Government of India

Ministry of Commerce & Industry

Department of Industrial Policy & Promotion
Secretariat for Industrial Assistance

PRESS NOTE NO.1 (2002 SERIES)

Press Note No.9 of 2000, inter-alia, provides for payment of royalty

upto 2% on exports and 1% on domestic sales under automatic route for use
of trademark and brand name of the foreign collaborator without technology
transfer. In case of technology transfer, payment of royalty subsumes the
payment of royalty for use of trademark and brand name of the foreign
collaborator. The issue regarding calculation of royalty for use of trademark
and brand name has been examined by the Government and it has been
decided that the following formula for calculation of royalty for use of
trademark and brand name be adopted:

“Royalty on brand name/trade mark shall be paid as a percentage of

net sales, viz., gross sales less agents’/dealers’ commission, transport
cost, including ocean freight, insurance, duties, taxes and other
charges, and cost of raw materials, parts, components imported from
the foreign licensor or its subsidiary/affiliated company.”

2. This is for information of investors.

(M.S. SRINIVASAN)
Joint Secretary to the Government of India

No.8(2)2001-FC.I dated 3rd.January 2002

 Government of India
Ministry of Commerce & Industry
Department of Industrial Policy & Promotion
SIA (FC Division)

PRESS NOTE NO. 2 (2002 SERIES)

Subject: Guidelines for licensing production of Arms & Ammunitions

In pursuance of the Government decision to allow private sector

participation up to 100% in the defence industry sector with foreign direct
investment (FDI) permissible up to 26%, both subject to licensing as notified vide
Press Note No. 4 (2001 series), the following guidelines for licensing production
of arms and ammunitions are hereby notified:

1. 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.

2. Cases involving FDI will be considered by the FIPB and licences given by
the Department of Industrial Policy & Promotion in consultation with
Ministry of Defence.

3. The applicant should be an Indian company / partnership firm.

4. The management of the applicant company / partnership should be in

Indian hands with majority representation on the Board as well as the
Chief Executive of the company / partnership firm being resident Indians.

5. Full particulars of the Directors and the Chief Executives should be

furnished along with the applications.

6. 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 sectors and having an established R & D base.

7. 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 foreign investor taking into account the category of weapons and
equipment that are proposed to be manufactured.

8. There would be a three-year lock-in period for transfer of equity from one
 foreign investor to another foreign investor (including NRIs & OCBs with
60% or more NRI stake) and such transfer would be subject to prior
approval of the FIPB and the Government.

9. 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.

10. 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.

11. Import of equipment for pre-production activity including development of

prototype by the applicant company would be permitted.

12. 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.

13. 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.

14. Purchase preference and price preference may be given to the Public
Sector organizations as per guidelines of the Department of Public
Enterprises.

15. 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.

16. Government decision on applications to FIPB for FDI in defence industry

sector will be normally communicated within a time frame of 10 weeks
from the date of acknowledgement by the Secretariat for Industrial
Assistance in the Department of Industrial Policy & Promotion.

(M.S. SRINIVASAN)
Joint Secretary to the Government of India

No. 5(37)/2001-FC I dated 4th January 2002

 Government of India
Ministry of Commerce & Industry
Department of Industrial Policy & Promotion
SIA (FC Division)

PRESS NOTE NO. 3 (2002 SERIES)

Subject: Guidelines for FDI in development of integrated township

including housing and building material

Government vide Press Note No. 4 (2001 series) permitted FDI up to

100% for development of integrated townships, including housing, commercial
premises, hotels, resorts, city and regional level urban infrastructure facilities
such as roads and bridges, mass rapid transit systems and manufacture of
building materials. Development of land and providing allied infrastructure will
form an integrated part of township’s development.

2. FDI in the development of integrated townships will be subject to the

following guidelines:

i) The foreign company intending to invest, shall be registered as an Indian

Company under Companies Act 1956 and will henceforth be allowed to
take up land assembly and its development as a part of Integrated
Township Development. All such cases would be processed by FIPB on
the recommendation of Ministry of Urban Development & Poverty
Alleviation and other concerned Ministries / Departments. Ministry of
Urban Development & Poverty Alleviation will develop an exclusive cell to
deal with such cases.

ii) The core business of the company seeking to make investment, should
be integrated township development with a record of successful execution
of such projects elsewhere.

iii) The minimum area to be developed by such a company should be 100

acres for which norms and standards are to be followed as per local
bylaws / rules. In the absence of such bylaws / rules, a minimum of two
thousand dwelling units for about ten thousand population will need to be
developed by the investor.

iv) The investing Foreign company should achieve clear milestones once
their proposal has been approved.

a) The minimum capitalisation norm shall be US$ 10 million for a wholly

owned subsidiary and US$ 5 million for joint ventures with Indian
partner/s. The funds would have to be brought in upfront.
 b) A minimum lock-in period of three years from completion of minimum
capitalisation shall apply before repatriation of original investment is
permitted.

c) A minimum of 50% of the integrated project development must be

completed within a period of five years from the date of possession of the
first piece of land. However, if the investor intends to exit earlier due to
reasons beyond his control, it shall be decided by FIPB on a case-to-case
basis.

v) Conditions regarding the use of land for commercial purposes,

development charges, external development charges and other charges
as laid down in Master Plan / Bylaws, preparation of layout and building
plan, development of internal and peripheral development, development of
other infrastructure facilities including the trunk services etc., will be the
responsibility of the investor as per planning norms and standards on
similar lines as those applicable to local investors. In the absence of such
standards and norms, every State Government may decide their own
conditions for which the Urban Development Plan Formulation and
Implementation guidelines circulated by the Ministry of Urban
Development & Poverty Alleviation may serve as a guiding principle.

vi) Land with assembled area for peripheral services such as police stations,
milk booths will be handed over free of cost to the Government / local
authority / agency as the case may be.

vii) The Developer will retain the lands for community services such as (i)
schools (ii) shopping complex (iii) community centres (iv) ration shop (v)
hospital / dispensary. These services will be developed by developer
himself and shall be made operational before the houses are occupied.

viii) The developer, after properly developing playgrounds, park, will make it
available to the local authorities free of cost.

ix) The developer will ensure the norms and standards as applicable under
local laws / rules.

x) For companies investing in Special Economic Zones, Foreign Investment

Promotion Board may accord exemption to any of the above mentioned
conditions on a case-to-case basis. This will, however, be an interim
measure till guidelines are evolved in due course in a need based manner.

(M.S. SRINIVASAN)
Joint Secretary to the Government of India
No. 5(6)/2000-FC I dated 4th January 2002
 Government of India
Ministry of Commerce & Industry
Department of Industrial Policy & Promotion
SIA (FC Division)

PRESS NOTE NO. 4 (2002 SERIES)

Subject: Revision of existing sectoral guidelines for FDI, including investment by

non-resident Indians and overseas corporate bodies

Press Note 2 (2000 series) dated the 11th February, 2000 enclosing the sector
specific guidelines for Foreign Direct Investment (FDI), inter alia includes the
following provisions for the Advertising and Film sectors:

Automatic approval is available for the following:

- Up to 74% FDI in Advertising sector.

- Up to 100% FDI in Film industry (i.e., film financing, production,

distribution, exhibition, marketing and associated activities relating to film industry
subject to the following:

I. Companies with an established track record in films, TV, music, finance, and
insurance would be permitted.

II. The company should have a minimum paid up capital of US$ 10 million if it is
the single largest equity shareholder and at least US$ 5 million in other cases.

III. Minimum level of foreign equity investment would be US$ 2.5 million for the
single largest equity shareholder and US$ 1 million in other cases

IV. Debt equity ratio of not more than 1:1 i.e. domestic borrowings shall not
exceed equity

V. Provisions of dividend balancing would apply.

2. With a view to further liberalizing the FDI regime, the Government have
permitted FDI up to 100% on the automatic route in the advertising sector. FDI
up to 100% in the film sector, which is already on the automatic route, will not be
subject to the conditions indicated at I to V above.

3. The provisions of Press Note No. 2 of 2000 series stand modified to the above
extent.

(M. S. SRINIVASAN)
Joint Secretary to the Government of India
 Government of India
Ministry of Commerce & Industry
Department of Industrial Policy & Promotion
SIA (FC Division)

PRESS NOTE NO. 5 (2002 Series)

Subject: Prohibition on foreign investment in lottery business, gambling

and betting – regarding

As per existing policy, lottery business, gambling and betting are not open to
foreign investment, which applies to FDI, FII portfolio investment, NRI/OCB
portfolio investment, NRI/OCB investment on non-repatriation basis and
investment by foreign venture capital investors.

2. Government has been receiving queries from certain State Governments,

prospective investors, technology providers, franchise / trademark / brand name
licensors, management consultants, etc., as to whether FDI is permissible in
Government / private lotteries, online lotteries, casinos, etc., and also whether
foreign technology collaboration, including licensing of franchise / trademark /
brand name, management contract, etc., are permitted in the lottery business,
gambling and betting sector.

3. It is clarified that both foreign investment and foreign technology collaboration

in any form are completely prohibited in the lottery business, gambling and
betting sector.

(M.S. SRINIVASAN)
Joint Secretary to the Government of India

F. No. 5(31)/2000-FC I dated 5th July 2002

 Government of India
Ministry of Commerce & Industry
Department of Industrial Policy & Promotion
SIA (FC Division)

PRESS NOTE NO. 6 (2002 SERIES)

Subject: Revision of existing sectoral guidelines for FDI, including investment by

non-resident Indians and overseas corporate bodies

As part of the ongoing liberalisation of the FDI regime, the Government, in partial
relaxation of the extant policy which prohibits FDI in the agriculture sector,
including plantations, has decided to allow FDI up to 100% in tea sector,
including tea plantations. Proposals for FDI in tea sector will require prior
approval of the Central Government and would be subject to following conditions:

(i) compulsory divestment of 26% equity of the company in favour of an Indian

partner / Indian public within a period of five years; and

(ii) prior approval of the State Government concerned in case of any future land
use change.

The above dispensation would be applicable to all fresh investments (FDI) made
in this sector from the date of this notification.

2. The provisions of Press Note No. 2 (2000 series) dated 11.2.2000 stand
modified to the above extent.

(M. S. SRINIVASAN)
Joint Secretary to the Government of India

No. 5(9)/2000-FC I dated 5th July 2002