Cabinet Approved a Plan for Review of Foreign Direct Investment (FDI) Policy on Single Brand Retail Trading, Digital Media, Contract Manufacturing, and Coal Mining
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Cabinet Approved Plan Review of Foreign-direct Investment

Cabinet Approved a Plan for Review of Foreign Direct Investment (FDI) Policy on Single Brand Retail Trading, Digital Media, Contract Manufacturing, and Coal Mining

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In 2019-20 Union Budget, the Finance Minister has recommended to further consolidate all the gains under FDI so as to make India a more appealing FDI destination. Going steady with its reform policy, the Union Cabinet has recently approved the plan for review of FDI Policy on various sectors on 28 August 2019.

The major highlights of the FDI Policy reform are as follows:

  1. Single Brand Retail Trading (SBRT): For offering enhanced flexibility and ease of operations in the SBRT sector, the below listed norms have been eased:
  • in case of SBRT firms with over 51% FDI, all procurements done from India by such SBRT firms for that single brand are going to be counted in the local sourcing of 30% bracket, regardless of whether the products obtained are sold in India or are exported outside. In addition, to give an push to exports, current limit of considering exports for five years only has been eliminated;
  • ‘sourcing of goods from India for global operations’ could be done directly now by the firm conducting SBRT or its resident/non-resident group companies, or can be done indirectly by them via a third party with a legally-tenable agreement;
  • additionally, complete sourcing from India for all the global operations would be considered for local sourcing requirement (with no incremental value);
  • retail trading done through online trade could be undertaken before opening of brick and mortar stores, but this has a condition that the entity should open brick and mortar stores within two years beginning from the date of starting their online retail.
  • Contract Manufacturing: As of now, 100% FDI is allowed under automatic route in the manufacturing sector. There is no particular provision for contract manufacturing mentioned in the FDI Policy. To give more clarity on contract manufacturing, a decision has been taken to allow 100% FDI under automatic route in contract manufacturing. Now, manufacturing activities could be performed either by the investee firm or via contract manufacturing in India with a legally-tenable contract, whether on Principal to Principal basis or Principal to Agent basis.
  • Digital Media: Extant FDI policy offers for 49% FDI under the approval route in Up-linking of various ‘News &Current Affairs’ TV Channels. Currently, up to 26% FDI under government route is allowed for uploading and streaming of various News and Current Affairs using Digital Media, on similar lines of print media.
  • Coal Mining: Currently, 100% FDI under automatic route is permitted for coal mining, especially for captive consumption by several power projects, cement, and iron and steel units and also for coal processing plants with the pre-requisite that the processing units would not do coal mining or selling in open markets. It has now been decided to allow 100% FDI under automatic route especially for selling coal, performing coal mining activities, which might also include associated processing infrastructure. Associated Processing Infrastructure includes activities like coal washery, coal handling, crushing, and separation (magnetic and non-magnetic).