Indian Law Updates August 2019

Amendments proposed to FDI Policy

The Union Cabinet, approved certain amendments to the Foreign Direct Investment (“FDI”) policy which was amended by way of a press release dated August 28, 2019 (“PR”). Amendments have been proposed in the conditions governing FDI in the following sectors:

 

Single Brand Retail Trading (SBRT)

Current FDI Regime

  • SBRT entities with more than 51% FDI must source more than 30% of their goods from India and sell such goods in India.
  • This 30% requirement must be met as an average of the first five years. Goods which were purchased in India, but exported were counted towards the above mentioned 30% requirement only for the above first five years.
  • Post the fifth anniversary it shall be required to be met annually
  • SBRT entities required to establish physical stores for the purposes of retail trading before commencing e-commerce activities.

Amendments Proposed as per PR

  • Any goods sourced from India by the SBRT entity shall count towards the 30% requirement, irrespective of whether such goods are sold in India.
  • All goods purchased in India, even if exported will count towards satisfying the local sourcing requirement.
  • Retail trading through e-commerce portals can also be undertaken prior to opening of physical stores, subject to the condition that the SBRT entity opens physical stores within 2 years from date of commencing online retail trading.

contract manufacturing

Current FDI Regime

  • The present FDI policy did not categorically prohibit FDI in contract manufacturing, both on a principal to principal basis and on an agency basis.

Amendments Proposed as per PR

  • The PR clarifies that 100% FDI in the contract manufacturing shall be allowed via the automatic route, thus bringing to an end certain ambiguities which .

Coal mining

100% FDI is currently permitted for coal and lignite mining for captive consumption in certain eligible industries, as also certain limited use coal processing plants. In a significant move to liberalise the coal industry, FDI is not fully permitted under automatic route in coal mining and sale of coal activities. This is, however, subject to the provisions of Coal Mines (Special Provisions) Act, 2015 and the Mines and Minerals (Regulation and Development) Act, 1957.

Digital Media

The current FDI Policy provides that 49% FDI under Government route is permissible for up-linking of ‘News and Current Affairs’ TV Channels. There are no specific provisions for uploading / streaming of such content through digital media and hence such digital media players were receiving FDI freely in their entities. The proposed amendments is that the 26% FDI under Government route is permitted for uploading and streaming of news and current affairs content through digital media. The exact scope of the term “digital media” and “news and current affairs”, will need to be examined to understand the full impact of the proposed amendment.