The government has also approved 100% FDI under automatic route for coal mining and 26% FDI for digital media with government approval.

Govt allows 100 FDI in contract manufacturing eases norms for single brand retail
Money FDI Thursday, August 29, 2019 - 10:50

In a bid to improve ease of doing business, the Union Cabinet cleared slew of changes to the Foreign Direct Investment on various sectors. This includes easing norms for overseas single-brand stores to set up stores in India and allowing FDI through the automatic route in contract manufacturing and all areas of coal mining.

According to the government, this will help make India a more attractive FDI destination.

In the coal sector, for sale of coal, 100% FDI under automatic route for coal mining, activities including associated processing infrastructure will attract international players to create an efficient and competitive coal market, a cabinet statement said.

“The above amendments to the FDI Policy are meant to liberalize and simplify the FDI policy to provide ease of doing business in the country, leading to larger FDI inflows and thereby contributing to growth of investment, income and employment,” it further said.

Single Brand Retail Trading (SBRT)

Earlier, the FDI Policy mandated that a foreign retailer has to locally source 30% of value of goods if the retailer has an FDI of over 51%.

Now, 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.

The government has also allowed companies to sell online before opening physical stores, subject to the condition that brick-and-mortar stores come up within two years from the date it starts online operations.

“It has therefore been decided that retail trading through online trade 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. Online sales will lead to creation of jobs in logistics, digital payments, customer care, training and product skilling.” The cabinet statement said.

The new norms also now allow a company to source good from India for global operations either directly by the company its group companies (resident or non-resident}, or indirectly through a third party.

Coal Mining

As per the present FDI policy, 100% FDI under automatic route is allowed for coal & lignite mining for captive consumption by power projects, iron & steel and cement units and other eligible activities permitted under and subject to applicable laws and regulations.

It has been decided to permit 100% FDI under automatic route for sale of coal, for coal mining activities including associated processing infrastructure subject to provisions of Coal Mines (special provisions) Act, 2015 and the Mines and Minerals (development and regulation) Act, 1957.

Contract Manufacturing

While the current FDI policy allows 100% 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, it has been decided to allow 100% FDI under automatic route in contract manufacturing in India as well. 

“Subject to the provisions of the FDI policy, foreign investment in 'manufacturing' sector is under automatic route. 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,” the statement said.

Digital Media

The government has permitted 26% FDI under government route for uploading/ streaming of News and Current Affairs through Digital Media, on the lines of print media.

Earlier, the FDI policy allowed 49% FDI under approval route in Up-linking of 'News &Current Affairs' TV Channels.

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