Cabinet okays 100% FDI in contract manufacturing, insurance and coal mining

Hyderabad: With an objective to boost foreign direct investment (FDI) in India, the Union Cabinet has okayed 100 per cent FDI in contract manufacturing, insurance, coal mining through the automatic route. The department of financial services of the Finance Ministry issued a notification in this regard.

The NDA government in a statement said, “Manufacturing activities may be conducted either by the investee entity or through contract manufacturing in India under a legally tenable contract, whether on Principal to Principal or Principal to Agent basis.”

The existing FDI policy, which provides for 100 per cent FDI under the automatic route in the manufacturing sector, has no specific provision in respect of contract manufacturing.

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The NDA government has increased the FDI limit in the insurance sector from 49 per cent to 100 per cent. Union Finance Minister Nirmala Sitharaman in her maiden budget speech had proposed permitting 100 per cent FDI for insurance intermediaries.

Insurance companies responded positively to this and said that the move to allow 100 per cent FDI for insurance intermediaries was a positive one and would help in the long-term and holistic development of the industry.

The government has been considering the proposal for 100 per cent FDI in insurance intermediaries for the past two years. The insurance regulator was also in favour of the move.

The FDI hike could also boost use of newer technologies, according to industry experts.

Another major decision taken by the Cabinet was FDI in digital media space. The government will allow 26 per cent FDI in the digital media segment through the approval route.

“It has been decided to permit 100 per cent FDI under automatic route for sale of coal, coal mining activities including associated processing infrastructure subject to provisions of Coal Mines Act, 2015 and the Mines and Minerals Act, 1957,” added the official statement.

“Associated processing infrastructure” would include coal washeries, crushing, coal handling, and separation (magnetic and non-magnetic).

As per the present FDI policy, 100 per cent FDI under automatic route is allowed for coal and lignite mining for captive consumption by power projects, iron and steel and cement units and other eligible activities permitted under and subject to applicable laws and regulations.

Further, in a bid to provide clarity on contractual manufacturing, the cabinet also permitted 100 per cent FDI in the sector through the automatic route. The existing FDI policy provides for 100 per cent FDI under automatic route in the manufacturing sector but there was no specific provision for contractual manufacturing.