Page 226 - DMGT401Business Environment

Unit 10: Foreign Trade

Notes

Notes Manufacture of SSI- reserved items by other industrial undertakings and location of
industrial undertakings in relaxation of the notified locational policy will attract compulsory
licensing.

Foreign Investment in the Small-scale Sector

Under the small-scale policy, equity holding by other units, including foreign equity in a small-
scale undertaking, is permissible up to 24%. However, there is no bar on higher equity holding
for foreign investment if the unit is willing to give up its small-scale status. In case of foreign
investment beyond 24% in a small-scale unit which manufactures small-scale reserved item(s),
an industrial licence carrying a mandatory export obligation of 50% would need to be obtained.

Foreign Investment Policy for Trading Activities (Export)

Foreign investment for trading can be approved through the automatic route of up to 51%
foreign equity and beyond this by the government through the FIPB. For approval through the
automatic route, the requirement would be that the undertaking concerned is an export house/
trading house/super trading house/star trading house registered under the provisions of the
Export and Import policy in force.

Other Modes of Foreign Direct Investments

Global Depository Receipts (GDR)/American Deposit Receipts (ADR)/Foreign Currency.
Convertible Bonds (FCCB): Foreign Investment through GDRs/ADRs, Foreign Currency.
Convertible Bonds (FCCBs) are treated as Foreign Direct Investment. Indian companies are
allowed to raise equity capital in the international market through the issue of GDR/ADRs/
FCCBs.

Highlights of the Annual Supplement 2010-11 to the Foreign Trade Policy

1. Additional benefit of 2% bonus, over and above the existing benefits of 5% / 2% under
Focus Product Scheme, allowed for about 135 existing products.
2. 256 new products added under FPS (at 8 digit level), which shall be entitled for benefits @
2% of FOB value of exports to all markets.
3. Tea and CSNL Cardinol included for benefits under VKGUY @ 5% of FOB value of exports.
4. Zero duty EPCG scheme, introduced in August 2009 and valid for only two years upto
31.3.2011, has been extended by one more year till 31.3.2012.
5. Duty Entitlement Passbook (DEPB) scheme has been extended beyond 31.12.2010 till
30.06.2011.

6. Concessional Export Credit: Interest subvention of 2% for pre-shipment credit for export
sectors namely, Handloom, Handicraft, Carpet and SMEs for all export sectors.
7. Exporters shall now have the flexibility to get a high value EPCG authorisation by filing
their EPCG application on Annual basis.
8. Clarifications on the availability of 4% SAD refund benefit.
9. Facility of a data preparation module for Advance Authorization and Export Promotion
Capital Good (EPCG) has been provided on an offline mode.

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