THE Govt has released the third edition of
the Consolidated FDI Policy today. It will come into effect from tomorrow.
The
major changes are as follows:
++ Pricing
of Convertible instruments: Instead of specifying the price of convertible
instruments upfront, companies will now have the option of prescribing a
conversion formula, subject to the FEMA/ SEBI guidelines on pricing. This
would help the recipient companies in obtaining a better valuation based
upon their performance.
++ Inclusion of fresh items for issue of shares against non-cash considerations:
The existing policy provides for conversion of only ECB/lump-sum fee/Royalty
into equity. A discussion paper on the possibility and need for inclusion of
additional items into equity had been released by DIPP in September, 2010.
After stakeholder consultations, Government has now decided to permit issue
of equity, under the Government route, in the following cases, subject to specific
conditions:
(a) import of capital goods/ machinery/ equipment (including second-hand machinery)
(b) pre-operative/ pre-incorporation expenses (including payments of rent etc.)
This measure, which liberalises conditions for conversion of non-cash items
into equity, is expected to significantly ease the conduct of business.
(iii)
Removal of the condition of prior approval in case of existing joint ventures/
technical collaborations in the ‘same field”
(iv) Guidelines relating to down-stream investments: The guidelines have been
comprehensively simplified and rationalised. Companies have now been classified
into only two categories – ‘companies
owned or controlled by foreign investors’ and ‘companies owned
and controlled by Indian residents’. The earlier categorisation of ‘investing
companies’, ‘operating companies’ and ‘investing-cum-operating
companies’ has been done away with.
(v) Development of Seeds: In the agriculture sector, FDI will now be permitted
in the development and production of seeds and planting material, without
the stipulation of having to do so under ‘controlled conditions’.
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