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Cabinet approves 100% FDI in contract manufacturing, coal mining

Centre eased FDI norms to give a boost to investment and manufacturing

Union Railways Minister Piyush Goyal along with Union Minister of Environment, Forest and Climate Change Prakash Javadekar addresses a press conference in New Delhi, on Wednesday | PTI

Continuing with giving impetus to the economy, the government on Wednesday announced a series of measures easing up FDI norms to give a boost to investment and manufacturing.

The cabinet held under the chairmanship of Prime Minister Narendra Modi approved allowing 100 per cent FDI in coal mining and associated infrastructure, 26 per cent FDI in digital news platforms, 100 per cent FDI in contract manufacturing through automatic route. The cabinet also tweaked certain norms to ease sourcing of 30 per cent of goods locally for single brand retail brands.

The single brand retail have also been allowed to sell their wares online even before setting up brick and mortar stores. Union minister Piyush Goyal said setting up stores used to take up to two to three years. So, the policy has been changed to allow them to sell online, while the brick and mortar stores can follow.

“These steps will give a big boost to FDI investment, manufacturing, create large number of jobs for India,” Goyal said during the cabinet briefing. “This will enhance ease of doing business and attract investment. The changes in FDI policy will result in making India a more attractive FDI destination, leading to benefits of increased investments, employment and growth,” he added.

In the coal sector, 100 per cent FDI under automatic route for mining activities including associated processing infrastructure will attract international players to create an efficient and competitive coal market. “It has been decided to permit 100 per cent FDI under automatic route for sale of coal, for coal mining activities including associated processing infrastructure subject to provisions of Coal Mines (Special Provisions) Act, 2015 and the Mines and Minerals (Development and Regulation) Act, 1957 as amended from time to time, and other relevant acts on the subject,” officials said.

As per the present FDI policy, 100 per cent FDI under automatic route is allowed for coal and lignite mining for captive consumption by power projects, iron & steel, and cement units and other eligible activities permitted under and subject to applicable laws and regulations.

In case of manufacturing through contract, FDI is now being permitted under automatic route. Goyal said presently the policy provides for 100 per cent FDI under automatic route in manufacturing sector. There is no specific provision for contract manufacturing in the policy. In order to provide clarity on contract manufacturing, it has been decided to allow 100 per cent FDI under automatic route in contract manufacturing in India as well.

The government said the easing local sourcing norms for FDI in Single Brand Retail Trading (SBRT) were announced in Budget.

The extant FDI policy provides that 30 per cent of value of goods has to be procured from India if SBRT entity has FDI more than 51 per cent. Further, regarding local sourcing requirement, the same can be met as an average during the first five years, and thereafter annually towards its India operations.

“With a view to provide greater flexibility and ease of operations to SBRT entities, it has been decided that all procurements made from India by the SBRT entity for that single brand shall be counted towards local sourcing, irrespective of whether the goods procured are sold in India or exported. Further, the current cap of considering exports for five years only is proposed to be removed, to give an impetus to exports,” Goyal said explaining the changes made in the 30 per cent local sourcing norms which were holding many international companies from setting up base here. Earlier, Apple had said they won't shift iPhone manufacturing to India if the 30 per cent sourcing norms were not eased.

In case of FDI in digital media, the extant FDI policy provides for 49 per cent FDI under approval route in Up-linking of 'News & Current Affairs' TV Channels. It has been decided to permit 26 per cent FDI under government route for uploading and streaming of 'News & Current Affairs' through digital media, on the lines of print media, Goyal said.

“These amendments in the FDI policy are meant to liberalise and simplify the FDI policy to provide ease of doing business in the country, leading to larger FDI inflows and thereby contributing to growth of investment, income and employment,” the minister added.

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