Consolidated FDI Policy – New Guidelines Release

The government is seeking to further simplify the foreign investment regime, by releasing revised consolidated FDI policy guidelines. The changes include investments in sectors like single and multi-brand retail, power exchanges; asset reconstruction companies (ARCs), broadcasting, civil aviation, and non-banking financial

companies (NBFCs).

Changes in the Consolidated FDI Policy Guidelines

• Allows upto 51% inflows of FDI in multi-brand retail sector.
• Allowing Pakistan citizens, nationals and companies to invest in India. In the change incorporated, an entity or citizen of Pakistan can invest in India after prior approval from the government.
• Allows 49% stake by a foreign airlines in the domestic carriers which are cash-strapped .
• Raises FDI cap in various broadcasting services to 74%.
• Permits up to 49% foreign investment in the power trading exchanges.
• Increases foreign investment ceiling in ARCs to 74%, up from 49%. This move is aimed at inviting foreign expertise in this segment. It has also been said that the total shareholding of an FII in an ARC will not exceed 10 per cent of the total paid-up capital.
• Lists as many as eight mandatory conditions and one optional clause with reference to the conversion of a company with Foreign Direct Investment into a Limited Liability Partnerships (LLPs) firm.
• A new paragraph has been added with regards to the issue price of shares.
• These changes were made in the sixth edition of the Consolidated FDI Policy Circular. The circular is said to be a ready reckoner on FDI-related regulations. These regulations are effective from April 5.

As of now, the base provisions will be from the Companies Act, 1956, by way of subscription to its Memorandum of Association. A non-resident, including an NRIs who intends to make investments in an Indian firm will have to comply with these provisions by way of – “such investments may be made at face value subject to their eligibility to invest under the FDI scheme”.