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MPEDA hopes seafood industry will benefit as India now allows 51% foreign investment.

MPEDA Hopes Seafood Industry Will Benefit As India Now Allows 51% Foreign Investment

Foreign investors can now take a 51% equity in fish and seafood processing operations in India, and a lot of the red tape investors have had to contend with is being cut.

C.T. Sukumaran, chairman of the Marine Products Export Development Authority (MPEDA), brought the good news to the 46th annual convention of the U.S. National Fisheries Institute (NFI) in New Orleans.

Long a stronghold of economic nationalism and socialist central planning, India has gradually relaxed its restrictions on investment in recent years. The latest Industrial Policy Resolution, adopted last July, allows 51% investment in "high priority industries."

The fish and seafood industry is one of those. Although it is already among the country's top export earners, it is still considered under-developed -- potential yield from Indian waters is 3.9 million tons per annum, Sukumaran said, but actual catches have averaged 1.8 million in recent years.

Besides fish processing operations, trading companies engaged primarily in exports will be allowed to have 51% foreign equity -- and those involved entirely in exports can even be 100% owned by non-domestic concerns. Foreign companies will also be allowed to establish industries and start business activities in India subject to approval by the Reserve Bank of India (RBI).

It is the RBI that will be issuing approvals for foreign equity investment and, simultaneously, for import of capital goods essential to that investment. Importation of components, raw materials and intermediate goods will be governed by the same policies as for domestic companies, and foreign equity proposals which don't cover the foreign exchange requirements for capital goods imports will need special clearance.

Dividends can now be easily repatriated from India, except that for the first seven years they must be balanced by export earnings from the company's Indian operations. Another innovation is a uniform exim scrip (foreign exchange entitlement for imports). Exporters will get 30% of the FOB value of their exports in such scrip, and 40% in the case of value-added products. Scrip is freely tradable. Export houses can get additional exim scrip at a rate of 5% of FOB, plus additional licenses worth 10-15% of their net foreign exchange earnings.

Advance licenses for duty-free imports of capital equipment needed to produce goods competitively for world markets will be issued within 15 days if input-output norms have been established, and within 45 days otherwise. New units and units undergoing expansion will get automatic approval for import of any capital goods except those on the official Restricted List, without having to try to source them locally, provided the import value is fully covered by foreign equity or amounts to up to 25% of the value of plant and equipment subject to a maximum of 20 million rupees.

Duty-free Zones

Duty-free enclaves called Export Processing Zones are now being allowed. Within these zones, foreign-equity companies will be able to produce exclusively for exportation. All such units are eligible for exim scrip at the 30% FOB rate, but by paying 50% of the customs duty (as long as that isn't less than the excise duty for the same products), they can also sell a certain percentage of their products on the domestic market.

Under a new Deep Sea Fishing Policy enacted in March, provisions for joint ventures have been liberalized, too. Joint venture arrangements with improved types of vessels, designs and fishing techniques suitable to local conditions are especially encouraged. A High Power Committee has been authorized to grant single window clearance for such ventures.

India's wish list for joint ventures involving both financial and technical collaboration for exploitation of deep sea fishery resources in the Exclusive Economic Zone (EEZ) and beyond includes trawling for deep sea lobsters and shrimp (other than pair trawling), long lining, purse-seining for tuna, squid jigging, etc. In special circumstances, approval will be granted for joint ventures by the same parties in two or more of those areas.

Joint venture companies may lease foreign-owned and foreign-registered vessels, and be allowed to hire foreign crews on a case-by-case basis, subject to a phaseout schedule mutually agreeable to the government and the company. The cost of fishing vessels supplied by foreign partners may be counted as paid-up share capital in joint ventures. Joint venture vessels must export their entire catch, but 20% of the FOB value of exports can be sold on the domestic market. Joint venture vessels should produce a 40% or greater foreign exchange inflow in each year of operation, but the cost of fuel procured in India will be factored into that.

Integrated joint ventures involving processing as well as fishing will be given preference, Sukumaran told the NFI. Test fishing to establish the commercial potential of joint ventures in the EEZ will be permitted, but only for the type of operations approved for joint ventures in the first place. Shrimp resources in the northern Bay of Bengal are off limits, and the foreign partner in the proposed joint venture should be an established fishing company with its own fleet of deep sea vessels. The Indian partner should agree to go ahead with the joint venture if MPEDA decides test fishing proves the operation to be commercially viable.
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Title Annotation:Marine Products Export Development Authority
Publication:Quick Frozen Foods International
Date:Jan 1, 1992
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