  be  permitted  to  undertake  'single  brand'  product  retail  trading  in  the country for the specific brand, either directly by the brand owner or through a legally  tenable  agreement  executed  between  the  Indian  entity  undertaking single brand retail trading and the brand owner.
7. (e)  In respect of proposals involving foreign investment beyond 51%, sourcing of 30% of the value of goods procured, 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. This procurement requirement would have to be met, in the first instance, as an average of five years'  total  value  of  the  goods  procured,  beginning  1st  April  of  the  year  of commencement of SBRT business (i.e. opening of first store or start of online retail, whichever is earlier). Thereafter, SBRT entity shall be required to meet the  30%  local  sourcing  norms  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.
8. (f)  For the purpose of meeting local sourcing requirement laid down at para (e) above, 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. SBRT entity is also permitted to set  off  sourcing  of  goods  from  India  for  global  operations  against  the mandatory sourcing requirement of 30%. For this purpose, 'sourcing of goods from India for global operations' shall mean value of goods sourced from India for  global  operations  for  that  single  brand  (in  INR  terms)  in  a  particular financial year directly by the entity undertaking SBRT or its group companies (resident or non-resident), or indirectly by them through a third party under a

## Note:

- (i) Conditions mentioned at Para 5.2.15.3 (2) (b) & 5.2.15.3 (2) (d) will not be applicable for undertaking SBRT of Indian brands.
- (ii)  Indian  brands  should  be  owned  and  controlled  by  resident  Indian  citizens  and/or companies which are owned and controlled by resident Indian citizens.
- (iii) Sourcing norms will not be applicable up to three years from commencement of the business i.e. opening of first store or start of online retail, whichever is earlier for entities undertaking single brand retail trading of products having 'state-of-art' and 'cutting-edge' technology  and  where  local  sourcing  is  not  possible.  Thereafter,  provisions  of  Para 5.2.15.3 (2) (e) will be applicable. A Committee under the Chairmanship of Secretary, DPIIT,  with  representatives  from  NITI  Aayog,  concerned  Administrative  Ministry  and independent technical expert(s) on the subject will examine the claim of applicants on the  issue  of  the  products  being  in  the  nature  of  'state-of-art'  and  'cutting-edge' technology  where  local  sourcing  is  not  possible  and  give  recommendations  for  such relaxation.
5. Digital Media

Following new clause 5.2.7.2.3 is added under para 5.2.7.2 of the FDI policy:

| 5.2.7.2.3 Uploading/ Streaming of News & Current Affairs through Digital Media   | 26%   | Government   |
|----------------------------------------------------------------------------------|-------|--------------|

Existing Para 5.2.7.2.3 shall be renumbered as 5.2.7.2.4

6. The above decision will take effect from the date of FEMA notification.

## (Sumita Dawra)

Joint Secretary to the Government of India

DPIIT File No.: 5/3/2019-FDI Policy, dated 18.09.2019

## Copy forwarded to :

1. Press  Information  Officer,  Press  Information  Bureau -  for  giving  wide  publicity  to  the  above Press Note.
2. Joint  Secretary(I&C),  Department  of  Economic    Affairs, North Block, New Delhi
3. Reserve  Bank  of  India,  Foreign  Exchange  Department, Mumbai

For suitably incorporating the policy changes in Foreign Exchange Management (Transfer or issue of security by a  person  resident  outside  India) Regulations, 2000 and the relevant schedules thereof.

4. NIC Section in the Department for Promotion of Industry and Internal Trade - for uploading the Press Note on DPIIT's website.
5. Hindi Section, DPIIT - for providing Hindi version.

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legally tenable agreement.

- (g)  An SBRT entity operating through brick and mortar stores can also undertake retail trading through e-commerce. However, retail trading through e-commerce  can  also  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.