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Difference between FDI and Foriegn collaboration

rohit (CA Finalist) (480 Points)

10 July 2010

Difference between FDI and Foriegn collaboration in terms of Meaning, Law and regulations...

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vivek (CS) (751 Points)
Replied 10 July 2010

Apprently if one (PROI) invest in India directly in the tangible assets like Plant, machinery, tools, land etc. it is termed as FDI. Here directly means includes the means like through Company or any other entity. It acn be a kind of Foreign Collaboration but FoForeign Collaboration is a wide term it can be like only technological collaboration for know how, trade mark etc. there will be no direct investment in India by any PROI it will be Foreign Collaboration but it will not be FDI.

For detail go throug the manual.

There are two ways for approval:-

1. Automatic Route

2. Approval Route

The methods are as follows:

8. FOREIGN DIRECT INVESTMENT

Procedure For Automatic Route

8.1 The proposals for approval under the automatic route are to be made to the Reserve Bank of India in the FC (RBI) form. In a major drive to simplify procedures for foreign direct investment under the “automatic route”, RBI has given permission to Indian Companies to accept investment under this route without obtaining prior approval from Reserve Bank of India.

However, investors are required to notify the concerned Regional Offices of RBI of receipt of inward remittances within 30 days of such receipt and will have to file the required documents with the concerned Regional Office of the RBI within 30 days after issue of shares to foreign investors. This facility is available to NRI/OCB investment also.

Procedure For Government Approval

8.2 Foreign Investment Promotion Board

(a) All other proposals for foreign investment, including NRI/OCB investment and foreign investment in EOU/EPZ/STP/EHTP units, which do not fulfil any or all of the parameters prescribed for automatic approval, as given in paragraph 2.8, 3.1, and 3.2 are considered for approval by the Foreign Investment Promotion Board (FIPB). The FIPB also grants composite approvals involving foreign technical collaborations and setting up of Export Oriented Units involving foreign investment/foreign technical collaboration.

(b) Applications to FIPB for approval of foreign investment should be submitted in Form FC-IL.

Plain paper applications carrying all relevant details are also accepted. No fee is payable.

The following information should form part of the proposals submitted to FIPB: -

i) Whether the applicant has had or has any previous financial/technical collaboration or trade mark agreement in India in the same or allied field for which approval has been sought; and

ii) If so, details thereof and the justification for proposing the new venture/technical collaboration (including trade marks).

(c) The application can be submitted with the FIPB Unit of the Department of Economic Affairs, Ministry of Finance, North Block, New Delhi. Applications can also be submitted with Indian Missions abroad who will forward them to the Department of Economic Affairs for further processing.

(d) Foreign investment proposals received in the Department of Economic Affairs ( DEA) are placed before the Foreign Investment Promotion Board (FIPB) within 15 days of its receipt.

The recommendations of FIPB in respect of project proposals involving a total investment of up to Rs. 6 billion are considered and approved by the Finance Minister. Projects with a total investment exceeding Rs. 6 billion are submitted to the Cabinet Committee on Economic Affairs (CCEA) for decision.

(e) The decision of the Government in all cases is conveyed by the DEA normally within 30 days.

(f) For inward remittance and issue of shares to NRI/OCB up to 100 per cent equity also, prior permission of RBI is not required. These companies have to file the required documents with the concerned Regional Offices of RBI within 30 days after the issue of shares to NRIs/OCBs.

9. FOREIGN TECHNOLOGY COLLABORATION

Procedure for Automatic Approval

9.1 Applications for automatic approval for such foreign technology agreements should be submitted in Form FT (RBI) with the concerned Regional Offices of Reserve Bank of India. No fee is payable. Approvals are available within 2 weeks.

Procedure for Government Approval

9.2 All other proposals for foreign technology agreement, not meeting any or all of the parameters for automatic approval, and all cases of extension of existing foreign technical collaboration agreement, are considered for approval, on merits, by the Government. Application in respect of such proposals should be submitted in Form FC-IL to the Secretariat for Industrial Assistance, Department of Industrial Policy & Promotion, Ministry of Commerce and Industry,

Udyog Bhavan, New Delhi. No fee is payable. The following information should form part of the proposals submitted to SIA:

i) Whether the applicant has had or has any previous financial/technical collaboration or trade mark agreement in India in the same or allied field for which approval has been sought; and

ii) If so, details thereof and the justifications for proposing the new venture/technical collaboration (including trade marks).

On consideration of the proposal by the Project Approval Board/FIPB, decisions are normally conveyed within 4 to 6 weeks of filing the application.

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