Umesh Kumar Joint Secretary Ministry of Commerce Industry Department of Industrial Policy Promotion New Delhi October

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2. 2/2/2012 2 Umesh Kumar Joint Secretary Ministry of Commerce & Industry Department of Industrial Policy & Promotion New Delhi October 19, 2004

3. 2/2/2012 3 Economic Reforms- Some Milestones Abolition of industrial licensing, except in few �strategic� sectors Foreign Direct Investment up to 100% allowed in most sectors under the �Automatic Route� Rationalization of both indirect and direct tax structure Portfolio investments by foreign institutional investors allowed in both equity and debt markets Rupee made fully convertible on trade account Removal of quantitative restrictions on imports Financial sector reforms and decontrol of interest rates The Fiscal Responsibility and Budget Management (FRBM) Act enacted in 2003 Average import duties brought down as percentage of imports Peak import duty rate 20%. Rupee made convertible on trade account in 1993. Movement towards capital account convertibility New Foreign trade Policy seeks to double India�s share in global merchandise trade in 5 years FRBM to reduce the revenue deficit to zero by 2007 Average import duties brought down as percentage of imports Peak import duty rate 20%. Rupee made convertible on trade account in 1993. Movement towards capital account convertibility New Foreign trade Policy seeks to double India�s share in global merchandise trade in 5 years FRBM to reduce the revenue deficit to zero by 2007

4. 2/2/2012 4 Liberalisation of FDI Policy New Sectors opened since 2000 Insurance (26%) Integrated Township (100%) Defence production (26%) Tea Plantation 100% Capitalisation of royalty and ECB Limits raised in Petroleum SectorNew Sectors opened since 2000 Insurance (26%) Integrated Township (100%) Defence production (26%) Tea Plantation 100% Capitalisation of royalty and ECB Limits raised in Petroleum Sector

5. 2/2/2012 5 FDI Policy in India FDI up to 100% under �Automatic Route� except Activities requiring compulsory licensing Investor having joint venture in same or allied field Limits specifically imposed under sectoral policies National Treatment to investments Foreign technology collaboration also encouraged Royalty up to prescribed limits can be paid under �automatic route� No limits on period of royalty payment under automatic route Recent liberalisation: Transfer of shares to the limits under automatic route do not require Govt. approval except where SAST Code is invoked. Ranked 41 on barriers to Foreign ownership. China 81, Malaysia 67th and Thailand 75th Post establishment National Treatment Recent liberalisation: Transfer of shares to the limits under automatic route do not require Govt. approval except where SAST Code is invoked. Ranked 41 on barriers to Foreign ownership. China 81, Malaysia 67th and Thailand 75th Post establishment National Treatment

6. 2/2/2012 6 Investing in India � Entry Routes Entry routes are easyEntry routes are easy

7. 2/2/2012 7 Other Policies on Investment Original investment, profits and dividends can be freely repatriated Investors can acquire immovable property to the extent of their business needs Capitalisation of royalty payable, and External Commercial Borrowings (ECBs) allowed Outward investment policies also liberalised Indian Corporates can invest in entities abroad up to 100% of their net worth Outward investment US$ 3 billion in last two years Bilateral Investment Promotion and Protection Agreement with 57 countries. Double taxation Avoidance Agreement with 63 countries Investment restrictions except township development. Investment restrictions except township development.

8. 2/2/2012 8 Industrial Licensing Policy Deregulation of industrial sector Prior to 1991 investment decisions were subject to Government directives Progressive deregulation and decontrol Industrial license is now required only for 6 industries under compulsory licensing Manufacturer of items reserved exclusively for Small-Scale Sector Project is to be located around large cities No industrial license is required for remaining items Atomic Energy and Railway transport: only sectors reserved for Public Sector

9. 2/2/2012 9 Telecommunications: Policy Initiatives Policy Measures 1991: Telecom equipment manufacturing delicensed 1992: Cellular phone services opened to private sector 1994: National Telecom Policy (NTP)- private sector participation in basic services 1997: Telecom Regulatory Authority of India set up 1999: Migration from fixed license fee to revenue sharing regime 2000: National Long Distance service opened to competition 2002: International Long Distance & Internet telephony opened to competition 2004: Broadband Policy announced Results Cellular subscribers increasing @ 2 million every month Sharp decline in tariff further boosting demand Mobile phones set to reach 200 million in next 3-4 years Cell phones were only 6.2 million by March 2002 Investment requirement of US$ 20 billion by 2007 Tele-density to reach 15 by 2007Cell phones were only 6.2 million by March 2002 Investment requirement of US$ 20 billion by 2007 Tele-density to reach 15 by 2007

10. 2/2/2012 10 Power: Policy Initiatives Investment Policies FDI up to 100% allowed under �Automatic Route� for all activities, except nuclear power Tax and duty concessions for Mega Power Projects No industrial license required The Electricity Act, 2003 Thermal generation delicensed, captive generation freely permitted Power trading recognised as a distinct activity Introduces competition in market Independent Regulation Central Electricity Regulatory Commission State Electricity Regulatory Commissions � set up in 23 States Additional capacity of 1000,000 MW required in next 10 years Tax Incentives to Mega Power projects (Thermal Plants of 1000 MW `and Hydel Plants of 500 MW) selling power to more than one state Import of capital goods free of import duties Income tax holiday for a block of 10 years within first 15 years Electricity Act Mandatory metering Open access to transmission system Open access to consumers of over 1 MW in 5 years Installed capacity 113500 MW (Sept 04) Ix plan 19015 MW added against 40245 MW X Plan target 41110 MW, 8518 MW added, 26862 MW under implementation. 11 IPPs for 4000 MW have achieved financial closure in last one year. Improvement in financial health of 16 SEBs Operating losses reduced from Rs. 25207 crores in 01-02 to rs. 17593 crores in 02-03. 3 states achieved 100% consumes metering 7 states have achieved 90% consumer metering Tax Incentives to Mega Power projects (Thermal Plants of 1000 MW `and Hydel Plants of 500 MW) selling power to more than one state Import of capital goods free of import duties Income tax holiday for a block of 10 years within first 15 years Electricity Act Mandatory metering Open access to transmission system Open access to consumers of over 1 MW in 5 years Installed capacity 113500 MW (Sept 04) Ix plan 19015 MW added against 40245 MW X Plan target 41110 MW, 8518 MW added, 26862 MW under implementation. 11 IPPs for 4000 MW have achieved financial closure in last one year. Improvement in financial health of 16 SEBs Operating losses reduced from Rs. 25207 crores in 01-02 to rs. 17593 crores in 02-03. 3 states achieved 100% consumes metering 7 states have achieved 90% consumer metering

11. 2/2/2012 11 Roads and Highways National Highways Authority of India (NHAI) set up Central Road Fund to mobilize cess fund and leverage for market borrowings Investment Policies FDI up to 100 per cent permitted under the �Automatic Route� Public Private Partnership through BOT toll-based and annuity based structures Investment Incentives Corporate tax holiday for a block of 10 years out of 20 years Duty-free import of specified modern high capacity equipment for highway construction National Highways Development Programme: Over 14,000 km of highways under implementation Another 10,000 km being taken up under BOT Central Road Fund augmented to mobilise dedicated cess fund levied on diesel and petrol. Leveraged for market borrowing and used for implementation of NHDP NHDP GQ 5846 KM (3121 completed) (2725 under impl.) NSEW: 7300 KM(653 completed) (410 under impl.) (6211 km to be awarded) Port & Other Total 1133 KM (263 completed) (350 under impl.) (520 km to be awarded) Total 4037 km completed; 3485 km under implementation 6731 km to be awarded Exp. US$ 4.93 billion New 10,000 km to be added on BOT to connect all capitals and places of tourist interest Cost US$ 12 billion Other incentives Capital grant up to 40% of project cost to achieve viability Control of national Highways Bill 2002 to prevent unauthorised occupation of highway land Cess of US$ 0.03 per litre on petrol and diesel Private sector participation 50 projects costing around US$ 2 billion initiated Central Road Fund augmented to mobilise dedicated cess fund levied on diesel and petrol. Leveraged for market borrowing and used for implementation of NHDP NHDP GQ 5846 KM (3121 completed) (2725 under impl.) NSEW: 7300 KM(653 completed) (410 under impl.) (6211 km to be awarded) Port & Other Total 1133 KM (263 completed) (350 under impl.) (520 km to be awarded) Total 4037 km completed; 3485 km under implementation 6731 km to be awarded Exp. US$ 4.93 billion New 10,000 km to be added on BOT to connect all capitals and places of tourist interest Cost US$ 12 billion Other incentives Capital grant up to 40% of project cost to achieve viability Control of national Highways Bill 2002 to prevent unauthorised occupation of highway land Cess of US$ 0.03 per litre on petrol and diesel Private sector participation 50 projects costing around US$ 2 billion initiated

12. 2/2/2012 12 Changing Role of Government �Facilitator� of private investment by creating an enabling environment �Provider� of gaps in critical infrastructure to encourage investment �Partner� of the private sector in �public-private� partnerships �Investor� in social sectors such as health, education, etc., to serve the needs of society

13. 2/2/2012 13 Public Private Partnerships in Infrastructure Objective To encourage private participation in infrastructure development Criteria Roads, railways, seaports, airports, power, water supply, sewerage, international convention centres Project must be implemented by an entity with at least 40% private equity Total Government support, central or state or their agencies, not to exceed 20& of total project cost Funding Viability gap funding: Government support to reduce project cost and help achieve financial viability Funding in instalments, contingent on achieving predetermined milestones At least 15% of funding to be disbursed after project is fully functioning

14. 2/2/2012 14 PPP Examples: Roads Sector The SPV model NHAI invests around 30 per cent of the project as equity Rest of the equity by private sector partner and/or from the market 11 projects taken up through the SPV route BOT-Annuity based projects Private concessionaire is responsible for construction and maintenance of the project NHAI pays the concessionaire a semi-annual payment Concession contract is awarded to the bidder quoting the lowest annuity amount Under this approach, Government bears the traffic risk Eight projects taken up under this route

15. 2/2/2012 15 India Investment Outlook Liberal and transparent investment policies, including FDI Policy Among the top 5 �Reformers� in 2003 - World Bank 3rd most attractive investment destination: ATKEARNEY FDI Confidence Index 2004 Among the top 3 investment �hot spots� for the next 4 years: UNCTAD & Corporate Location Most preferred BPO destination - ATKEARNEY Indian economy expected to continue growing at 5% per annum till 2050: Goldman Sachs India ranked 5th after Ranked after China and USA; was ranked 6th last year and 15th the year before. India ranked 2nd most attractive destination for manufacturing after China, ahead of USA Third hot spot after China and USA for the next 4 years India ranked 5th after Ranked after China and USA; was ranked 6th last year and 15th the year before. India ranked 2nd most attractive destination for manufacturing after China, ahead of USA Third hot spot after China and USA for the next 4 years

16. 2/2/2012 16 Thank You

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