|
RESERVE BANK OF INDIA
FOREIGN EXCHANGE DEPARTMENT
CENTRAL OFFICE
MUMBAI-400 001
Notification No.FEMA.319/2014-RB
September 5, 2014
Foreign Exchange Management (Transfer or Issue of Security by a
Person Resident outside India) (Thirteenth Amendment) Regulations, 2014
In exercise of the powers conferred by clause (b) of sub-section (3) of Section
6 and Section 47 of the Foreign Exchange Management Act, 1999 (42 of 1999), the
Reserve Bank of India hereby makes the following amendments in the Foreign
Exchange Management (Transfer or Issue of Security by a Person Resident outside
India) Regulations, 2000 (Notification No. FEMA. 20/2000-RB dated 3rd May 2000),
namely:-
1. Short Title & Commencement:-
(i) These Regulations may be called the Foreign Exchange Management (Transfer or
Issue of Security by a Person Resident Outside India) (Thirteenth Amendment)
Regulations, 2014.
(ii) They shall come into force from August 26, 2014@ .
2. Amendment of Regulation 14
In the Foreign Exchange Management (Transfer or Issue of Security by a Person
Resident outside India) Regulations, 2000, (Notification No. FEMA 20/2000-RB
dated 3rd May 2000), in regulation 14, in sub-regulation (3), in clause (iv), in para (D), the words, “and Defence sectors” shall be deleted.
3. Amendment of Schedule 1
In the Foreign Exchange Management (Transfer or Issue of Security by a Person
Resident outside India) Regulations, 2000, (Notification No. FEMA 20/2000-RB
dated 3rd May 2000), in the existing Annex B, the existing entry 6, 6.1 and 6.2
shall be substituted by the following:
| SI. No. |
Sector/Activity |
% of Equity/FDI Cap |
Entry Route |
| 6 Defence |
| 6.1 |
Defence Industry subject to Industrial license under the Industries
(Development & Regulation) Act, 1951 |
49%
|
Government route up to 49%
Above 49% to Cabinet Committee on Security (CCS) on case to case basis,
wherever it is likely to result in access to modern and 'state-of-art'
technology in the country. |
| |
Note: (i) The above limit of 49% is composite and
includes all kinds of foreign investments i.e. Foreign Direct Investment
(FDI), Foreign Institutional Investors (Flls), Foreign Portfolio
Investors (FPIs), Non Resident Indians (NRIs), Foreign Venture Capital
Investors (FVCI) and Qualified Foreign Investors (QFIs) regardless of
whether the said investments have been made under Schedule 1 (FDI), 2
(FII), 2A (FPI), 3 (NRI), 6 (FVCI) and 8 (QFI) of FEMA (Transfer or
Issue of Security by Persons Resident Outside India) Regulations.
(ii) Portfolio investment by FPIs/FIls/NRIs/QFIs and investments by
FVCIs together will not exceed 24% of the total equity of the
investee/joint venture company. Portfolio investments will be under
automatic route. |
| 6.2 |
Other Conditions |
| |
- Licence applications will be considered and licences
given by the Department of Industrial Policy & Promotion, Ministry of
Commerce & Industry, in consultation with Ministry of Defence and
Ministry of External Affairs.
- The applicant company seeking permission of the Government for FDI up to
49% should be an Indian company owned and controlled by resident Indian
citizens.
- The management of the applicant company should be in Indian hands with
majority representation on the Board as well as the Chief Executives of
the company/partnership firm being resident Indians.
- Chief Security Officer (CSO) of the investee/ joint venture company
should be resident Indian citizen.
- Full particulars of the Directors and the Chief Executives should be
furnished along with the applications.
- The Government reserves the right to verify the antecedents of the
foreign collaborators and domestic promoters including their financial
standing and credentials in the world market. Preference would be given
to original equipment manufacturers or design establishments and
companies having a good track record of past supplies to Armed Forces,
Space and Atomic energy sections and having an established R & D base.
- There would be no minimum capitalization for the FDI. A proper
assessment, however, needs to be done by the management of the applicant
company depending upon the product and the technology. The licensing
authority would satisfy itself about the adequacy of the net worth of
the non-resident investor taking into account the category of weapons
and equipment that are proposed to be manufactured.
- The Ministry of Defence is not in a position to give purchase guarantee
for products to be manufactured. However, the planned acquisition
programme for such equipment and overall requirements would be made
available to the extent possible.
- The capacity norms for production will be provided in the licence based
on the application as well as the recommendations of the Ministry of
Defence, which will look into existing capacities of similar and allied
products.
- Investee/joint venture company should be structured to be
self-sufficient in areas of product design and development. The
investee/joint venture company along with manufacturing facility, should
also have maintenance and life cycle support facility of the product
being manufactured in India.
- Import of equipment for pre-production activity including development of
prototype by the applicant company would be permitted.
- Adequate safety and security procedures would need to be put in place by
the licensee once the licence is granted and production commences. These
would be subject to verification by authorized Government agencies.
- The standards and testing procedures for equipment to be produced under
licence from foreign collaborators or from indigenous R & D will have to
be provided by the licensee to the Government nominated quality
assurance agency under appropriate confidentiality clause. The nominated
quality assurance agency would inspect the finished product and would
conduct surveillance and audit of the Quality Assurance Procedures of
the licensee. Self-certification would be permitted by the Ministry of
Defence on case to case basis, which may involve either individual
items, or group of items manufactured by the licensee. Such permission
would be for a fixed period and subject to renewals.
- Purchase preference and price preference may be given to the Public
Sector organizations as per guidelines of the Department of Public
Enterprises.
- Arms and ammunition produced by the private manufacturers will be
primarily sold to the Ministry of Defence. These items may also be sold
to other Government entities under the control of the Ministry of Home
Affairs and State Governments with the prior approval of the Ministry of
Defence. No such item should be sold within the country to any other
person or entity. The export of manufactured items would be subject to
policy and guidelines as applicable to Ordnance Factories and Defence
Public Sector Undertakings. Non-lethal items would be permitted for sale
to persons/entities other than the Central or State Governments with the
prior approval of the Ministry of Defence. Licensee would also need to
institute a verifiable system of removal of all goods out of their
factories. Violation of these provisions may lead to cancellation of the
licence.
- All applications seeking permission of the Government for FDI in defence
would be made to the Secretariat of Foreign Investment Promotion Board
(FIPB) in the Department of Economic Affairs.
- Applications for FDI up to 49% will follow the existing procedure with
proposals involving inflows in excess of Rs. 1200 crore being approved
by Cabinet Committee on Economic Affairs (CCEA).
- Based on the recommendation of the Ministry of Defence and FIPB,
approval of the Cabinet Committee on Security (CCS) will be sought by
the Ministry of Defence in respect of cases seeking permission of the
Government for FDI beyond 49% which are likely to result in access to
modern and `state-of-art' technology in the country.
- Proposals for FDI beyond 49% with proposed inflow in excess of Rs. 1200
crores, which are to be approved by CCS will not require further
approval of the Cabinet Committee on Economic Affairs (CCEA).
- Government decision on applications for FDI in defence industry sector
will be normally communicated within a time frame of 10 weeks from the
date of acknowledgement.
- For the proposal seeking Government approval for foreign investment
beyond 49% applicant should be Indian company/foreign investor. Further
condition at para (iii) above will not apply on such proposals
|
Yours faithfully,
(C.D. Srinivasan)
Chief General Manager
Foot Note:-
(i) @ It is clarified that no person will be adversely affected as a result of
the retrospective effect being given to these Regulations.
(ii) The Principal Regulations were published in the Official Gazette vide
G.S.R. No.406 (E) dated May 8, 2000 in Part II, Section 3, sub-Section (i) and
subsequently amended as under:-
G.S.R.No. 158(E) dated 02.03.2001
G.S.R.No. 175(E) dated 13.03.2001
G.S.R.No. 182(E) dated 14.03.2001
G.S.R.No. 4(E) dated 02.01.2002
G.S.R.No. 574(E) dated 19.08.2002
G.S.R.No. 223(E) dated 18.03.2003
G.S.R.No. 225(E) dated 18.03.2003
G.S.R.No. 558(E) dated 22.07.2003
G.S.R.No. 835(E) dated 23.10.2003
G.S.R.No. 899(E) dated 22.11.2003
G.S.R.No. 12(E) dated 07.01.2004
G.S.R.No. 278(E) dated 23.04.2004
G.S.R.No. 454(E) dated 16.07.2004
G.S.R.No. 625(E) dated 21.09.2004
G.S.R.No. 799(E) dated 08.12.2004
G.S.R.No. 201(E) dated 01.04.2005
G.S.R.No. 202(E) dated 01.04.2005
G.S.R.No. 504(E) dated 25.07.2005
G.S.R.No. 505(E) dated 25.07.2005
G.S.R.No. 513(E) dated 29.07.2005
G.S.R.No. 738(E) dated 22.12.2005
G.S.R.No. 29(E) dated 19.01.2006
G.S.R.No. 413(E) dated 11.07.2006
G.S.R.No. 712(E) dated 14.11.2007
G.S.R.No. 713(E) dated 14.11.2007
G.S.R.No. 737(E) dated 29.11.2007
G.S.R.No. 575(E) dated 05.08.2008
G.S.R.No. 896(E) dated 30.12.2008
G.S.R.No. 851(E) dated 01.12.2009
G.S.R.No. 341 (E) dated 21.04.2010
G.S.R.No. 821 (E) dated 10.11.2012
G.S.R.No. 606(E) dated 03.08.2012
G.S.R.No. 795(E) dated 30.10.2012
G.S.R.No. 796(E) dated 30.10.2012
G.S.R. No. 797(E) dated 30.10.2012
G.S.R.No. 945 (E) dated 31.12.2012
G.S.R. No.946(E) dated 31.12.2012
G.S.R. No.38(E) dated 22.01.2013
G.S.R.No.515(E) dated 30.07.2013
G.S.R.No.532(E) dated 05.08.2013
G.S.R. No.341(E) dated 28.05.2013
G.S.R.No.344(E) dated 29.05.2013
G.S.R. No.195(E) dated 01.04.2013
G.S.R.No.393(E) dated 21.06.2013
G.S.R.No.591(E) dated 04.09.2013
G.S.R.No.596(E) dated 06.09.2013
G.S.R.No.597(E) dated 06.09.2013
G.S.R.No.681(E) dated 11.10.2013
G.S.R.No.682(E) dated 11.10.2013
G.S.R. No818(E) dated 31.12.2013
G.S.R. No805(E) dated 30.12.2013
G.S.R.No.683(E) dated 11.10.2013
G.S.R.No.189(E) dated 19.03.2014
G.S.R.No.190(E) dated 19.03.2014
G.S.R.No.270(E) dated 07.04.2014
G.S.R.No. 361 (E) dated 27.05.2014
G.S.R.No.370(E) dated 30.05.2014
G.S.R.No.371(E) dated 30.05.2014
G.S.R.No.400(E) dated 12.06.2014
G.S.R.No. 435(E) dated 08.07.2014
G.S.R.No. 436(E) dated 08.07.2014
Published in the Official Gazette of Government of India – Extraordinary –
Part-II, Section 3, Sub-Section (i) dated 13.11.14- G.S.R.No.799(E)
|