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FDI policy and regulations applicable in various sectors Summary of the policy on FDI (Foreign Direct Investment) was notified vide Press Note 4 (2006). Thereafter, further policy revisions were issued vide Press Note 5(2006) and Press Note 2 (2007) and 3(2007). A comprehensive review of the FDI policy was undertaken in 2007-08 and the policy measures were notified vide Press Note 1-6 (2008).

FDI policy and regulations applicable in various sectors and activities after incorporating the policy changes up to 31-3-2008 is as below:   POLICY ON FOREIGN DIRECT INVESTMENT (as on 31st March 2008) I. Sectors prohibited for FDI i. Retail Trading (except single brand product retailing) ii. Atomic Energy iii. Lottery Business iv. Gambling and Betting v. Business of chit fund vi. Nidhi Company vii. Trading in Transferable Development Rights (TDRs). viii.

Activity/sector not opened to private sector investment II. Sector-specific policy for FDI: In the following sectors/activities, FDI is allowed up-to the limit indicated below subject to other conditions as indicated. |Sr. |Sector/Activity |FDI Cap / |Entry |Other conditions | |No. | |Equity |Route | | |I |AGRICULTURE | |1. Floriculture, Horticulture, |100% |Automatic |  | | |Development of Seeds, Animal | | | | | |Husbandry, Pisciculture, | | | | | |Aqua-culture and Cultivation | | | | | |of

Vegetables & Mushrooms | | | | | |under controlled conditions | | | | | |and services related to agro | | | | | |and allied sectors. | | | | |  | | | | | |Note: Besides the above, FDI | | | | | |is not allowed in any other | | | | | |agricultural sector/activity | | | | |2. Tea Sector, |100% |FIPB |Subject to divestment of 26% equity in | | |including tea | | |favour of Indian partner/Indian public | | |plantation | | |within 5 years and prior approval of | | |Note: Besides the above, FDI | | |State Government concerned in case of | | |is not allowed in any other | | |any change in future land use. | | |plantation sector/activity | | | | |II |INDUSTRY | |II A |MINING | |3. Mining covering |100% |Automatic |Subject to Mines & Minerals (Development| | |exploration and | | |& Regulation) Act, 1957 www. mines. nic. in| | |mining of diamonds | | |Press Note 18 (1998) and Press Note 1 | | |& precious stones; | | |(2005) are not applicable for setting up| | |gold, silver and | | |100% owned subsidiaries in so far as the| | |minerals. | |mining sector is concerned, subject to a| | | | | |declaration from the applicant that he | | | | | |has no existing joint venture for the | | | | | |same area and /or the particular | | | | | |mineral. | |4. |Coal & Lignite |100% |Automatic |Subject to provisions of Coal Mines | | |mining for captive | | |(Nationalization) Act, 1973 | | |consumption by | | |www. coal. nic. n | | |power projects, | | | | | |and iron & steel, cement | | | | | |production and other eligible| | | | | |activities permitted under | | | | | |the Coal Mines | | | | | |(Nationalisation) Act, 1973. | | | |5. |Mining and mineral separation|100% |FIPB |Subject to sectoral regulations and the | | |of titanium bearing minerals | | |Mines and Minerals (Development & | | |and ores, its value addition | | |Regulation) Act, 1957 and the following | | |and integrated activities . | | |conditions- | | |Note : FDI will not be | | |i. alue addition facilities are set up | | |allowed in mining of | | |within India along with transfer of | | |“prescribed substances” | | |technology; | | |listed in Government of India| | |ii. disposal of tailing during the | | |notification No. S. O. 61(E) | | |mineral separation shall be carried out | | |dt. 18. 1. 2006 issued by the | | |in accordance with regulations framed by| | |Department of Atomic Energy | | |the Atomic Energy Regulatory Board such | | |under the Atomic Energy Act, | | |Atomic Energy (Radiation Protection) | | |1962. | |Rules 2004 and the Atomic Energy (Safe | | | | | |Disposal of Radioactive Wastes) Rules | | | | | |1987. | |II B |MANUFACTURING | | 6. |Alcohol- |  |  |Subject to license by appropriate | | |Distillation & |100% |Automatic |authority | | |Brewing | | | | | 7. Cigars & |  |  |Subject to industrial license under the | | |Cigarettes- |100% |FIPB |Industries (Development & Regulation) | | |Manufacture | | |Act, 1951 | | 8. |Coffee& Rubber |  |Automatic |  | | |processing & |100% | | | | |warehousing | | | | | 9. Defence |  |FIPB |Subject to licensing under Industries | | |production |26% | |(Development & Regulation) Act, 1951 and| | | | | |guidelines on FDI in production of arms | | | | | |& ammunition. | | 10. |Hazardous |100% |Automatic |Subject to industrial license under the | | |chemicals, viz. | | |Industries (Development & Regulation) | | |hydrocyanic acid | | |Act, 1951 and other sectoral | | |and its derivatives; | | |regulations. | | |phosgene and its | | | | | |derivatives; and | | | | | |isocyanates and diisocyantes | | | | | |of hydrocarbon. | | | | 11. |Industrial |100% |Automatic |Subject to industrial license under | | |explosives – | | |Industries (Development & Regulation) | | |Manufacture | | |Act, 1951 and regulations under | | | | | |Explosives Act, 1898 | |12. Drugs & Pharmaceuticals |100% |Automatic |  | | |including those involving use| | | | | |of recombinant DNA technology| | | | |II C |POWER | |13. |Power including |100% |Automatic |Subject to provisions of the Electricity| | |generation | | |Act, 2003 www. powermin. nic. n | | |(except Atomic | | | | | |energy); | | | | | |transmission, distribution | | | | | |and | | | | | |Power Trading. | | | | | |  | | | | |III |SERVICES | |14. |CIVIL AVIATION SECTOR | |(i) |Airports- | |a. Greenfield projects |100% |Automatic |Subject to sectoral regulations notified| | | | | |by Ministry of Civil Aviation www | | | | | |civilaviation. nic. in | | | | | |  | |b. |Existing projects |100% |FIPB |Subject to sectoral regulations notified| | | | |beyond |by Ministry of Civil Aviation | | | | |74% |www. civilaviation. nic. in | | | | |  | |(ii) |Air Transport Services including Domestic Scheduled Passenger Airlines; Non-Schedules Airlines; Chartered Airlines; Cargo | | |Airlines; Helicopter and Seaplane Services | | c. |Scheduled Air Transport |49%- FDI; |Automatic |Subject to no direct or indirect | | |Services/ Domestic Scheduled |100%- for | |participation by foreign airlines and | | |Passenger Airline |NRI | |sectoral regulations.. | | | |investment | | | | d. Non-Scheduled Air Transport |74%- FDI |Automatic |Subject to no direct or indirect | | |Service/ Non-Scheduled |100%- for NRIs investment | |participation by foreign airlines in | | |airlines, Chartered airlines,| | |Non-Scheduled and Chartered airlines. | | |and Cargo airlines | | |Foreign airlines are allowed to participate| | | | | |in the equity of companies operating Cargo | | | | | |airlines. Also subject to sectoral | | | | | |regulations. | | e. Helicopter Services/Seaplane |100% |Automatic |Foreign airlines are allowed to participate| | |services requiring DGCA | | |in the equity of companies operating | | |approval | | |Helicopter and seaplane airlines. Also | | | | | |subject to sectoral regulations. | |(iii) |Other services under Civil Aviation Sector | | f. |Ground Handling Services |74%- FDI |Automatic |Subject to sectoral regulations and security | | | |100%- for NRIs | |clearance. | | | |investment | | | | g. Maintenance and Repair |100% |Automatic |  | | |organizations; flying | | | | | |training institutes; and | | | | | |technical training | | | | | |institutions | | | | | |  | | | | | 15. Asset |  |  |Where any individual investment exceeds 10% of the | | |Reconstruction |49% |FIPB |equity, provisions of Section 3(3)(f) of | | |Companies |(only | |Securitization and Reconstruction of Financial Assets| | | |FDI) | |and Enforcement of Security Interest Act, 2002 should| | | | | |be complied with. www. finmin. nic. in | |16. |Banking – |74% |Automatic |Subject to guidelines for setting up branches / | | |Private sector |(FDI+FII) | |subsidiaries of foreign banks issued by RBI. | | | | |www. rbi. org. in | |17. |Broadcasting | |a. |FM Radio |FDI +FII |FIPB |Subject to Guidelines notified by Ministry of | | | |investment | |Information & Broadcasting. www. mib. nic. in | | | |up to 20% | | | |b. Cable network |49% |FIPB |Subject to Cable Television Network Rules (1994) | | | |(FDI+FII) | |Notified by Ministry of Information & Broadcasting. | | | | | |www. mib. nic. in | |c. |Direct-To-Home |49% |FIPB |Subject to guidelines issued by Ministry of | | | |(FDI+FII). | |Information & Broadcasting. www. mib. nic. n | | | |Within this | | | | | |limit, FDI | | | | | |component not to | | | | | |exceed | | | | | |20% | | | |d. |Setting up |49% |FIPB |Subject to Up-linking Policy notified by Ministry of | | |hardware facilities |(FDI+FII) | |Information & Broadcasting. www. mib. nic. n | | |such as up-linking, | | | | | |HUB, etc | | | | |e. |Up-linking a News |26% |FIPB |Subject to guidelines issued by Ministry of | | |& Current Affairs |FDI+FII | |Information & Broadcasting. www. mib. nic. in | | |TV Channel | | | | |f. Up-linking a Non- |100% |FIPB |Subject to guidelines issued by Ministry of | | |news & Current | | |Information & Broadcasting. www. mib. nic. in | | |Affairs TV | | | | | |Channel | | | | |18. |Commodity Exchanges |49% (FDI+FII) |FIPB |FII purchases shall be restricted to secondary market| | | |Investment by | |only. | | |Registered FII under| |No foreign investor/entity, including persons acting | | | |PIS will be limited | |in concert, will hold more than 5% of the equity in | | | |to 23% and | |these companies. | | | |Investment under FDI| | | | | |Scheme limited to | | | | | |26%. | | | |19. Construction |100% |Automatic |Subject to conditions notified vide Press Note 2 | | |Development | | |(2005 Series) including: | | |projects, including | | |a. minimum capitalization of US$ 10 million for | | |housing, | | |wholly owned subsidiaries and US$ 5 million for joint| | |commercial | | |venture. The funds would have to be brought within | | |premises, resorts, | | |six months of commencement of business of the | | |educational | | |Company. | | |institutions, | | |b.

Minimum area to be developed under each project- | | |recreational | | |10 hectares in case of development of serviced | | |facilities, city | | |housing plots; and built-up area of 50,000 sq. mts. | | |and regional | | |in case of construction development project; and any | | |level infrastructure, | | |of the above in case of a combination project. | | |townships. | | |[Note 1: For investment by NRIs, the conditions | | |  | | |mentioned in Press Note 2 / 2005 are not | | |Note:: FDI is not allowed in | | |applicable. | |Real Estate Business | | |Note 2: For investment in SEZs, Hotels & Hospitals, | | | | | |conditions mentioned in Press Note 2(2005) are not | | | | | |applicable] | |20. |Courier services |100% |FIPB |Subject to existing laws and exclusion of activity | | |for carrying packages, | | |relating to distribution of letters, which is | | |parcels and other items which| | |exclusively reserved for the State. | |do not come within the ambit | | |www. indiapost. gov. in | | |of the Indian Post Office | | | | | |Act, 1898. | | | | |21. |Credit Information Companies |49 % (FDI+FII) |FIPB |Foreign Investment in CIC will be subject to Credit | | |  |Investment by |  |Information Companies (Regulation) Act, 2005. | | |Registered FII under|  |FII investment will be subject to the conditions | | | |PIS will be limited |  |that: | | | |to 24% only in the | |(a) No single entity should directly or indirectly | | | |CICs listed at the | |hold more than 10% equity | | | |Stock Exchanges | |(b) Any acquisition in excess of 1% will have to be | | | |within the overall | |reported to RBI as a reporting requirement; and | | | |limit of 49% foreign| |(c) FIIs investing in CICs shall not seek a | | | |investment. | |representation on the Board of Directors based upon | | | | | |their shareholding. | | 22. Industrial Parks both setting|100% |Automatic |Conditions in Press Note 2(2005) applicable for | | |up and in established | | |construction development projects would not apply | | |Industrial Parks | | |provided the Industrial Parks meet with the | | | | | |under-mentioned conditions- | | | | | |i. it would comprise of a minimum of 10 units and no | | | | | |single unit shall occupy more than 50% of the | | | | | |allocable area; | | | | | |ii. he minimum percentage of the area to be | | | | | |allocated for industrial activity shall not be less | | | | | |than 66% of the total allocable area. | | 23 |Insurance |26% |Automatic |Subject to licensing by the Insurance Regulatory & | | | | | |Development Authority | | | | | |www. irda. nic. in | | 24. Investing |100% |FIPB |Where there is a prescribed cap for foreign | | |companies in | | |investment, only the direct investment will be | | |infrastructure / | | |considered for the prescribed cap and foreign | | |services sector | | |investment in an investing company will not be set | | |(except telecom | | |off against this cap provided the foreign direct | | |sector) | | |investment in such investing company does not exceed | | | | | |49% and the management of the investing company is | | | | | |with the Indian owners. | |25. |Non Banking Finance Companies | |i) |Merchant |100% |Automatic |Subject to: | |  |Banking | | |a. minimum capitalization norms for fund based NBFCs | |  |  | | |- US$ 0. million to be brought upfront for FDI up to| |ii) |Underwriting | | |51%; US$ 5 million to be brought upfront for FDI | |  |Portfolio | | |above 51% and up to 75%; and US$ 50 million out of | |  |Management | | |which US$ 7. 5 million to be brought upfront and the | | |Services | | |balance in 24 months for FDI beyond 75% and up to | |  |  | | |100%. | |iii) |Investment | | |b. minimum capitalization norms for non-fund based | |  |Advisory | | |NBFC activities- US$ 0. 5 million. | |  |Services | | |c. oreign investors can set up 100% operating | |  |  | | |subsidiaries without the condition to disinvest a | |iv) |Financial | | |minimum of 25% of its equity to Indian entities | |  |Consultancy | | |subject to bringing in US$ 50 million without any | |  |  | | |restriction on number of operating subsidiaries | |v) |Stock Broking | | |without bringing additional capital. | |  |  | | |d. oint venture operating NBFC’s that have 75% or | |vi) |Asset | | |less than 75% foreign investment will also be allowed| |  |Management | | |to set up subsidiaries for undertaking other NBFC | |  |  | | |activities subject to the subsidiaries also complying| |vii) |Venture Capital | | |with the applicable minimum capital inflow. | |  |  | | |e. compliance with the guidelines of the RBI. | |viii) |Custodial | | |f.

The minimum capitalization norms would apply would| |  |Services | | |be applicable where the foreign holding in a | |ix) |  | | |NBFC(both direct and indirect) exceeds the limits | |  |Factoring | | |indicated at (a) above | |x) |  | | |g. The capital for the purpose of minimum | |  |Credit Rating | | |capitalization norms shall consist of ordinary shares| |  |Agencies | | |only. |xi) |  | | | | |  |Financial Leasing & Hire | | | | |  |Purchase | | | | |xii) |  | | | | |  |Finance | | | | |  |  | | | | |xiii) |Housing | | | | |  |Finance | | | | |  |Forex Broking | | | | |xiv) |  | | | | |  |Credit card | | | | |xv) |Business | | | | |  |  | | | | |  |Money | | | | |xvi) |changing | | | | |  |business | | | |  |  | | | | |xvii) |Micro credit | | | | |  |  | | | | |  |Rural credit | | | | |xviii) | | | | | |  | | | | | |26. |Petroleum & Natural Gas sector | | |  | |a. |Refining |49% in |FIPB |Subject to Sectoral policy | | | |case of |(in case of |www. petroleum. nic. in and no divestment or dilution of| | | |PSUs |PSUs) |domestic equity in the existing PSUs. | | |100% in |  | | | | |case of |Automatic | | | | |Private |(in case of | | | | |companies |private | | | | |  |companies) | | |b. |Other than |100% |Automatic |Subject to sectoral regulations issued by Ministry of| | |Refining and | | |Petroleum & Natural Gas | | |including market | | |www. petroleum. nic. in | |study and | | | | | |formulation; | | | | | |investment/ | | | | | |financing; setting | | | | | |up infrastructure | | | | | |for marketing in | | | | | |Petroleum & | | | | | |Natural Gas | | | | | |sector. | | | | |27. |Print Media | |a. |Publishing of |26% |FIPB |Subject to Guidelines notified by Ministry of | | |newspaper and | | |Information & Broadcasting. www. mib. nic. n | | |periodicals | | | | | |dealing with | | | | | |news and current affairs | | | | |b. |Publishing of |100% |FIPB |Subject to guidelines issued by Ministry of | | |scientific | | |Information & Broadcasting. www. mib. nic. in | | |magazines/ | | | | | |specialty | | | | | |journals/ | | | | |periodicals | | | | |28. |Telecommunications | |a. |Basic and |74% |Automatic |Subject to guidelines notified in the PN 3(2007) | | |cellular, Unified |(Including |up to | | | |Access Services, |FDI, FII, |49%. | | |National/ |NRI, |  | | | |International |FCCBs, |  | | | |Long Distance, |ADRs, |FIPB | | | |V-Sat, Public |GDRs, |beyond | | | |Mobile Radio |convertible |49%. | | |Trunked |preference | | | | |Services |shares, and | | | | |(PMRTS), |proportio- | | | | |Global Mobile |nate | | | | |Personal |foreign | | | | |Communications |equity in | | | | |Services |Indian | | | | |(GMPCS) and |promoters/ | | | | |other value |Investing | | | |added telecom |Company) | | | | |services | | | | | |  | | | | |b. |ISP with |74% |Automatic |Subject to licensing and security requirements | | |gateways, radio- | |up to 49%. |notified by the Dept. of Telecommunications. | |paging, end-to- | |  |www. dotindia. com | | |end bandwidth. | |FIPB | | | | | |beyond | | | | | |49%. | | |c. |(a) ISP without |100% |Automatic |Subject to the condition that such companies shall | | |gateway, | |up to 49%. divest 26% of their equity in favour of Indian public| | |(b) infrastructure | |  |in 5 years, if these companies are listed in other | | |provider | |  |parts of the world. Also subject to licensing and | | |providing dark | |FIPB |security requirements, where required. | | |fibre, right of way,duct | |beyond |www. dotindia. com | | |space,tower (Category I); | |49%. | | |(c) electronic | | | | | |mail and voice | | | | | |mail | | | | |d. |Manufacture of |100% |Automatic |Subject to sectoral requirements. | | |telecom | | |www. dotindia. com | | |equipments | | | | |29. |Trading | |a. Wholesale/cash |100% |Automatic |  | |  |& carry trading |  |  |  | |  |  |  |  |  | |  |  |  |  |  | |b. |Trading for |100% |Automatic |  | |  |exports |  |  |  | |  |  |  |  |  | |c.   |100% |FIPB |Subject to the condition that the test marketing | |  |Trading of items |  |  |approval will be for a period of two years and I | |  |sourced from small scale |  |  |nvestment in setting up manufacturing facilities | |  |sector |  |  |comomences simultaneously with test marketing. | |  |  |  |  |  | |  |  |  |  |  | |  |  |100% |FIPB |  | |d. |Test marketing |  |  | |  |of such items for which a |  |  |  | |  |company has approval for |  |  |  | |  |manufacture |  |  |  | |  |  |  |  |  | |  |  |  |  |  | |  |Single Brand |  |  |  | |e. |product retailing |51% |FIPB |Subject to guidelines for FDI in trading issued by | | |  | | |Department of Industrial Policy & Promotion vide | | | | | |Press Note 3 (2006 Series). | | | | | |  | |30. Satellites – |74% |FIPB |Subject to Sectoral guidelines issued by Department | | |Establishment | | |of Space/ISRO | | |and operation | | |www. isro. org | |31. |Special |100% |Automatic |Subject to Special Economic Zones Act, 2005 and the | | |Economic Zones |  | |Foreign Trade Policy. | | |and Free Trade | | |www. sezindia. nic. n | | |Warehousing | | | | | |Zones covering | | | | | |setting up of these Zones and| | | | | |setting up units in the Zones| | | | | | | | | | | | | | II. In Sectors/Activities not listed above, FDI is permitted up to 100% on the automatic route subject to sectoral rules/ regulations applicable. III. Prior Government approval for FDI required in the following circumstances: i)               where provisions of Press Note 1 (2005 Series) issued by the Government of India are attracted; ii)              where more than 24% foreign equity is proposed to be inducted for manufacture of items reserved for the Small Scale sector.