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G. Srinivasan

All windows available under the FDI policy for trading activity are open to a company and it can obtain prior approval to pursue trading activities under more than one mode.

NEW DELHI, Jan. 1

EVEN as the extant policy of foreign direct investment (FDI) up to 100 per cent is permitted in the trading sector for specified activities, the Government has clarified on additional kinds of trading activities, including provision of after sales service, e-commerce activities and trading of hi-tech items and domestic sourcing of products for exports and test-marketingwhere 100 per cent FDI is permitted.

Official sources told Business Line here that the Department of Industrial Policy and Promotion (DIP&P) had in an office memorandum on December 30, 2002, clarified that based on the policy guidelines approved by the Union Cabinet and specific inputs obtained from the Department of Commerce, which is the nodal department for FDI in sector, the DIP&P came out with some clarifications on additional kinds of trading activities where 100 per cent FDI is permitted. Thus, non-fulfilment of test marketing obligation does not make a company ineligible to be considered for other approvals for carrying out trading activity as per the notified policy.

As regards the violation of the test-marketing obligation, the same must be examined on a case-by-case basis and in the absence of sufficient justification for non-fulfilment of the condition, suitable action might be taken against the company under the existing FEMA provisions. Again, it is clarified that when a company obtains necessary approval for undertaking test-marketing, but does not avail itself of the facility, there should be no objection if it wants to surrender the said approval and obtains separate approvals for other permitted modes of trading. All windows available under the FDI policy for trading activity are open to a company and it can obtain prior approval to pursue trading activities under more than one mode.

The Department of Commerce is the Administrative Ministry for all trading activities and all proposals in this sector must be considered as per the notified policy. The policy has to be applied uniformly unless the relevant sectoral policy imposes specific restrictions from sectoral angle.

It was further clarified that test marketing permission should be granted only when the item/s proposed to be test marketed are not ordinarily available in the Indian market or even if available, are highly specialised/hi-tech requiring specialised after-sales service. These clarifications were made after several specific representations were made such as where a company holding an approval for manufacture of automobiles also seeks approval to import auto components for after-sales service of automobiles of the same company, including imported completely built units (CBUs).

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