PROJECT

MANAGEMENT

5. INDUSTRIAL POLICY

TODAYS SESSION:
MAIN FEATURES OF THE INDUSTRIAL POLICY

INDUSTRIAL LICENSING

Licensing policy

Locational policy

Small Scale Industries (SSI)

Environmental clearances
FOREIGN DIRECT INVESTMENT (FDI)

Automatic / Government approval

FDI in SSI sector

INVESTMENT BY NRIs & OCBs
FOREIGN TECHNOLOGY AGREEMENTS

Automatic / Government approval

100 % EOUs , EPZs and SEZs
ELECTRONIC HARDWARE TECHNOLOGY PARKS &
SOFTWARE TECHNOLOGY PARK SCHEMES

OBJECTIVES OF
THE INDUSTRIAL POLICY
Industrialization in a country is a barometer of
Development of its economy
In the era of global competition it is necessary to:

Maintain a sustained growth in industrial productivity and

production;
Generate gainful employment;
Ensure optimal utilization of human and other resources;
Help the nation to attain international competitiveness and
Transform a nation into a major partner and player in the
global arena.

GOVERNMENTS APPROACH:
WTO regime requires that we should gear ourselves to integrate with
the global economy as early as possible to be able to take on the
international competition successfully.
The Government's liberalisation and economic reforms programme aims
at:
- Rapid and substantial economic growth,
- Integration with the global economy
Achievements of the industrial policy reforms:
- Have reduced the industrial licensing requirements,
- Removed restrictions on fresh investments and expansion,
- Facilitated easy access to foreign technology and foreign direct
investment.

POLICY FOCUS

Policy focus of the Government since 1991

is on
Deregulating Indian industry;
Allowing the industry the requisite freedom
and flexibility in responding to market
forces and
Providing a policy regime that facilitates
and fosters growth of Indian industry.

FIRST STEP IN LIBERALIZATION.

India has abolished the license raj and no
license is required to start any manufacturing
activities except in the following cases:

Industries reserved for the Public Sector (Annexure I),

Industries retained under compulsory licensing (Annexure II),
Items of manufacture reserved for the Small Scale Sector and
Items or proposals, which attract location restrictions.
Items which require environment clearance

COMPULSORY LICENSING

The list of items requiring compulsory licensing is reviewed on an ongoing basis.

The lists of industries reserved for the public sector and of items under
compulsory licensing are given in Annexures I & II respectively.
At present, there are only three industries reserved for the public sector.
(ANNEXURE- I - LIST OF INDUSTRIES RESERVED FOR THE PUBLIC
SECTOR )

Arms and ammunition and allied items of defence

equipment, defence / fighter aircrafts and warships.
Atomic Energy
Railway transport.

Similarly, only six industries are under compulsory licensing mainly on account
of environmental, safety and strategic considerations.

ANNEXURE-II
LIST OF INDUSTRIES FOR WHICH INDUSTRIAL
LICENSING IS COMPULSORY
1. Distillation and brewing of alcoholic drinks.
2. Cigars and cigarettes of tobacco and manufactured tobacco substitutes.
3. Electronic Aerospace and defence equipment: all types.
4. Industrial explosives including detonating fuses, safety fuses, gunpowder,
nitrocellulose, and safety matches.
5. Hazardous chemicals. (Hydrocyanic acid and its derivatives, Phosgene and its
derivatives, Isocyanates and di-isocyanates of hydrocarbon, Methyl Isocyanate, etc.)

6. Drugs and Pharmaceuticals (according to modified Drug Policy issued in

September, 1994).
Note: The compulsory licensing provisions would not apply in respect of the Smallscale units taking up the manufacture of any of the above items reserved for
exclusive manufacture in small-scale sector.

INDUSTRIAL ENTREPRENEUR
MEMORANDUM (IEM)
Industrial undertakings, which are exempt from obtaining an
industrial license are required to file an Industrial
Entrepreneur Memorandum (IEM) Part A with the Secretariat
of Industrial Assistance (SIA), Department of Industrial
Policy and Promotion, Government of India, and obtain an
acknowledgement. No further approval is required.
Part B of the IEM has to be filled immediately after
commencement of commercial production.
No industrial approval is required for exempted industries.
Amendments are also allowed to IEM proposals filed after
1.7.1998.

IMPORTANCE OF
SMALL SCALE SECTOR

Small Scale Sector is a dynamic and vibrant sector

of the economy.
- It accounts for nearly 35% of the gross value of output in
the manufacturing sector and over 40% of the total exports
from the country.
- In terms of value added this sector accounts for about 40%
of the value added in the manufacturing sector.
- The sector's contribution to employment is next only to
agriculture in India.

IMPORTANCE OF
SMALL SCALE SECTOR

There are close to 5 million small scale units in the

country manufacturing more than 7,500 products.
They provide employment to over 31 million numbers.
Together they produce goods / services worth over Rs.
650,000 crores.
Exports of SSI sector are over Rs. 60,000 crores
Government is encouraging Cluster Development of
small scale units with financial support from UNIDO

Policy for Small Scale Industries

Reservation of items of manufacture exclusively for the small scale

sector forms an important focus of the industrial policy as a measure of
protecting this sector.
Total of 749 items are reserved for manufacture in small scale sector.
The list is revised every year. Definition of small scale sector has also
been changed by the Govt. from time to time.
Since 24th December 1999, industrial undertakings with an investment
up to rupees ten millions i.e. one crore (in plant and machinery) are
within the small scale and ancillary sector. A differential investment
limit has been adopted since 9th October 2001 for 41 reserved items
where the investment limit up to Rs. five crores is prescribed for
qualifying as a small scale unit. The investment limit for tiny units is
Rs. 25 lakhs.

DEFINITION OF PLANT AND MACHINERY

In calculating the value of plant and machinery for

this notification, the original price of plant and
machinery, irrespective of whether the plant and
machinery are new or reconditioned second hand,
shall be taken into account.
It is necessary to know the items / provisions that
are allowed or disallowed to be included in the
value of plant and machinery for qualifying as a
small scale unit.

DEFINITION OF PLANT AND MACHINERY

Following items will not be included:

the cost of equipments such as tools, jigs, dies, moulds and spare
parts for maintenance and the cost of consumable stores;
the cost of installation of plant and machinery;
the cost of research and development equipment and pollution
control equipment;
the cost of generation sets and extra transformer installed by the
undertaking as per the regulations of the State Electricity Board;
the bank charges and service charges paid to the National Small
Industries Corporation or the State Small Industries Corporation;

DEFINITION OF PLANT AND MACHINERY

Following items will not be included:

the cost involved in procurement or installation of cables, wiring, bus

bars, electrical control panels (not those mounted on individual
machines), oil circuit breakers or miniature circuit breakers which are
necessarily to be used for providing electrical power to the plant and
machinery or for safety measures;
transportation charges (excluding of sales tax and excise) for
indigenous machinery from the place of manufacturing to the site of the
factory;
charges paid for technical know how for erection of plant and
machinery;
cost of such storage tanks which store raw materials, finished products
only and are not linked with the manufacturing process; and
cost of fire fighting equipments.

DEFINITION OF PLANT AND MACHINERY

In the case of imported machinery, the following

items shall be included in calculating the value of
plant and machinery:

Import duty (excluding miscellaneous expenses as

transportation from the port to the site of the factory,
demurrage paid at the port);
The shipping charges;
Customs clearance charges; and
Other taxes / duties.

ITEMS RESERVED FOR SSI

The reserved items fall under the following broad categories:

Food and allied industries;

Textile products including hosiery;
Wood and wood products;
Paper products;
Leather and leather products including footwear;
Rubber products;
Plastic products;
Chemical and chemical products;
Glass and ceramics;
Mechanical engineering;
Electrical machines, appliances etc.;
Electronic equipments and components;
Transport equipment, auto-parts, bicycle parts and
Miscellaneous (sports goods, stationery items etc.)

ITEMS RESERVED FOR SSI

SOME EXAMPLES

Food and Allied Industries: Pickles & Chutneys, Bread, Mustard Oil
(except solvent extracted), Ground nut oil (except solvent extracted).
Wood and Wood Products: Wooden furniture and fixtures
Paper Products: Exercise books and registers, paper plates, files, etc.
Injection Moulding Thermo Plastic Product: PVC Pipes, including
conduits upto 110 mm dia, Fittings for PVC pipes
Other Chemicals & Chemical Products: Wax candles, Laundry soap,
Safety matches, Fire works, Agarbatties
Glass & Ceramics: Glass Bangles
Mechanical Engg. Excluding Transport Equipment: Steel almirah,
Rolling shutters, Steel chairs all types, Steel tables all other types, Steel
furniture all other types, Padlocks, Stainless steel utensils, Domestic
utensils Aluminium, nails, staples, etc.

SMALL SCALE INDUSTRIES (SSI)

The Small-scale units should get registered with the Directorate of

Industries / District Industries Centre in the State Government concerned.
Such units can manufacture any item including those notified as
exclusively reserved for manufacture in the small-scale sector.
Small-scale units are also free from location restrictions cited in earlier
slides.
However, a Small-scale unit is not permitted more than 24 per cent equity
in its paid up capital from any large industrial undertaking either foreign or
domestic. If the equity holding from another company (including foreign
equity) exceeds 24 per cent, even if the investment in plant and machinery
in the unit is below Rs 10 million, the unit loses its Small-scale status.

SMALL SCALE INDUSTRIES (SSI)

CONTD.

There are 749 items, which are reserved for manufacture in the
small scale sector (the list keeps changing depending on the
priorities set by the Government in its policy documents).
All undertakings other than the small scale industrial undertakings,
if they wish to manufacture items reserved for the small scale
sector, they are required to obtain an industrial license and
undertake an export obligation of 50% of the annual production.
This condition of licensing is, however, not applicable to those
undertakings operating under 100% Export Oriented Undertakings
Scheme, the Export Processing Zone (EPZ) or the Special
Economic Zone Schemes (SEZs).

SMALL SCALE INDUSTRIES (SSI)

CONTD.

A Small-scale unit manufacturing Small-scale reserved item(s), on

exceeding Small-scale investment ceiling in plant and machinery by virtue
of natural growth, needs to obtain a Carry-on-Business (COB) License. No
export obligation is fixed on the capacity for which the COB license is
granted. However, if the unit expands its capacity for the Small-scale
reserved item (s) further, it needs to obtain a separate industrial license.
It is possible that a chemical or a by-product recoverable through pollution
control measures is reserved for the Small-scale sector. With a view to
adopting pollution control measures, Government has decided that an
application needs to be made for grant of an Industrial Licence for such
reserved items, which would be considered for approval without
necessarily imposing the mandatory export obligation. For instance a unit
manufacturing fly ash aggregates, bricks or blocks

INCENTIVES OFFERED TO SSI

Incentives are also linked to the location strategy and

will be covered in details while dealing with the
subject on Location Analysis.
Weaver of stamp duty and registration fees up to
March 31, 2011 .
Refund of octroi paid
Capital subsidy ranging from Rs. 10 lakhs to Rs. 35
lakhs
Environment Clearance not required.

ENVIRONMENTAL CLEARANCES
Entrepreneurs are required to obtain Statutory clearances
relating to Pollution Control and Environment for setting up an
industrial project.
A Notification issued under The Environment Protection Act 1986 has
listed 29 projects in respect of which environmental clearance needs to be
obtained from the Ministry of Environment, Government of India.
This list includes industries like petrochemical complexes, petroleum
refineries, cement, thermal power plants, bulk drugs, fertilisers, dyes, paper,
leather, etc.
2. However if investment is less than Rs. 500 million, such clearance is not
necessary:
Unless it is for pesticides, bulk drugs and pharmaceuticals, asbestos and asbestos
products, integrated paint complexes, mining projects, tourism projects of certain
Parameters, tarred roads in Himalayan areas, distilleries, dyes, foundries, and
electroplating industries.

1.

ENVIRONMENTAL CLEARANCES
(CONTD.)
3. Further, any item reserved for the Small-scale sector
manufactured by a small-scale unit is also exempt from
obtaining environmental clearance from the Central
Government.

4. Powers have been delegated to the State Governments for grant

of environmental clearance for certain categories of thermal
power plants.
5. Setting up industries in certain locations considered ecologically
fragile (e.g. Aravalli Range, coastal areas, Doon valley, Dahanu,
etc.) are guided by separate guidelines issued by the Ministry of
Environment of the Government of India.

FOREIGN DIRECT INVESTMENT (FDI)

Promotion of foreign direct investment forms an

integral part of Indias economic policies. The role
of foreign direct investment in accelerating
economic growth is by way of infusion of capital,
technology and modern management practices.
The Department has put in place a liberal and
transparent foreign investment regime where most
activities are opened to foreign investment on
automatic route without any limit on the extent of
foreign ownership.

FOREIGN DIRECT INVESTMENT (FDI)

Some of the recent initiatives taken to further liberalize the FDI

regime, include
Opening up of sectors such as Insurance (up to 26%);
development of integrated townships (up to 100%); defence industry
(up to 26%); tea plantation; Enhancement of FDI limits in private
sector banking,
Allowing FDI up to 100% under the automatic route for most
manufacturing activities in SEZs;
Opening up B2B e-commerce; Internet Service Providers (ISPs)
without Gateways; electronic mail and voice mail to 100% foreign
investment subject to 26% divestment condition; etc.
The Department has also strengthened investment facilitation
measures through Foreign Investment Implementation Authority
(FIIA).

FOREIGN DIRECT INVESTMENT

Government wishes to facilitate foreign direct investment (FDI) and

investment from Non-Resident Indians (NRI)s including Overseas
Corporate Bodies (OCBs), predominantly owned by them, to complement
and supplement domestic investment. Investment and returns are freely
repatriable, except in the case of 22 specified items, which attract the
condition of dividend balancing.
Foreign direct investment is freely allowed in all sectors including the
services sector, except where the existing and notified sectoral policy
does not permit FDI beyond a ceiling.

FDI for virtually all items / activities can be brought in through the
automatic route under powers delegated to the Reserve Bank of India
(RBI), and for the remaining items / activities through Government
Approval.

Government approvals are accorded on the recommendation of the

Foreign Investment Promotion Board (FIPB).

AUTOMATIC ROUTE
(a) New Ventures

All items/activities except the following fall under the automatic route for
FDI/NRI/OCB investment

All proposals that require an Industrial Licence which include

The item requiring an Industrial Licence

Foreign investment being more than 24% in the equity capital of units
manufacturing items reserved for Small-scale industries; and
All items which require an Industrial Licence in terms of the location policy

All proposals in which the foreign collaborator has a previous venture /

tie-up in India.
All proposals relating to acquisition of shares in an existing Indian
company in favour of a foreign/NRI/OCB investor.
All proposals falling outside notified sectoral policy/caps or under sectors
in which FDI is not permitted and/or whenever any investor chooses to
make an application to the FIPB and not to avail of the automatic route.

AUTOMATIC ROUTE (CONTD.)

(b) Existing Companies

In addition to Automatic Approval for new companies, such approval can be
granted also for existing companies proposing to induct foreign equity. For
existing companies with or without an expansion programme, the additional
requirements are that

The increase in equity level must result from the expansion of the equity base of the
existing company,
The money to be remitted should be in foreign currency and
The proposed expansion programme or existing activities should be predominantly
in the sector(s) under Automatic Route.

Otherwise, the proposal would need Government approval through the FIPB.
The 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.

AUTOMATIC ROUTE

Investment made by multilateral

financial institutions such as ADB,
IFC, etc. as also investment made in IT
sector qualify for automatic route
except in such cases which require
industrial license.

APPROVAL ROUTE
Government approval for FDI through the FIPB shall be necessary for the following
categories:-

i) All proposals that require an Industrial Licence which include

All proposals requiring an Industrial Licence under Annexures I & II
Foreign investment being more than 24% in the equity capital of units
manufacturing items reserved for Small-scale industries; and
All items which require an Industrial Licence in terms of the locational
policy

ii) All proposals in which the foreign collaborator has a previous

venture/tie-up in India. (exception: ADB, IFC, etc.)

All proposals relating to acquisition of shares in an existing Indian company in favour of a

foreign/NRI/OCB investor.
All proposals falling outside notified sectoral policy/caps or under sectors in which FDI is not
permitted and/or whenever any investor chooses to make an application to the FIPB and not to
avail of the automatic route.

APPROVAL ROUTE (CONTD.)

Foreign Investment in the Small-Scale Sector

Under the Small-scale policy, equity holding by other

units including foreign equity in a Small-scale unit is
permissible up to 24 per cent. 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 per cent in a Smallscale unit, which manufactures item/s, which are
reserved for Small-scale an industrial license carrying a
mandatory export obligation of 50 per cent should be
obtained.

OTHER MODES OF FOREIGN DIRECT

INVESTMENTS
Global Depository Receipts (GDR) /American Deposit Receipts
(ADR) /Foreign Currency Convertible Bonds (FCCB):

Foreign Investment through GDRs /ADRs /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. These are not
subject to any ceilings on investment.
There is no restriction on the number of GDRs /ADRs /FCCBs to be floated by a
company or a group of companies in a financial year.
There are no end-use restrictions on GDR/ADR issue proceeds, except for an
express ban on investment in real estate and stock markets

Preference Shares: Foreign investment through preference shares is treated

as foreign direct investment. Proposals are processed either through the
automatic route or FIPB.
APPLICANT COMPANIES SHOULD HAVE A GOOD TRACK
RECORD OF AT LEAST THREE YEARS!! (Exception: Infrastructure
projects)

INVESTMENT BY NON RESIDENT INDIANS /

OVERSEAS CORPORATE BODIES

Investment by the NRIs and OCBs in which the NRIs hold at least 60 per cent
equity is treated as foreign direct investment. For all sectors excluding those
falling under Government Approval, NRIs and OCBs are eligible to bring
investment through the Automatic Route of RBI. All other proposals which do
not fulfil any or all of the criteria for automatic approval are considered by the
Government through the FIPB.
The NRIs and OCBs are allowed to invest in housing and real estate
development sector, in which foreign direct investment is not permitted. They
are allowed to hold even100 per cent equity in civil aviation sector in which
otherwise foreign equity only up to 40 per cent is permitted. Similarly for the
banking sector, NRIs/ OCBs can hold 40 per cent equity inclusive of foreign
direct investment. Equity participation by foreign banking companies, foreign
financial companies, and multilateral institutions as co-promoter and/or
technical collaborator is also permitted up to 20 per cent. Investment made by
the NRIs and OCBs are fully repatriable except in the case of real estate,
which has a 3-year lock-in period on original investment and 16 per cent cap
on dividend repatriation.

FOREIGN TECHNOLOGY AGREEMENTS

Imports of foreign technology are essential to give international
competitive edge to the domestic industry and services sectors. Foreign
technology induction is therefore encouraged by the Government both
through FDI and through foreign technology collaboration agreements.
Foreign technology collaborations are permitted either through the
automatic route under delegated powers exercised by the RBI, or by the
Government.

However, cases involving industrial licenses / Small-scale reserved items do

not qualify for automatic approval and would require consideration and
approval by the Government.
Automatic route would also not be available to those who have, or had any
previous technology transfer / trademark agreement in the same or allied field
in India.
Further, automatic approval for EOU /EHTP /STP units are governed by
separate provisions.

FOREIGN TECHNOLOGY AGREEMENTS

(contd.)
Automatic Approval

The RBI accords automatic approval to all industries for

foreign technology collaboration agreements subject to

The lump sum payments not exceeding US $ 2 Million;

Royalty payable being limited to 5 per cent for domestic sales and 8 per cent for
exports, subject to a total payment of 8 per cent on sales over a 10 year period; and
The period for payment of royalty not exceeding 7 years from the date of
commencement of commercial production, or 10 years from the date of agreement,
whichever is earlier.
The items of foreign technology collaboration which are eligible for approval
through the automatic route, and by the Government are technical know how fees,
payment for design and drawing, payment for engineering service and royalty.
Exclusive payment for use of brand names and trademarks are not allowed, although
such payments may be subsumed in the other fee payable.

FOREIGN TECHNOLOGY AGREEMENTS

(contd.)

Government Approval

For the following categories, Government approval would be

necessary:
Proposals attracting compulsory licensing (Annexure I and II)
Items of manufacture reserved for the small scale sector
Proposals involving any previous joint venture, or technology
transfer/trademark agreement in the same or allied field in India.
Extension of foreign technology collaboration agreements (including
those cases, which may have received automatic approval in the first
instance)
Proposals not meeting any or all of the Parameters for automatic
approval.

100% EXPORT ORIENTED UNITS/ EXPORT

PROCESSING ZONES

100 per cent Export Oriented Units (EOUs)

and units in the Export Processing Zones
(EPZs), enjoy a package of incentives and
facilities, which include duty free imports
of all types of capital goods, raw materials,
and consumables in addition to tax
holidays against export.

SPECIAL ECONOMIC
ZONES

Most of the EPZs have been converted into SEZs.

All SEZs are governed by SEZ Act (2005)- An Act
to provide for the establishment, development and
management of the Special Economic Zones for the
promotion of exports and related activities.
Incentives / concessions accorded to units in SEZs
are similar or even better than those earlier offered to
EPZs.

OBJECTIVES OF SEZs

Generation of additional economic activity

Promotion of exports of goods and services;

Promotion of investment from domestic and foreign sources;

Creation of employment opportunities;

Development of infrastructure facilities; and

Maintenance of sovereignty and integrity of India, the security of the

State and friendly relations with foreign States.

SPECIFIC INCENTIVES /
FACILITIES IN SEZs

Duty free import/domestic procurement of goods for development,

operation and maintenance of SEZ units
100% Income Tax exemption on export income for SEZ units under
Section 10AA of the Income Tax Act for first 5 years, 50% for next 5 years
thereafter and 50% of the ploughed back export profit for next 5 years.
Exemption from minimum alternate tax under section 115JB of the Income
Tax Act.
External commercial borrowing by SEZ units upto US $ 500 million in a
year without any maturity restriction through recognized banking channels.
Exemption from Central Sales Tax.
Exemption from Service Tax.
Single window clearance for Central and State level approvals.
Exemption from State sales tax and other levies as extended by the
respective State Governments.

RESTRICTIONS

No restrictions except:

when the goods produced or services rendered are

aimed at domestic tariff area. (Relevant duties and
taxes that are applicable to all imports into the
country become applicable).
When the goods or services are to be brought into
the EPZ from domestic tariff area. (Relevant
duties and taxes that are applicable to exports from
the country become applicable).

AUTOMATIC APPROVAL FOR EOUS

The Development Commissioners (DCs) of Export Processing

Zones (EPZs) /Free Trade Zones (FTZS) / SEZs accord automatic
approval to projects where
Items are not included in Annexure I or do not attract compulsory
licensing;
Where the location is in conformity with the prescribed Parameters;
The units undertake to achieve exports and value addition norms as
prescribed in the Export and Import Policy in force;
The CIF value of imported capital goods is financed through foreign
equity, or foreign exchange required for import of plant and
equipment (net of taxes) is within Rs. 100 Million, and in the case of
import of second-hand capital goods if an Import Licence is not
required;

Automatic Approval for EOUs (contd.)

Where the foreign technology agreement if any, envisages a lump sum payment
not exceeding US $ 2.00 Million and royalty payment up to 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.
Where the exports are to general currency/hard currency areas;
Where the unit is amenable to bonding by customs authorities; and
The unit has projected the minimum export turnover, as specified in the
Handbook of Procedures. All proposals for FDI/NRI/OCB investments in
EOU/EPZ units qualify for approval through Automatic.
Conversion of existing Domestic Tariff Area (DTA) units into EOU is also
Permitted under automatic route, if the DTA unit satisfies the Parameters
mentioned earlier and there is no outstanding export obligation under any
other Export Oriented scheme of the Government of India.

ELECTRONIC HARDWARE TECHNOLOGY

PARK AND SOFTWARE TECHNOLOGY PARK
SCHEMES

In order to provide impetus to the electronics industry,

to enhance its export potential and to develop an
efficient electronic component industry, Electronic
Hardware Technology Park (EHTP) and Software
Technology Park (STP) schemes offer a package of
incentives and facilities like duty free imports on the
lines of the EOU Scheme, deemed exports benefits and
tax holidays.

ELECTRONIC HARDWARE TECHNOLOGY

PARK AND SOFTWARE TECHNOLOGY PARK
SCHEMES

Automatic Approval

The Directors of STPs in respect of STP proposals; and the

Designated Officers in respect of EHTP proposals accord
automatic approval if
The items do not attract compulsory licensing;
The location is in conformity with the prescribed Parameters;
The export obligation laid down in the respective EHTP scheme or
STP scheme is fulfilled;
The CIF value of the imported capital goods required for the project
does not exceed Rs. 100 million;

ELECTRONIC HARDWARE TECHNOLOGY

PARK AND SOFTWARE TECHNOLOGY PARK
SCHEMES

Foreign technology proposals envisaged, if any, do not involve lump sum

know how fee exceeding US$ 2 million, 8 per cent royalty on export and 5
per cent royalty on domestic sales (all net of taxes) over a period of 5
years from the date of commencement of commercial production;
The exports are to general currency/hard currency area;
The unit is amenable to bonding by the Customs, and all the
manufacturing operations are carried out in the same premises and the
proposal does not envisage sending out of the bonded area any raw
material or intermediate products for any other manufacturing or
processing activity. All proposals for FDI/NRI/OCB investments in
EHTP/STP units are eligible for approval through Automatic Route.
All proposals which do not meet any or all of the Parameters for
automatic approval need to be considered and approved by the
Government.

TYPICAL QUESTIONS:
1.

2.

List industries reserved for public sector and industries

for which Industrial Licensing is compulsory under
current Industrial Policy of the Government.(2001)
What are the eligibility criteria under the current
Industrial Policy of the Government of India for an
industry to be covered under SSI sector? What are the
special provisions, concessions and incentives
available to the SSI sector under the policy? (2002)

TYPICAL QUESTIONS:
3. What are the criteria under the current Industrial Policy of the
Government of India for the Automatic Approval for Foreign
Technology Agreement? Under what circumstances one has to
obtain specific Government approval for entering into Foreign
Technology Agreement? (2003)
4. Industrial Policy of India before 1991 was mainly regulatory
and restrictive in nature. What are the main changes in the
policy approach & outlook after economic liberalization?
Briefly discuss in view of changes in licensing policy,
Technology Transfer and Foreign Direct Investment. (2005)

REVIEW QUESTIONS:
3.

4.

5.

6.

What are the different provisions that are allowed or not

allowed while determining the investment in plant and
machinery for a unit to qualify as a small scale unit?
NOTE : Please note that this definition is different from the
definition of plant and machinery costs that are allowed for
depreciation purpose.
What are the special benefits / concessions or incentives
offered to units located in SEZs ?
What are the provisions of automatic approval for FDI? In
which cases the FDI has to be approved by FIPB?
Write short notes on GDR, ADR.