The Union Cabinet today tweaked the foreign direct investment rules (FDI) to make investments in sectors like mining and single brand retail more attractive to overseas players. The changes will result in making India a more attractive FDI destination, leading to benefits of increased investments, employment and growth, the government claims.
While FDI under automatic route is already allowed in coal and lignite mining for captive consumption by industries, and also coal processing plants, today's decision extends this to investments in the sale of coal and creation of associated processing infrastructure. Similarly, FDI is already permitted in manufacturing, but there were no clear rules for investments in contract manufacturing. Today's Cabinet decision allowed contract manufacturing also to be treated at par with setting up own manufacturing facilities by foreign investors. This tweak will allow companies to set off products manufactured by such entities against their local sourcing requirements.
One sector that will benefit from this is single brand retail trading (SBRT) where local sourcing norms was stringent and a hindrance for many to set shop in India. Also government has allowed such entities to open online sales prior to opening of brick and mortar stores to bring policy in sync with current market practices.
With more foreign visits including one to the US scheduled for September for the Prime Minister, the amendments to the FDI Policy can help bilateral discussions as India could now take credit for liberalizing and simplifying its FDI policy to attract more investments.
The Cabinet also decided to provide a lump sum export subsidy at Rs. 10,448 per metric tonne (MT) to sugar mills for the sugar season 2019/20. The total estimated expenditure of about Rs 6,268 crore will be incurred for this purpose. The entire amount will be credited into the farmers' account on behalf of the mills against pending sugar cane price dues.
Another major decision was to sanction Rs 24,375 crore to establish 75 new government medical colleges in existing District/Referral Hospitals by 2021-22.