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| Indian Policies |
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Section:
Notifications Date: Mar 31, 2000
A.D.(M.A.Series) Circular No.3 (March 31, 2000)
RESERVE BANK
OF INDIA
EXCHANGE CONTROL DEPARTMENT
CENTRAL OFFICE
MUMBAI 400 001
A.D.(M.A.Series) Circular No.3
March 31, 2000 |
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To
All Authorised Dealers in Foreign Exchange
Dear Sirs,
Foreign investment under the Automatic Route of
Reserve Bank -Further Liberalisation
1. Attention of authorised dealers is drawn to
paragraph 10B.2 of Exchange Control Manual (ECM),
regarding foreign investment under the 'Automatic
Route of Reserve Bank'.
2. Government of India have since substantially
expanded foreign investment under the 'Automatic
Route of Reserve Bank' to include all items/activities,
except certain items, for investment under Foreign
Direct Investment (FDI) and Non-Resident Indian
(NRI)/Overseas Corporate Body (OCB) investment.
The said liberalisations have been announced through
Ministry of Commerce &Industry's Press Note No.2
(2000 Series) dated 11th February 2000 (copy enclosed).
3. In line with these liberalisations, Reserve
Bank has granted general permission under FERA,1973
for issue of shares to non-residents (which includes
FDI and NRI/OCB investments) vide Notification
No. FERA. 215/2000-RB dated 22nd March 2000 (copy
enclosed). Accordingly, eligible Indian companies
can issue shares to non-residents and submit the
prescribed documents to the Regional Office of
the Reserve Bank, as hitherto.
4. In this connection, it may be observed that,
in terms of Press Note dated 11th February 2000
Government have superseded earlier Annexure III
items which were linked to eligibility under the
"Automatic Route of Reserve Bank". In that context,
present Notification of Reserve Bank dated 22nd
March 2000 has also been issued, in supersession
of certain earlier Notifications, to give effect
to the liberalisation in line with Government's
Press Note dated 11th February 2000.
5. With regard to Reserve Bank's present Notification
dated 22nd March 2000 granting general permission
for issue of shares under FERA, 1973 it is clarified
as under :
(a) All items/activities not covered by List A
& B (mentioned in the Notification) will be eligible
for foreign investment (FDI and NRI/OCB) under
the 'Automatic Route of Reserve Bank', upto even
100% of capital subject to compliance of the conditions
of the Notification.
(b) Automatic Route of Reserve Bank will not be
available in respect of items in List A. All such
investment proposals would come under SIA/FIPB
route.
(c) Automatic Route of Reserve Bank will be available
only upto the cap indicated in List B. [Proposals
beyond the cap would come under SIA/FIPB route].
(d) Investment by non-residents (FDI and NRI/OCB)
in EOUs/EPZ/EHTP/ STP units have now been made
eligible under the 'Automatic Route of Reserve
Bank' in terms of paragraph 2 of Press Note No.2
(2000 Series) dated 11th February 2000.
(e) The Automatic Route of Reserve Bank, hereafter,
will be available only where non-resident investment
does not exceed Rs.600 crores (FDI and NRI/OCB
investments put together).
(f) The general permission granted by Reserve
Bank as per the Notification dated 22nd March
2000 is available only when the Indian company
is issuing shares to non-resident investors. Needless
to mention where shares are to be acquired from
the existing shareholders, such proposals will
require clearance from SIA/FIPB and thereafter
application will have to be made in Form FNC-7
to the Chief General Manager, Exchange Control
Department (Foreign Investment Division), Reserve
Bank of India, Central Office, Mumbai-400001.
(g) In terms of item (ii) of opening paragraph
of Government's Press Note No.2 (2000 Series)
dated 11th February 2000, all proposals in which
the foreign collaborator has any previous venture/tie
up in India (through investment or technical collaboration
or trade mark agreement) in the same or allied
field, are not eligible to be covered under the
'Automatic Route of Reserve Bank' (as per Government
Press Note No.18 dated 14th December 1998). However,
only foreign companies/entities have been made
ineligible vide paragraph 2(b) of Notification
dated 22nd March 2000.
(h) It is the responsibility of the investee Indian
companies to ensure that investment (i.e. FDI
and NRI/OCB investment) is eligible under the
'Automatic Route of Reserve Bank' as provided
for in the Notification dated 22nd March 2000.
Where there is a doubt or where it is clear that
the proposal will not come under the 'Automatic
Route of Reserve Bank', such cases will require
clearance from SIA/FIPB.
(i) A new form, Form FC-GPR has now been prescribed
(instead of earlier FC-RBI) for reporting shares
issued in terms of the present Notification dated
22nd March 2000.
6. Authorised dealers may bring the contents of
this circular to the notice of their constituents
concerned.
7. Consequential amendments to the Exchange Control
Manual will be issued in due course.
8. The directions contained in this circular have
been issued under Section 73(3) of the Foreign
Exchange Regulation Act, 1973 (46 of 1973) and
any contravention or non-observance thereof is
subject to the penalties prescribed under the
Act. Yours faithfully,
B. MAHESHWARAN
Chief General Manager |
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Government
of India
Ministry of Commerce & Industry
Department of Industrial Policy & Promotion
SIA (FC Division) |
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Press Note No.2 (2000 Series)
Subject : Expansion of list of industries/activities
eligible for automatic route for Foreign Direct
Investment (FDI), Non Resident Indian (NRI)
and Overseas Corporate Body (OCB) investment.
In pursuance of Government's commitment to
early implementation of the second phase of
the economic reforms and with a view to further
liberalising the FDI regime, Government on
review of the policy on FDI, has decided to
place all items/activities under the automatic
route for FDI/NRI and OCB investment except
the following :
(i) All proposals that require an Industrial
Licence which includes (i) the item requiring
the Industrial Licence under the Industries
(Development and Regulation) Act, 1951 ; (ii)
foreign investment being more than 24% in
the equity capital of units manufacturing
items reserved for small scale industries;
and (iii) all items which require an Industrial
Licence in terms of the locational policy
notified by Government under the New Industrial
Policy of 1991.
(ii) All proposals in which the foreign collaborator
has a previous venture/tieup in India. The
modalities prescribed in Press Note No. 18
dated 14-12-98 of 1998 series shall apply
in such cases.
(iii) All proposals relating to acquisition
of shares in an existing Indian company in
favour of a foreign/NRI/OCB investor.
(iv) All proposals falling outside notified
sectoral policy/caps or under sectors in which
FDI is not permitted and/or whenever any investor
chooses to make an application to the FIPB
and not to avail of the automatic route.
2. All proposals for investment in public
sector units as also for EOU/EPZ/EHTP/STP
units would qualify for automatic route subject
to the above parameters.
3. The modalities and procedures for automatic
route would remain the same and RBI would
continue to be the concerned agency for monitoring/reporting
as per existing procedure. The National Industrial
Classification of all Economic Activities
(NIC), 1987, shall remain applicable for description
of activities ans calssification for all matters
relating to FDI/NRI/OCB investment.
4. FDI/NRI/OCB investment under the automatic
route shall continue to governed by the notified
sectoral policy and equity caps and RBI shall
ensurecompliance with the same.
5. Areas/sectors/activities hitherto not open
to FDI/NRI/OCB investment shall continue to
be so unless otherwise decided and notified
by Government.
6. Henceforth, any change in sectoral policy/sectoral
equity cap shall be notified by the Secretariat
for Industrial Assistance (SIA) in the Department
of Industrial Policy & Promotion.
7. Press Note No.2 (1997 Series), Press Note
No.14 (1997 Series), Press Note No.2 (1998
Series) and Press note No.1 (1999 Series)
stand superseded to the extent as aforesaid.
(ASHOK KUMAR)
Joint Secretary to the Government of India
No.7(4)/2000-IP dated 11th February 2000 |
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RESERVE BANK OF INDIA
EXCHANGE CONTROL DEPARTMENT
CENTRAL OFFICE
MUMBAI 400 001 |
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Notification No.F.E.R.A. 215 /2000-RB dated
22nd March 2000
Permission for issue of shares to Non-resident
investors
under the Automatic Route of Reserve Bank
In pursuance of clause (a) and clause (d) of
sub-section (1) of Section 19 read with clause
(b) of sub-section (1) of Section 29 of the
Foreign Exchange Regulation ACT, 1973 (46 OF
1973) , the Reserve Bank is pleased to permit
a company incorporated in India -
(a) which is engaged or proposing to engage
in any activity/manufacture of items except
those sectors (for the time being in force)
indicated in annexed List A (which may be amended
from time to time as notified by Govt.);
(b) which is a Trading Company primarily engaged
in export, and is registered as an Export/Trading/Star
Trading House, with the Ministry of Commerce,
Government of India;
to issue shares to non-residents subject to
the conditions mentioned in para 3, and to send
such shares out of India, to their place of
residence or incorporation, as the case may
be:
Provided that a company, existing on the date
of this Notification, which is not engaged in
the activity/manufacture of items as per (a)
above, shall be eligible to issue shares, if
it embarks on expansion programme in the said
eligible activities/manufacture of items , subject
to the condition that the capital raised by
issue of shares to non-residents is utilised
for such expansion.
Provided further that in the case of a newly
set-up Trading Company primarily engaged in
exports, issue of shares shall be subject to
the condition that registration as an Export/Trading/Star
Trading House is obtained before remittance
of dividend to the foreign investor.
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2. The general permission
granted herein shall not apply to or in respect
of -
(a) a person who is a citizen of, or a company
incorporated in Pakistan, Bangladesh or Sri Lanka
(b) investment proposal in which the foreign company/entity
has any previous venture/tie up in India (through
investment or technical collaboration or trade
mark agreement) in the same or allied field
(c) a company
(i) being an SSI unit seeking investment more
than 24% of capital, or
(ii) being unit manufacturing items which require
an Industrial licence under the Industries (Development
and Regulation) Act,1951 or which require an Industrial
Licence in terms of the locational policy notified
by Government under the New Industrial Policy
of 1991, or
(iii) having a proposal exceeding Rs.600/- Crores.
3. The general permission granted herein to issue
shares is subject to the following conditions,
namely:
(i) where the issuer company is a Trading Company,
non-resident investment therein shall not exceed
51% of its capital and in respect of activities/area
specified in the annexed List B, the cap for non-resident
shareholding indicated thereat shall be observed;
(ii) In the case of issue of shares by an existing
company,
(a) Board Resolution has been passed in connection
with preferential allotment of shares, if any,
to foreign investor, indicating the issue price;
(b) Special Resolution has been passed under Section
81(1A) of the Companies Act, 1956, wherever applicable,
in connection with preferential allotment, indicating
the issue price;
(c) In the case of a listed company, the price
for the issue is worked out according to SEBI
guidelines and is duly certified by the Company's
Statutory Auditors; and in the case of any other
company, calculation of fair value of shares (as
per erstwhile CCI guidelines) is made by an independent
Chartered Accountant; and the issue price shall
not be less than that calculated price.
(iii) Approval, wherever necessary, from any authority,
statutory or otherwise, required for the project
or for issue of shares is obtained by the company;
(iv) payment for the shares to be issued to the
foreign investor has been received by remittance
from abroad through normal banking channels and/or
from the NRE/FCNR accounts of eligible holders;
(v) In the case of issue of convertible preference
shares, the valuation procedure shall conform
to the guidelines issued by the Reserve Bank or
SEBI, as the case may be, besides observing the
equity cap prescribed ( after conversion).
(vi) the rate of dividend payable in respect of
preference shares shall not exceed SBI Prime Lending
Rate (prevailing on the date of the Board meeting
in which issue of shares is recommended) plus
300 basis points;
(vii) remittance of dividend in respect of 22
comsumer goods industries specified in the Ministry
of Industry Press Note No.12 dated 26.6.1992,
shall be subject to the condition of balancing
of dividend over a period of seven years to be
reckoned in the case of an existing company, from
the date of issue of shares, and in any other
cases, from the date of commencement of production;
(viii) the issuer company files with the Regional
Office of Reserve Bank, not later than 30 days
from the date of receipt of remittance, a report
containing the following:
(a) Name of the foreign investor;
(b) Country of residence or incorporation of the
foreign investor;
(c) Date of receipt of remittance and its rupee
equivalent;
(d) Name and address of the authorised dealer
in India through whom the remittance is received.
(ix) the issuer company files with the Regional
Office of Reserve Bank, not later than 30 days
from the date of issue of shares, the following:
(a) A declaration as per annexed Form "FC-GPR"
(b) Original Foreign Inward Remittance Certificate
(FIRC) evidencing receipt of funds from abroad
or as the case may be, from the eligible NRE/FCNR
accounts of the investor;
(c) Memorandum and Articles of Association of
the issuer company;
(d) Particulars of shares issued, date of issue,
number of shares and the issue price duly countersigned
by a Chartered Accountant
(e) Certified copy each of Board Resolution, Special
Resolution, Statutory Auditor's Certificate, or
the Chartered Accountant's calculation, referred
to in para 3(ii) above.
(f) Such other particulars and documents as may
be required or specified by the Reserve Bank from
time to time.
4. This notification supersedes the following
notifications :
(i) No. F.E.R.A. 180/98-RB dated 13.01.1998
(ii) No. F.E.R.A. 184/98-RB dated 14.07.1998
(iii) No. F.E.R.A. 187/98-RB dated 03.10.1998
(iv) No. F.E.R.A. 190/98-RB dated 02.12.1998
(v) No. F.E.R.A. 197/99-RB dated 30.03.1999
(P.R. Gopala Rao)
Executive Director
Encl: List A& B, Form FC-GPR LIST
A
1. Banking
2. NBFC's activities in Financial Services Sector
3. Civil Aviation
4. Petroleum including exploration/refinery/marketing
5. Housing & Real Estate Development sector for
foreign investment, other than NRIs/OCBs.
6. Venture Capital Fund & Venture Capital Company
7. Investing companies in Infrasturcture & Service
Sector
8. Atomic Energy & related projects
9. Defence and strategic industries
10. Agriculture (including plantation)
11. Print Media
12. Broadcasting
13. Postal services
LIST B 1.Telecommunications
i)In basic, Cellular Mobile, paging and Value
Added Services, and Global Mobile Personal Communications
by Satellite, FDI is limited to 49% subject to
grant of licence from Department of Telecommunications
and adherence by the companies (who are investing
and the companies in which investment is being
made) to the licence conditions for foreign equity
cap and lock in period for transfer and adition
of equity and other licence provisions
ii)No equity cap is applicable to manufacturing
activities 2.Housing
and Real Estate
No foreign investment is permitted in this sector.
NRIs/OCBs are allowed to invest. The scheme specificto
NRIs and OCBs covers the following:
a)Development of serviced plots and construction
of residential premises
b)Investment in real estate covering construction
of residential and commercial premises including
business centres and offices
c)Development of townships
d)City and regional level urban infrastructure
facilities, including both roads and bridges.
e)Investment in manufacture of building materials
f)Investment in participatory ventures in (a)
to (e) above
g)Investment in housing finance institutions
3.Coal and Lignite
upto
49% in PSU and upto
50% in other cases as per the following terms
and conditions prescribed by Govt.
i)Private Indian companies setting up or operating
power projects as well as coal or lignite mines
for captive consumption.
ii)for setting up coal processing plants 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.
iii)for exploration or mining of coal or lignite
for captive consumption.
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4.Drugs
& Pharmaceuticals |
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upto 74% in case of
bulk drugs, their intermediaries and formulations
(except those produced by the use of recombinant
DNA technology)
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5.Hotel
& Tourism upto 51% |
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The term hotels include
restaurants, beach resorts, and other tourist
complexes providing accommodation and/or catering
and food facilities to tourists. Tourism related
industry includes travel agencies, tour operating
agencies and tourist transport operating agencies,
units providing facilities for cultural, adventure
and wild life experience to tourists, surface,
air and water transport facilities to tourists,
leisure, entertainment amusement, sports, and
health units for tourists and Convention/Seminar
units and organisations.
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6.Mining |
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upto
74% for exploration and mining of diamonds and
precious stones upto
100% for exploration and mining of gold and silver
and minerals other than diamonds and precious
stones, metallurgy and processing
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7.Advertising
and films |
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upto
74% in advertising sector upto
100% in film industry (i.e. film financing, production,
distribution, exhibition, marketing and associated
activities relating to film industry) subject
to the following:
I)Companies with an established track record in
films, TV, music, finance and insurance
II)The company should have a minimum paid up capital
of US $ 10 million if it is the single largest
equity shareholder and atleast US $ 5 million
in other cases
III)Minimum level of foreign equity investment
would be US $ 2.5 million for the single largest
equity shareholder and US$ 1 million in other
cases
IV)Debt equity ratio of not more than 1:1 i.e.,
domestic borrowings shall not exceed equity
V)Provisions of dividend balancing would apply.
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Explanation
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(a) a person (not being
a citizen of Pakistan or Bangladesh or Sri Lanka)
shall be deemed to be of "Indian Origin", if
(i) he, at any time, held an Indian passport;
or
(ii) he or either of his parents or his grandparents
was citizen of India by virtue of the Constitution
of India or the Citizenship Act, 1955 (57 of 1955)
(b) "Overseas Corporate Body (OCB)" mean any overseas
company, partnership firm, society and other corporate
body predominantly owned directly or indirectly
to the extent of at least 60% by non-residents
of Indian nationality or origin(NRIs) |
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| Industrial Complexes
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| To ensure a good
impact with the available limited resources, SIPCOT
has created Industrial Complexes and Parks, strategically
located in seventeen places, which occupy a place
of pride in the State's industrial map. |
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