Seeking FDI and Foreign Technology Collaboration (Optional)
For both private and public companies, you look for FDI (Foreign Direct Investment) and investment from NRIs (Non Resident Indians), including OCBs (Overseas Corporate Bodies), predominantly owned by NRIs, to complement and supplement domestic investment. You also seek foreign technology collaboration agreements.
FDI and foreign technology collaboration are are approved either through the automatic route (no prior government approval is necessary) under powers delegated to the RBI (Reserve Bank of India), or the government (government approval is necessary).
Automatic approval FDI
With the government committed to an early implementation
of the second phase of reforms and further liberalizing
the FDI regime, all items/activities are under the automatic
route for FDI/NRI and OCB investment, except the following:
Proposals that require an Industrial Licence, including
items requiring Industrial Licence under the Industries
(Development and Regulation) Act, 1951; more than 24%
foreign investment in the equity capital of units manufacturing
items reserved for small-scale industries; and items
requiring an Industrial Licence under the locational
policy notified by the Government, in the New Industrial
Policy, 1991
- Proposals where the foreign collaborator has a previous venture/tie-up in India
- Proposals relating to share acquisition in existing Indian companies, by a foreign/NRI/ OCB investor
- Proposals falling outside the notified sectoral policy/caps or under sectors where FDI is not permitted and/or where the investor chooses the FIPB and not the automatic route.
- Proposals for investment in public-sector units, or EOU/EPZ/EHTP/STP units, would be in the automatic route, subject to the above parameters.
Foreign
technology collaboration agreements
The RBI also gives automatic permission for foreign technology agreements
in all areas of electronics provided the technology price does not exceed
$2 million and royalty payments don’t exceed 5% of domestic sales and
8% of exports.
Payments are subject to an overall ceiling of 8% of total sales, over
a 10-year period from the date of agreement, or a 7-year period, from
the date of starting production, whichever is earlier. Investment applications
under the automatic process are made to the RBI and approved within
three weeks.
However, automatic route for technology collaboration is not available
to those who have, or had any previous technology transfer/trade-mark
agreement in the same or allied field in India.
Government approval
The FDI/foreign technology collaboration agreement proposals, which
don’t conform to the automatic-approval guidelines, require government
approval through the FIPB. The government has set up a special FIPB
as a fast track mechanism to invite and facilitate foreign investment
in large projects, considered beneficial for India, but are not covered
by the automatic-approval process and norms under which SIA (Secretariat
for Industrial Assistance) is authorized to grant investment approvals.
Investment proposals outside the purview of the RBI
Other proposals including those in the services sector that don’t conform
to the guidelines for automatic approval, or seek higher foreign equity
investment are approved by SIA (Industry Ministry).
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