PRESS NOTE NO.

7 (1998 Series)

AMENDMENT TO THE INDUSTRIAL ENTREPRENEURS MEMORANDUM

Subject: Amendments to the Industrial Entrepreneurs Memorandum.

In terms of Press Note Number 22(1991Series) dated 24th December, 1991, no

amendments/modifications can be made in the Industrial Entrepreneurs
Memorandum(IEM) already filed and acknowledged in the Secretariat of Industrial
Assistance(SIA), except for clerical errors in the acknowledgment. Whenever any
correction or amendment is sought to be made in the IEM, the entrepreneur is required to
submit a fresh memorandum for issue of fresh acknowledgment. In terms of Press Note
No.6(1993 Series) dated 29th July, 1993, an IEM is deleted from the records of SIA, if on
scrutiny, it is found that the proposal contained in any IEM is not exempted from
licensing.

2. Many entrepreneurs have represented that since an IEM once filed is not serviced for
any amendment/modifications thereafter, they face hardship in cases where after initial
filing of IEM, any of the project parameters like the location, the name of the
company,the items and capacities proposed to be manufactured etc. undergo change, as a
result of which for the same investment proposal, they have to file multiple lEMs.

3. The matter has been considered in the Government. It has now been decided that lEMs
filed in the new form made effective from 1st July, 1998, and notified through Press Note
No.4(1998 Series) dated 15.6.98, would be amended/modified as per the request of the
entrepreneurs. The amendments would be subject to the terms and conditions spelt out in
Press Note No.17(1997 Series) dated 27th November, 1997 with reference to the
Statutes/regulations/ notifications issued by the Central and State Governments issued
from time to time.

Sd/-

(Ashok Kumar)

Joint Secretary to the Govt. of India

F. No.10(14)/98-IP New Delhi, the 20th July, 1998

 PRESS NOTE NO. 8
(1998 SERIES)

SUBJECT : Amendment to the Industrial Entrepreneurs Memorandum

In the Press Note No. 13 (1997 Series) issued by this Department on 5th September, 1997
"Forex Broking" was included in the list of activities where Foreign Direct Investment is
permissible under Non-Banking Financial Services. It has since been decided to further
expand the list by the inclusion of "Credit Card Business" and "Money Changing
Business" in the list of activities opened in this sector to foreign investors. The permitted
activities on the "credit Card Business" would include issuance, sales, marketing and
design of various payment products such as credit cards, charge cards, debit cards, stored
value cards, smart cards, value added cards etc. The normal guidelines applicable for
foreign investment in Non-Banking Financial Companies, as have been stipulated from
time to time, including the Minimum Capatilization Norms as also any guidelines/norms
prescribed by the competent authority for opening the business, shall be applicable to
foreign equity participation in the "Credit Card Business" and "Money Changing
Business". Press Note No. 4 (1997 Series) issued by this Department on 5th September
1997 may be deemed to have been amended to the above extent.

(ASHOK KUMAR)
Joint Secretary to the Government of India
 PRESS NOTE NO. 9
(1998 SERIES)

F. No. 10(37)/98-IP

Government of India
Ministry of Industry
Department of Industrial Policy & Promotion
Udyog Bhawan,

New Delhi The 27th August 1998

Subject:- Grant of Industrial Licences/Foreign Collaboration approvals/Project Import

Certification etc. for wood based items- prior clearance from the Ministry of
Environment & Forests - regarding.

Plywood, veneer of all types and other wood based products such as particle board,
medium density fibre board/ block board have been delicensed vide this Department
Press Note No.11 (1997 series) dated the 17th July, 1997 subject to locational conditions
and relevant statutes/statutory/policy notifications such as the National Forest Policy and
directions and decisions of the Hon’ble Supreme Court. However, in respect of wood
based items reserved for the small scale sector where the unit is being set up in the
organised sector, or where locational angle is involved, compulsory licensing under the
Industries(Development &Regulation) Act, 1951 is still attracted. Similarly, for setting
up 100% EOUs, foreign collaboration and project import certification etc., approval of
the Government is required. Such cases pertaining to wood based items, where approval
of the Government is needed, are necessarily considered in consultation with the Ministry
of Environment & Forests. It has, therefore, been decided that henceforth entrepreneurs
who wish to obtain approval from the Government for setting up any wood based project
should obtain prior clearance from the Ministry of Environment & Forests before
submitting the application to the Administrative Ministry/SIA and enclose a copy of "in
principle" approval given by the Ministry of Environment & Forests.

(ASHOK KUMAR)
Joint Secretary to the Government of India
 PRESS NOTE NO. 10
(1998 SERIES)

Government of India
Ministry of Industry
Department of Industrial Policy & Promotion
Udyog Bhawan,

Subject: Adoption of pollution control measures-manufacture of new products and by

products recovered through application of pollution control processes.

It is the policy of the Government that the industrial undertakings desiring to use the
wastes and effluents for manufacture of new products should be encouraged to do so.

Many of the chemicals recovered from pollution control processes and recycling of waste
products are reserved for exclusive manufacture in the small scale. As per current
industrial policy, the non-small scale units require to obtain industrial licence with 50%
export obligation for manufacturing any of the products reserved for the small scale
sector. In this background, it was felt that if the chemicals are recovered through
installation of pollution control processes which are in the larger interest of sustainable
industrial development, capacity of such recoverable chemicals, even if reserved for the
small scale, should be permitted without the mandatory export obligation.

The Government have now decided that in order to encourage adoption of pollution
control processes by the industrial undertakings which have the potential to utilise the
waste products and effluents for manufacture of new items, they may be allowed to do so
by suitable endorsement in the existing Industrial Licences or issued new Industrial
Licences for such recoverable items which may be reserved for the small scale sector,
without necessarily stipulating the mandatory export obligation.

The industrial undertakings will submit application in Form IL, to the Secretariat for
Industrial Assistance, Ministry of Industry, Udyog Bhawan, New Delhi. Such
applications will be considered on merits and wherever Government agrees to allow
industrial undertakings to recycle their wastes and effluents, necessary endorsement of
capacity for the items allowed would be made on industrial licences, without necessarily
stipulating the conditions for export of such new items. However, before taking a
decision in the matter, the Secretariat for Industrial Assistance will obtain the prior
written comments/views of the Development Commissioner (SSI) in each case.
It is hoped that adoption of this positive policy would encourage the industrial units to
install pollution control processes and be a positive incentive to utilise the waste products
and effluents.

Entrepreneurs desirous of availing of this facility shall have to submit applications in the
prescribed form for Industrial Licences (Form FC/IL) to the Secretariat for Industrial
Assistance (SIA), Department of Industrial Policy & Promotion, Ministry of Industry,
Udyog Bhavan, New Delhi-110011, giving reference to this Press Note, with full details
of the pollution control processes proposed to be adopted, and new items with capacities
which would be recovered from the same.

(ASHOK KUMAR)
Joint Secretary to the Government of India

F.No.10(39)/98-LP, New Delhi, the 26th August, 1998

 PRESS NOTE NO. 11
(1998 SERIES)

Government of India
Ministry of Industry
Department of Industrial Policy & Promotion
Udyog Bhawan,

Under the present policy, manufacture of cigarettes requires compulsory licencing under
the IDR Act. For induction of foreign direct investment (FDI) for this activity each
proposal is considered by FIPB/Government as per the prescribed parameters and
requirements under the policy.

The Government have reviewed the existing provisions and have decided to consider
proposals for manufacture of cigarettes with FDI upto 100%. Such approvals shall be
subject to the provisions relating to compulsory licencing under the Industries
(Development and Regulation) Act, 1951.

This Press Note shall be a part of the FIPB guidelines notified vide Press Note No.3
(1997 series) dated 17.01.1997.

(ASHOK KUMAR)
Joint Secretary to the Government of India

F.No.10(43)/98-LP, New Delhi, the 27th August, 1998

 PRESS NOTE NO. 12
(1998 SERIES)

Government of India
Ministry of Industry
Department of Industrial Policy & Promotion
Udyog Bhawan,

Subject: De-licensing of Sugar Industry

The Government has further reviewed the list of industries retained under compulsory
licensing, and has decided to delete sugar industry from the list of industries requiring
compulsory licensing under the provisions of the Industries (Development and
Regulation) Act, 1951. However, in order to avoid unhealthy competition among sugar
factories to procure sugarcane, a minimum distance of 15 KM would continue to be
observed between an existing sugar mill and a new mill by exercise of powers under the
Sugarcane Control Order, 1966.

The entrepreneurs who wish to avail themselves of the de-licensing of sugar industry
would be required to file an Industrial Entrepreneur Memoranda (IEM) with the
Secretariat of Industrial Assistance in the Ministry of Industry as laid down for all de-
licensed industries in terms of the Press Note dated 2nd August, 1991, as amended from
time to time.

Entrepreneurs who have been issued Letter(s) of Intent (LOI) for manufacture of sugar
need not file an initial IEM. In such cases, the LOI holder shall only file Part "B" of the
IEM at the time of commencement of commercial production against the LOI issued to
them. It is however open to entrepreneurs to file an initial IEM (in lieu of the LOI/
Industrial Licence held by them) if they so desire, whenever any variation from the
conditions and parameters stipulated in the LOI/ Industrial License is contemplated.

(ASHOK KUMAR)
Joint Secretary to the Government of India
New Delhi, the 31st August, 1998
 PRESS NOTE NO. 13
(1998 SERIES)

Government of India
Ministry of Industry
Department of Industrial Policy & Promotion
Udyog Bhawan,

Under the existing policy, foreign direct investment in Private Sector banks up to 20% by
Foreign banking companies or finance companies, including multilateral financial
institutions as technical collaborators or co-promoters is permissible. Under this policy,
NRI are also allowed equity participation in private sector banks up to 40%, which would
be inclusive of equity participation by other foreign investors as indicated above.

With a view to attracting foreign direct investment up to the permissible limit of 40% in
private sector banks, in case of shortfall in NRI contributions, multilateral financial
institutions would be allowed to contribute foreign equity to the extend of the shortfall in
NRI contributions within the overall limit of 40 percent.

(ASHOK KUMAR)
Joint Secretary to the Government of India
New Delhi, the 1st September, 1998
 PRESS NOTE NO. 14
(1998 SERIES)

SUBJECT : Delegation of Powers for the Export Oriented Units and EPZ Units

Government had delegated certain powers to the Development Commissioners of EPZs

for making post-approval amendments in respect of Export Oriented Units and EPZ units
vide Press Note No. 4 (1995 Series) dated 19-4-1995, and No. 15 (1997 Series) dated 10-
11-1997 Vide Press Note dated 10-7-1998 the procedure for submission of applications
had been streamlined.

2. In tune with the ongoing economic reforms, Government have deicded to delegate
further powers to the Development Commissioners of EPZs as follows:
Enhancement in the value of Imported Capital Goods required for the project:- To allow
enhancement in the value of imported Capital Goods upto 75% of the value approved
initially, subject to the maximum of Rs. 10.00 Crores. The enhancement in value of
imported Capital Goods can be on account of additional items of import or on account of
increase in prices of permitted items.
Additional location for the EOU project:- Sometimes, the entrepreneurs need some more
space to run their EOU projects and as such details of additional premises are required to
be incorporated in the approval letters.
The Development Commissioners of EPZs have been given powers to approve additional
location(s) for an EOU project, provided the additional location(s) falls within the
jurisdiction of the same Commissioner of Central Excise and Customs and all the
premises are custom-bonded, as per rules.

Revision in Export Obligation:- Development Commissioners shall have powers to revise

prospectively the export obligation stipulated in the approval letters (both upward and
downward) provided the revised export obligation is not below the level of minimum
export obligation prescribed in the EIM Policy/general or sector specific FDI guidelines.

(ADITI S RAY)
DIRECTOR
New Delhi the 16th October
 PRESS NOTE NO. 15
(1998 SERIES)

Government of India
Ministry of Industry
Department of Industrial Policy & Promotion
Udyog Bhawan,

Global Mobile Personal Communications by Satellite (GMPCS) is an emerging

technology in the field of mobile telephony. The Government have decided to permit
Foreign Direct Investment in licence companies operating GMPCS services upto 49% of
the total equity subject to, inter-alia, obtaining licence for GMPCS from the Telecom
Authority on the recommendations of an Inter-Ministerial Licencing Committee.

(ASHOK KUMAR)
Joint Secretary to the Government of India
New Delhi, the 15th October, 1998
 PRESS NOTE NO. 16
(1998 SERIES)

Government of India
Ministry of Industry
Department of Industrial Policy & Promotion
Udyog Bhawan,

In the Press Note No.4(1997 Series) issued by this Department on 30th April, 1997,
guidelines for FDI in the Non-Banking Financial Companies (NBFCs) including norms
for the minimum capitalisation were announced. The question of minimum capitalisation
requirement has been reviewed by the Government and it has been decided that foreign
investment proposals for purely financial consultancy services that are non-fund based,
would not be subjected to the minimum capitalisation norms subject to the following
condition:-

"It would not be permissible for such a company to set up any subsidiary for any other
activity, nor any equity it may contribute in an NBFC holding/operating company would
be reckoned as domestic equity".

NBFCs undertaking fund based activities shall, however, continue to attract minimum
capitalisation norms.

(ADITI S RAY)
DIRECTOR
New Delhi the 3rd November 1998
 PRESS NOTE NO. 17
(1998 SERIES)

Government of India
Ministry of Industry
Department of Industrial Policy & Promotion
Udyog Bhawan,

SUBJECT : Export of Cotton Yarn by EOU/EPZ Units

The Export Oriented Units/EPZ units in the cotton yarn sector are currently allowed to
manufacture and export cotton yarn with domestic cotton use restrictions as stipulated in
Press Note No.19 (1997 series) dated 26.12.97.

2. There have been representations from the 100% EOUs producing cotton yarn seeking
greater operational flexibility so that they are better equipped to deal with the adverse
market conditions prevailing in the international market. At the same time, there is an
urgent need for promoting downstream investments by cotton yarn EOUs in the interest
of higher value added export of fabrics.

3. With a view to encouraging investments towards setting up of integrated units and thus
achieving value additions, as well as to address the current difficulties of the cotton yarn
EOUs, Government have decided to allow the flexibility to the 100% EOUs to export
cotton yarn without any count restriction/sourcing of domestic cotton conditions in a
manner and to the extent as set out hereinunder :-

(i) Those 100% EOUs that are manufacturing cotton yarn and are subject to count
restrictions may be permitted to export cotton yarn without any count/domestic cotton use
restriction upto 31st December, 1998 subject to the condition that such exports are within
the overall quantitative ceiling on cotton yarn exports of counts 1-40 (which is 175
million Kgs for the calendar year 1998 as of date). For such exports, the EOUs will have
to apply to the Cotton Textile Export Promotion Council (TEXPROCIL) for allocation of
ceiling.

(ii) The composite units manufacturing cotton yarn as well as fabrics - both existing and
new - as may be provided in the Letter of Permission (LOP) under the 100% EOU sector,
would be allowed the flexibility to export cotton yarn also, without any count
restriction/sourcing of domestic

cotton condition. This dispensation would be contingent upon the following conditions:-
(a) Special eligibility would accrue only after the weaving capacity has been fully
installed, certified as balanced unit of spinning and weaving capacity by Textile
Commissioner, and its commercial production has started.

(b) The export of yarn at any time would not be more than exports effected in the form of
fabric in value terms and will be overall governed by the Letter of Undertaking (LUT)
regarding export obligation.

4. All investors and entrepreneurs may please take note of the aforesaid revision in the
Policy.

(ADITI S RAY)
DIRECTOR
New Delhi the 13th November 1998
 PRESS NOTE NO. 18
(1998 SERIES)

Government of India
Ministry of Industry
Department of Industrial Policy & Promotion
Udyog Bhawan,

SUBJECT: Guidelines pertaining to approval of foreign/technical collaborations under

the automatic route with previous ventures/tie-up in India.

1. The Government have reviewed the present Guidelines relating to approval of

foreign/technical collaborations under the automatic route and after careful consideration
it has been decided that foreign financial/technical collaborators with previous
ventures/tie-up in India would be subjected to the following guidelines:

Automatic route for FDI and/or technology collaboration would not be available to those
who have or had any previous joint venture or technology transfer/trade-mark agreement
in the same or allied field in India. RBI, therefore, have to stipulate necessary declaration
before applications for the automatic route are taken on record.
Investors of Technology to the suppliers of the above category therefore will have to
necessarily seek the FIPB/PAB approval route for joint ventures or the technology
transfer agreements (including trade-mark) giving detailed circumstances in which they
find it necessary to set-up a new joint venture/enter into new technology transfer
(including trade-mark).

The onus is clearly on such investors/technology suppliers to provide the requisite

justification as also proof to the satisfaction of FIPB/PAB that the new proposal would
not in any way jeopardize the interests of the existing joint venture or technology/trade-
mark partner or other stakeholders. It will be at the sole discretion of FIPB/PAB to either
approve the application with or without conditions or reject in toto duly recording the
reasons for doing so.

2. The above procedure will form part of the approval procedures contained in the
"Manual on Industrial Policy & Procedures in India" published by SIA, Ministry of
Industries, Government of India, which shall stand clarified accordingly in respect of
foreign/technical collaborators with previous joint ventures/tie-up in India.

Sd/-
 (I. SRINIVAS)
DIRECTOR
New Delhi, dated the 14th December,1998
 PRESS NOTE NO. 19
(1998 SERIES)

Government of India
Ministry of Industry
Department of Industrial Policy & Promotion
Udyog Bhawan,

SUBJECT: Policy and Procedure governing automatic approval under the scheme for
100% Export Oriented Units (EOUs) and Export Processing Zone (EPZ) units –
Liberalization - Regarding.

The policy and procedure governing automatic approvals under the scheme for EOUs and
EPZ units were laid down in Press Note No. 13 (1991) dated 9.10.1991, which were
further liberalised through Press Note No. 3 (1995) dated 19.4.1995, No. 8 (1997) dated
7.7.1997 and No. 6 (1998) dated 10.7.1998.

It has been laid down that for automatic approvals, the proposals should inter-alia meet
the following criteria :-

The payments for foreign technology agreements, if any, should not exceed lump sum fee
of Rs. 1.00 crore or 8% royalty (net of taxes) over a period of 5 years from the date of
commencement of commercial production; and
The activity envisaged in the proposal must be a manufacturing activity, as covered
within the ambit of Section 3 of the Central Excise & Salt Act, 1944.
With a view to liberalise the procedure further, Government have now decided that the
proposals envisaging foreign technology agreements with a lump sum fee of US $ two
million and royalty payments upto 8% on exports and 5% on DTA sales (net of taxes)
over a period of 5 years from the date of commencement of commercial production, will
be approved under the automatic route.

Similarly, the proposals, other than the manufacturing activities within the ambit of
Section 3 of the Central Excise Act, will also be allowed automatic approvals, provided
the proposed activity is included in Para 9.1 of the EXIM Policy. Other criteria for
granting automatic approvals shall continue to be in force.

Sd-

(ADITI S. RAY)
DIRECTOR
New Delhi, dated the 15th December,1998
 PRESS NOTE NO. 20
(1998 SERIES)

Government of India
Ministry of Industry
Department of Industrial Policy & Promotion
Udyog Bhawan,

SUBJECT: Delegation of power for post approval amendments for the Export Oriented
Units (EOUs) and Export Processing Zone (EPZ) Units.

Government had delegated certain powers to the Development Commissioners of EPZs

for making post approval amendments in respect of Export Oriented Units and EPZ units
vide Press Note No. 4 (1995 Series) dated 19.4.95, No. 15 (1997 Series) dated 10.11.97
and No. 14 (1998 Series) dated 16.10.1998.

In tune with the ongoing economic reforms, Government have decided to delegate further
powers to the Development Commissioners of EPZs as follows:-

i) Disposal of obsolete capital goods- The Development Commissioners of EPZs have

been given powers to permit disposal of obsolete capital goods (used for less than 5
years), in Domestic Tariff Area (DTA), on payment of applicable duties, upto a
maximum limit of Rs. 10 Lakh in each financial year for an EOU/EPZ unit.

Government have now decided that Development Commissioners of EPZs can permit
disposal of obsolete capital goods, in DTA, on payment of applicable duties, without any
restrictions. However, disposal of obsolete machinery must not adversely affect the
contracted export obligation/Net Foreign Exchange Earning.

ii) Import of office equipment- The Development Commissioners of EPZs have been
given powers to permit import of office equipments, not exceeding 20% of the total
capital goods value, subject to a maximum of Rs. 25.00 lakh.

Government have now decided that Development Commissioners of EPZs can permit
import of office equipment in accordance with EXIM Policy and Hand Book of
Procedures.

iii) Merger of two or more EOU/EPZ units - Sometimes, an entrepreneur sets up two or
more EOU projects/EPZ units, having separate identity and accounts; separate E.O.; and
separate bond licence. Subsequently, the applicant desires to merge two or more units
into one unit.

Government have now decided that the Development Commissioners of EPZs can permit
the merger of two or more EOUs/EPZ units into one EOU/one EPZ unit, provided the
units fall within the jurisdiction of the same Development Commissioner and the same
Commissioner of Central Excise and Customs.

Sd/-

(ADITI S. RAY)
DIRECTOR
New Delhi, the 15th December,1998