The Union Government has introduced various financial incentives for investments in core and infrastructure sectors as also high priority industries such as information technology and through specific schemes such as Growth Centre Schemes, Electronic Hardware Technology Park (EHTP), the Transport Subsidy Schemes, the New Industrial Policy for the North Eastern States, Software Technology Park (STP), Export Promotion Zones (EPZs), Special Economic Zones (SEZs), etc.

Foreign direct investment is freely allowed in all sectors including the services sector, except where the existing and the notified sectoral policy does not permit FDI beyond a ceiling Virtually FDI for all items / activities can be brought in through the automatic route under powers delegated to the Reserve Bank of India (RBI), and for remaining items / activities through Government approval. Government approvals are accorded on the recommendation of the Foreign Investment Promotion Board (FIPB).

Sectors where 100 percent FDI Permitted

Some of the important sectors where 100 percent foreign ownership is permitted are given in the following paragraphs:

Non- Automatic Route where Government Approval is required

• Airports
• B2B e-commerce
• Trading companies within notified policy
• Drugs and pharmaceuticals not falling on the automatic route
• Integrated township development
• ISPs with out gateways, electronic mail and voice mail
• Courier services other than distribution of letters

Automatic Route

• Most manufacturing activities other than those, which attract compulsory licensing /sectoral equity, cap or are reserved exclusively in small scale industries.
• Non-banking financial services.
• Infrastructure such as roads and highways, ports and harbours, electricity generation transmission and distribution, mass rapid transit systems, LNG projects, etc.
• Drugs and pharmaceuticals that does not attract compulsory licensing and involve recombinant DNA technology.
• Hotels and tourism
• Food processing
• Electronic hardware
• Software development
• Film industry
• Hospitals
• Private oil refineries
• Pollution control and management
• Exploration and mining of minerals other than diamonds and precious stones
• Management consultancy
• Venture capital funds / companies
  

EOU/ EPZ for setting up industry

The Export Processing Zones set up as enclaves separated from the Domestic Tarrif Area (DTA) by fiscal barriers, are intended to provide an internationally competitive duty free environment for export production at low cost. This enables the products to be competitive both quality and price-wise in the international market. India has seven Export Processing Zones (EPZs), functioning at Kandla (Gujarat), Mumbai (Maharashtra), Noida(UP),Madras (Tamil Nadu), Cochin (Kerala ), Falta (West Bengal) and Visakhapatnam (Andra Pradesh).

The scheme for 100 % Export Oriented Units (EOUs) was introduced in 1980 for generating production capacity for exports. Under this scheme, the units are eligible to procure the machinery, raw materials, components, consumables, etc; from indigenous / imported sources, free of excise / custom duty. The units are required to export their entire product and achieve a minimum prescribed NFEP (Net foreign exchange as a percentage of exports) as per Exim policy for specified sectors. EOUs can make sale in the DTA, except for some specified categories. The DTA sale entitlement is 50 per cent of the FOB value of exports and this is on payment of applicable duties and subject to the fulfillment of prescribed minimum NFEP.

The development Commissioner of concerned Export Processing Zone (EPZ) is the authorized agency to allow DTA sale of production as per provision of Export Import policy in force. Under 100 % Export Oriented Unit (EOU) Scheme, the entrepreneur can choose the location in accordance with the location policy of the Government and the premises, where the manufacturing activity is to be carried out, are custom bonded.

As an aftermath of industrial liberalization, for expeditious redressal of the problems faced by entrepreneurs, the Development Commissioners of the Export Processing Zones / Special Economic Zones have been powers to approve fresh application and also post-approval amendments as specified in the EXIM policy.

It has been decided that EOUs need not obtain separate industrial licence for the manufacture of items reserved for SSI sector, irrespective of the investment, in plant and machinery. Units undertaking to export their entire production of goods and services may be set up under the Export Oriented Unit (EOU) Schemes. Such units may be engaged in manufacture, services, repair, remaking, reconditioning, reengineering, etc.

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