FDI 100% in coal mining and contract manufacturing

Seeking to give the slowing economy a foreign investment push, the Centre on Wednesday relaxed foreign direct investment norms across sectors, including single-brand retail and allowed 100% FDI in coal mining and contract manufacturing.

On the lines of print media, it also allowed 26% FDI in digital media space. The existing policy allows 49% FDI under approval route in up-linking of news and current affairs TV channels.

Wednesday’s Cabinet decision permitted 26% FDI under government route for uploading/streaming of news and current affairs through digital media, on the lines of print media.

The decisions were taken by the Union Cabinet headed by Prime Minister Narendra Modi, focussing on the sectors which have either slowed down or were not giving a desired push to the government’s ‘Make in India’ initiative.

On FDI in single-brand retailing, the Cabinet expanded the definition of mandatory 30% domestic sourcing norm. It also allowed single-brand retailers to start online sales, waiving the previous condition of setting up a mandatory brick-and-mortar store.

The decision to relax local outsourcing norms would help firms like the US telecom giant Apple, Chinese Xiaomi among others. Many of them had complained that the norm was a deterrent to their business in the country.

Under the existing FDI Policy, 30% of the product’s component material must come from the country in which the finished products are being sold.

The decision comes in the wake of FDI equity inflows declining in 2018-19, for the first time in six years to $44.4 billion from $44.8 billion in 2017-18.

“There is a little slowing down of FDI worldwide so we have taken some significant decisions. 100% FDI for coal mining and all related processing activities will be allowed under automatic route,” Commerce Minister Piyush Goyal said.

Goyal said decisions of the Cabinet on Wednesday are aimed 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 the growth of investment, income and employment”.

The existing policy provides for 100% FDI under automatic route in manufacturing sector. There is no specific provision for contract manufacturing in the policy.

The Cabinet allowed 100% FDI under automatic route for sale of coal, for coal mining activities including associated processing infrastructure. Earlier, 100% FDI under automatic route was allowed for coal and lignite mining for captive consumption by power projects.

The decision on FDI came within a week of the government announcing a slew of reform measures to perk up the economy, including the auto sector.