Govt relaxes FDI rules in single-brand retail, coal mining, contract manufacturing, digital media: All you need to know

  • The government on Wednesday approved further relaxed rules for foreign direct investment (FDI) rules in four sectors

  • Retail trading through online trade can also be undertaken prior to the opening of brick-and-mortar stores

  • The current cap of considering exports for five years only is also removed, to give an impetus to export

The government on Wednesday approved further relaxed rules for foreign direct investment (FDI) rules in four sectors—100 percent foreign investment in coal mining and contract manufacturing, eased sourcing norms for single-brand retailers, and approved 26 percent overseas investment in digital media.

Here's all you need to  know about the rules for the various sectors:

Conditions were relaxed for single-brand retailers having FDI for complying with the mandatory 30 percent local sourcing regulations by allowing them to adjust all of their purchases to meet this norm.

What does this mean for single-brand retail

  1. Such entities can take the e-commerce route and then open brick-and-mortar stores. The existing policy for such entities was that they should operate through brick-and-mortar stores before starting retail trading of that brand through e-commerce
  2. The entities would now be able to serve global markets
  3. All procurements made from India will be counted towards local sourcing, irrespective of whether the goods procured are sold in India or exported
  4. The current cap of considering exports for five years only has also been removed
  5. Sourcing of goods from India for global operations can be done directly by the entity undertaking single-brand retail or its group companies (resident or non-resident), or indirectly by them through a third party under a legally tenable agreement
  6. Entire sourcing from India for global operations shall be considered towards local sourcing requirement and no incremental value," it added.
 Govt relaxes FDI rules in single-brand retail, coal mining, contract manufacturing, digital media: All you need to know

Representational image. News 18.

FDI in digital media

The government has permitted 26 percent foreign direct investment (FDI) through government approval route for uploading/streaming of news and current affairs through digital media, on the lines of print media.

  1. Accordingly, the government has created digital media sector, a separate segment for the purpose of FDI
  2. In the print media sector, 26 percent FDI is allowed through government approval route. Similarly, 49 percent is permitted in broadcasting content services through government approval route. Government approval route means the government’s nod is needed for each proposed FDI project on a case-by-case basis.
  3. FDI was previously only applicable to print media in the country. With the latest announcement, media companies come under a new category — digital news and current affairs media. This means, for example, video streaming services like VOOT or ZEE5 that are run by broadcast networks like Zee Entertainment Enterprises or Viacom18 Media may now be listed as separate companies and raise their own investment, said a report in Mint.

FDI in coal mining

In a fresh round of foreign direct investment (FDI) reforms, the government on Wednesday allowed 100 percent overseas investment in coal mining in a bid to boost economic growth from a five-year low.

What does this mean

  1. Foreign players can invest 100 percent for mining and sale of coal under automatic route. Automatic route means FDI is allowed without prior approval by Government or Reserve Bank of India. Under the existing policy,  100 percent overseas investments under automatic route was allowed for coal and lignite mining for captive consumption by power projects, iron and steel and cement units only.
  2. For sale of coal, 100 percent FDI under automatic route for coal mining, activities including associated processing infrastructure will attract international players to create an efficient and competitive coal market.
  3. A 100 percent FDI under automatic route is also permitted for setting up coal processing plants like washeries. However, there are conditions, namely,  the company shall not do coal mining, not sell washed coal or sized coal from its coal processing plants in the open market, and shall supply washed or sized coal to those parties who are supplying raw coal to coal processing plants for washing or sizing,
  4. Sale of coal for coal mining activities including associated processing infrastructure are 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.
  5. It also means coal mining firms will also be able to carry out other associated processing infrastructure related to the sector such as coal washery, crushing, coal handling, and separation (magnetic and non-magnetic).

FDI in contract manufacturing

The current FDI policy provides for 100 percent FDI under automatic route in manufacturing sector. There is no specific provision for contract manufacturing in the Policy. In order to provide clarity on contract manufacturing, the government has now allowed 100 percent FDI under automatic route in contract manufacturing in India.

What does this mean

  1. Foreign investment in 'manufacturing' sector is under the automatic route, as per FDI policy.
  2. 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

Updated Date: Aug 29, 2019 13:43:41 IST