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SECTOR-SPECIFIC CONDITIONS ON FDI SERVICES SECTOR PART A

FDI is permitted in Different Sectors like Agriculture, Mining and Petroleum & Natural Gas Manufacturing, Services Sector, Financial Services, and Other sectors such as Pharmaceuticals, etc., we will discuss sector-specific conditions specified in Services Sector.

Also Read: Conditions on FDI in Construction Development, Industrial Parks & Satellites

Here is the List of Services in which FDI is permitted

1. Broadcasting

2. Print Media

3. Civil Aviation

4. Construction Development: Townships, Housing, Built-up Infrastructure

5. Industrial Parks

6. Satellites- Establishment, and Operation

7. Private Security Agencies

8. Telecom Services

9. Trading

10. Railway Infrastructure

We will discuss points 1 to 3 in this article and from points 4 to 10 in the next Article.

1. BROADCASTING

BROADCASTING CARRIAGE SERVICES

SR N. Sector/Activity % of Equity/ FDI Cap Entry Route
1 Teleports (setting up of up-linking HUBs/Teleports); 100% Automatic
2 Direct to Home (DTH); 100% Automatic
3 Cable Networks (Multi System operators (MSOs) operating at National or State or District level and undertaking upgradation of networks towards digitalization and addressability); 100% Automatic
4 Mobile TV; 100% Automatic
5 Headend-in-the Sky Broadcasting Service(HITS) 100% Automatic
6 Cable Networks (Other MSOs not undertaking upgradation of networks towards digitalization and addressability and Local Cable Operators (LCOs)) 100% Automatic

Note:

Infusion of fresh foreign investment, beyond 49% in a company not seeking license/permission from sectoral Ministry, resulting in a change in the ownership pattern or transfer of stake by existing investor to a new foreign investor, will require Government approval.

Detailed guidelines on the Broadcasting Sector are given in Annexure-1(attached)

2. PRINT MEDIA

SR NO. Sector/Activity % of Equity/ FDI Cap Entry Route
1 Publishing of newspaper and periodicals dealing with news and current affairs 26% Government
2 Publication of Indian editions of foreign magazines dealing with news and current affairs 26% Government
OTHER CONDITIONS

(i) ‘Magazine’, for the purpose of these guidelines, will be defined as a periodical publication, brought out on a non-daily basis, containing public news or comments on public news.

(ii) Foreign investment would also be subject to the Guidelines for Publication of Indian editions of foreign magazines dealing with news and current affairs issued by the Ministry of Information & Broadcasting on 4.12.2008, as amended from time to time.

SR NO. Sector/Activity % of Equity/ FDI Cap Entry Route
3 Publishing/printing of scientific and technical magazines/specialty journals/ periodicals, subject to compliance with the legal framework as applicable and guidelines issued in this regard from time to time by Ministry of Information and Broadcasting. 100% Government
4 Publication of facsimile edition of foreign newspapers 100% Government
OTHER CONDITIONS

(i) FDI should be made by the owner of the original foreign newspapers whose facsimile edition is proposed to be brought out in India.

(ii) Publication of facsimile edition of foreign newspapers can be undertaken only by an entity incorporated or registered in India under the provisions of the Companies Act, as applicable.

(iii) Publication of facsimile edition of foreign newspaper would also be subject to the Guidelines for publication of newspapers and periodicals dealing with news and current affairs and publication of facsimile edition of foreign newspapers issued by Ministry of Information & Broadcasting on 31.3.2006, as amended from time to time.

3. CIVIL AVIATION

a. AIRPORTS

SR NO. Sector/Activity % of Equity/ FDI Cap Entry Route
1 Greenfield projects 100% Automatic
2 Existing projects 100% Automatic

b. AIR TRANSPORT SERVICES

SR NO. Sector/Activity % of Equity/ FDI Cap Entry Route
1 (a) Scheduled Air Transport Service*/ Domestic Scheduled Passenger Airline

(b) Regional Air Transport Service

100% Automatic up to 49% (Automatic up to 100% for NRIs) Government route beyond 49%
2 Non-Scheduled Air Transport Services 100% Automatic
3 Helicopter services/seaplane services requiring DGCA approval 100% Automatic

*As per Schedule XI of Aircraft Rules, 1937, Air Operator Certificate to operate Scheduled air transport services (including Domestic Scheduled Passenger Airline or Regional Air Transport Service) may be granted to a company or a body corporate provided that: –

(a) it is registered and has its principal place of business within India;

(b) the Chairman and at least two-thirds of its Directors are citizens of India; and

(c) its substantial ownership and effective control is vested in Indian nationals.

c. OTHER SERVICES UNDER THE CIVIL AVIATION SECTOR

SR NO. Sector/Activity % of Equity/ FDI Cap Entry Route
1 Ground Handling Services subject to sectoral regulations and security clearance 100% Automatic
2 Maintenance and Repair organizations; flying training institutes; and technical training institutions. 100% Automatic

DEFINITIONS:

The Civil Aviation sector includes Airports, Scheduled and Non-Scheduled domestic passenger airlines, Helicopter services/Seaplane services, Ground Handling Services, Maintenance and Repair organizations; Flying training institutes; and Technical training institutions.

For the purposes of the Civil Aviation sector:

I. “Airport” means a landing and taking off area for aircrafts, usually with runways and aircraft maintenance and passenger facilities and includes aerodrome as defined in clause (2) of section 2 of the Aircraft Act, 1934;

II. “Aerodrome” means any definite or limited ground or water area intended to be used, either wholly or in part, for the landing or departure of aircraft, and includes all buildings, sheds, vessels, piers and other structures thereon or pertaining thereto;

III. “Air transport service” means a service for the transport by air of persons, mails or any other thing, animate or inanimate, for any kind of remuneration whatsoever, whether such service consists of a single flight or series of flights;

IV. “Air Transport Undertaking” means an undertaking whose business includes the carriage by air of passengers or cargo for hire or reward;

V. “Aircraft component” means any part, the soundness and correct functioning of which, when fitted to an aircraft, is essential to the continued airworthiness or safety of the aircraft and includes any item of equipment;

VI. “Helicopter” means a heavier-than-air aircraft supported in flight by the reactions of the air on one or more power-driven rotors on a substantially vertical axis;

VII. “Scheduled air transport service” means an air transport service undertaken between the same two or more places and operated according to a published timetable or with flights so regular or frequent that they constitute a recognizably systematic series, each flight being open to use by members of the public;

VIII. “Non-Scheduled air transport service” means any service which is not a scheduled air transport service;

IX. “Seaplane” means an aeroplane capable normally of taking off from and alighting solely on water;

X. “Ground Handling” means (i) ramp handling, (ii) traffic handling both of which shall include the activities as specified by the Ministry of Civil Aviation through the Aeronautical Information Circulars from time to time, and (iii) any other activity specified by the Central Government to be a part of either ramp handling or traffic handling.

OTHER CONDITIONS

1. Air Transport Services would include Domestic Scheduled Passenger Airlines; Non-Scheduled Air Transport Services, helicopter and seaplane services.

2. Foreign airlines are allowed to participate in the equity of companies operating Cargo airlines, helicopter, and seaplane services, as per the limits and entry routes mentioned above.

3. Foreign airlines are also allowed to invest in the capital of Indian companies, operating scheduled and non-scheduled air transport services, up to the limit of 49% of their paid-up capital. Such investment would be subject to the following conditions:

a. It would be made under the Government approval route,

b. The 49% limit will subsume FDI and FPI investment,

c. The investments so made would need to comply with the relevant regulations of SEBI, such as the Issue of Capital and Disclosure Requirements (ICDR) Regulations/Substantial Acquisition of Shares and Takeovers (SAST) Regulations, as well as other applicable rules and regulations,

d. All foreign nationals likely to be associated with Indian scheduled and non-scheduled air transport services, as a result of such investment shall be cleared from security viewpoint before deployment and

e. All technical equipment that might be imported into India as a result of such investment shall require clearance from the relevant authority in the Ministry of Civil Aviation.

4. In addition to the above conditions, foreign investment in M/s Air India Ltd. shall be subject to the following conditions:

a. Foreign investment(s) in M/s Air India Ltd., including that of foreign airline(s) shall not exceed 49% either directly or indirectly except in case of those NRIs, who are Indian Nationals, where foreign investment(s) is permitted up to100% under automatic route.

b. Substantial ownership and effective control of M/s Air India Ltd. shall continue to be vested in Indian Nationals as stipulated in Aircraft Rules, 1937.

c. FDI in Civil Aviation is subject to provisions of Aircraft Rules, 1937, as amended from time to time.

NOTE:

1. The FDI limits/entry routes mentioned under the head AIR TRANSPORT SERVICES above, are applicable in the situation where there is no investment by a foreign airline. Any investment by foreign airlines in companies operating in Air Transport Services, including in M/s Air India Limited, shall be subject to para (b) and (c) above mentioned under the heard other Conditions

2. The dispensation for those NRIs, who are Indian Nationals regarding FDI up to 100% will also continue in respect of the investment regime specified at para (c) (ii) and (d) above mentioned under the heard other Conditions.

Annexure- 1

Conditions for Broadcasting Sector

1.0 FDI for Up-linking/Down-linking TV Channels will be subject to compliance with the relevant Up-linking/Down-linking Policy notified by the Ministry of Information & Broadcasting from time to time.

1.1 Foreign investment (FI) in companies engaged in all the aforestated services will be subject to relevant regulations and such terms and conditions, as may be specified from time to time, by the Ministry of Information and Broadcasting.

1.2 The foreign investment (FI) limit in companies engaged in the aforestated activities shall include, in addition to FDI,), Foreign Portfolio Investors (FPIs), Qualified Foreign Investors(QFIs), Non-Resident Indians (NRIs), Foreign Currency Convertible Bonds (FCCBs), American Depository Receipts (ADRs), Global Depository Receipts (GDRs) and convertible preference shares held by foreign entities.

1.3 Foreign investment in the aforestated broadcasting carriage services will be subject to the following security conditions/terms:

Mandatory Requirement for Key Executives of the Company

(i) The majority of Directors on the Board of the Company shall be Indian citizens.

(ii) The Chief Executive Officer (CEO), Chief Officer in-charge of technical network operations and Chief Security Officer should be resident Indian citizens.

Security Clearance of Personnel

(iii) The Company, all Directors on the Board of Directors and such key executives like Managing Director/ Chief Executive Officer, Chief Financial Officer (CFO), Chief Security Officer (CSO), Chief Technical Officer (CTO), Chief Operating Officer (COO), shareholders who individually hold 10% or more paid-up capital in the company and any other category, as may be specified by the Ministry of Information and Broadcasting from time to time, shall require to be security cleared.

In case of the appointment of Directors on the Board of the Company and such key executives like Managing Director/ Chief Executive Officer, Chief Financial Officer (CFO), Chief Security Officer (CSO), Chief Technical Officer (CTO), Chief Operating Officer (COO), etc., as may be specified by the Ministry of Information and Broadcasting from time to time, prior permission of the Ministry of Information and Broadcasting shall have to be obtained.

It shall be obligatory on the part of the company to also take prior permission from the Ministry of Information and Broadcasting before effecting any change in the Board of Directors.

(iv) The Company shall be required to obtain security clearance of all foreign personnel likely to be deployed for more than 60 days in a year by way of appointment, contract, and consultancy or in any other capacity for installation, maintenance, operation or any other services prior to their deployment. The security clearance shall be required to be obtained every two years.

Permission vis-à-vis Security Clearance

(v) The permission shall be subject to permission holder/licensee remaining security cleared throughout the currency of permission. In case the security clearance is withdrawn, the permission granted is liable to be terminated forthwith.

(vi) In the event of security clearance of any of the persons associated with the permission holder/licensee or foreign personnel being denied or withdrawn for any reasons whatsoever, the permission holder/licensee will ensure that the concerned person resigns or his services terminated forthwith after receiving such directives from the Government, failing which the permission/license granted shall be revoked and the company shall be disqualified to hold any such Permission/license in future for a period of five years.

Infrastructure/Network/Software related requirement

(vii) The officers/officials of the licensee companies dealing with the lawful interception of services will be resident India citizens.

(viii) Details of infrastructure/network diagram (technical details of the network) could be provided, on a need basis only, to equipment suppliers/manufactures and the affiliate of the licensee company. Clearance from the licensor would be required if such information is to be provided to anybody else.

(ix) The Company shall not transfer the subscribers’ databases to any person/place outside India unless permitted by relevant law.

(x) The Company must provide traceable identity of their subscribers.

Monitoring, Inspection and Submission of Information

(xi) The Company should ensure that necessary provision (hardware/ software) is available in their equipment for doing the lawful interception and monitoring from a centralized location as and when required by Government.

(xii) The company, at its own costs, shall, on demand by the government or its authorized representative, provide the necessary equipment, services and facilities at designated place(s) for continuous monitoring or the broadcasting service by or under supervision of the Government or its authorized representative.

(xiii) The Government of India, Ministry of Information & Broadcasting or its authorized representative shall have the right to inspect the broadcasting facilities. No prior permission/intimation shall be required to exercise the right of Government or its authorized representative to carry out the inspection. The company will, if required by the Government or its authorized representative, provide necessary facilities for continuous monitoring for any particular aspect of the company’s activities and operations. Continuous monitoring, however, will be confined only to security related aspects, including screening of objectionable content.

(xiv)The inspection will ordinarily be carried out by the Government of India, Ministry of Information & Broadcasting or its authorized representative after reasonable notice, except in circumstances where giving such a notice will defeat the very purpose of the inspection.

(xv)The company shall submit such information with respect to its services as may be required by the Government or its authorized representative, in the format as may be required, from time to time.

(xvi)The permission holder/licensee shall be liable to furnish the Government of India or its authorized representative or TRAI or its authorized representative, such reports, accounts, estimates, returns or such other relevant information and at such periodic intervals or such times as may be required.

(xvii)The service providers should familiarize/train designated officials or the Government or officials of TRAI or its authorized representative(s) in respect of relevant operations/features of their systems.

National Security Conditions

(xviii) It shall be open to the licensor to restrict the Licensee Company from operating in any sensitive area from the National Security angle. The Government of India, Ministry of Information and Broadcasting shall have the right to temporarily suspend the permission of the permission holder/Licensee in public interest or for national security for such period or periods as it may direct. The company shall immediately comply with any directives issued in this regard failing which the permission issued shall be revoked and the company disqualified to hold any such permission in future for a period of five years.

(xix) The company shall not import or utilize any equipment, which are identified as unlawful and/ or render network security vulnerable.

Other Conditions

(xx) Licensor reserves the right to modify these conditions or incorporate new conditions considered necessary in the interest of national security and public interest or for proper provision of broadcasting services.

(xxi) Licensee will ensure that broadcasting service installation carried out by it should not become a safety hazard and is not in contravention of any statute, rule or regulation and public policy.

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My Self Puja Singh, having More than 9 years experience in Secretarial work. Great exposure in Incorporation, start-up and FEMA Compliances. Core Area is Incorporation and FEMA Compliances. You can reach at puja.rimi.singh@gmail.com Mob: 8617756164 View Full Profile

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