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Foreign Direct Investment in InfrastructureSTUDENT: PROJECT GUIDE:AKASH TILOKANI DR. M. S. RANADIVE121420006

College Of Engineering, PuneDepartment of Civil Engineering

2CONTENTS Definition FDI and FPI Types and Forms of FDI FDI in India Various Sectors FDI Policy Case Study – Kakinada Deep Water Port

College Of Engineering, PuneDepartment of Civil Engineering

3Foreign Direct Investment (FDI) ‘FDI’ means investment by non-resident entity/person resident

outside India in the capital of an Indian company under Schedule 1 of Foreign Exchange Management (Transfer or Issue of Security by a Person Resident Outside India) Regulations, 2000 – Policy Definition

Investment from one country into another (normally by companies rather than governments) that involves establishing operations or acquiring tangible assets, including stakes in other businesses.

‘The category of international investment that reflects the objective of a resident entity in one economy (direct investor) of establishing a lasting interest in an enterprise (the direct investment enterprise) resident in another economy.’ – IMF Definition

College Of Engineering, PuneDepartment of Civil Engineering

4FDI and FPI Difference FDI is distinguished from portfolio foreign investment (the

purchase of one country’s securities by nationals of another country) by the element of control.

FDI is not just a transfer of ownership as it usually involves the transfer of factors complementary to capital, including management, technology and organizational skills.

College Of Engineering, PuneDepartment of Civil Engineering

5Types of FDIFDI

Horizontal Vertical Conglomerate

College Of Engineering, PuneDepartment of Civil Engineering

6Forms of FDI Greenfield: A form of foreign direct investment where a parent

company starts a new venture in a foreign country by constructing new operational facilities from the ground up. 

Foreign takeover is often covered by the term 'mergers and acquisitions’ (M&As) but internationally, mergers are vanishingly small, accounting for less than 1 per cent of all foreign acquisitions - as Tata’s acquisition of Jaguar Land Rover illustrates.

College Of Engineering, PuneDepartment of Civil Engineering

7FDI in IndiaFDI

Automatic RouteNo Prior Permission. Only Information to be given to RBI

Government RoutePrior Government Approval needed. FIPB is given the

responsibility

College Of Engineering, PuneDepartment of Civil Engineering

8FDI in India ContinuedOpen Sectors• Agriculture• Mining, Petroleum &

Natural Gas• Services Sector• Financial Services• Others

Prohibited Sectors• Lottery Business• Gambling and Betting

including Casinos• Chit Funds• Nidhi Company• Atomic Energy• Railway Operations• Construction of Farm

Houses• Manufacture of tobacco

related goods

Sectors of Discussion• Ports and Shipping• Roads and Highways• Railways

College Of Engineering, PuneDepartment of Civil Engineering

9Ports and Shipping Sector FDI Policy Major ports are under the jurisdiction of the Government of India

and are governed by the Major Port Trust Act, 1963, except Ennore Port, which is administered under the Companies Act, 2013.

Non-major ports are under the jurisdiction of the respective state governments’ maritime board.

100% FDI allowed under automatic route in Shipping Sector. 100% FDI allowed under automatic route in projects related to

construction and Maintenance of Ports and Harbours.

College Of Engineering, PuneDepartment of Civil Engineering

10Roads and Highways Sector FDI Policy 100% FDI allowed under automatic route, subject to applicable laws and

regulations. GOI/NHAI to provide grant up to 40% to enhance viability of project on case to

case basis. 100% tax exemption for 5 years and 30% relief for next five years which may

be availed in 20 years. Duty free import of high capacity construction equipment for highway

construction. Standardized processes for PPP projects, clear policy framework for bidding

and tolling. Government to carry out work of land acquisition and ROW will be made

available by the government.

College Of Engineering, PuneDepartment of Civil Engineering

11Railways Sector FDI Policy 100% FDI allowed under automatic route in following areas of railways:1. Construction, operation and maintenance of suburban corridor projects

through PPP.2. High Speed Train Projects and MRTS.3. Dedicated Freight Lines & Freight Terminals.4. Rolling stock including train sets and locomotive/coaches manufacturing

and maintenance facilities.5. Railway Electrification, Signalling Systems and Passenger Terminals6. Infrastructure in industrial parks pertaining to railway line/siding

including electrified railway lines and connectivities to main railway line.

College Of Engineering, PuneDepartment of Civil Engineering

12Case Study – Kakinada Deep Water Port (KDWP) The Kakinada deep water port (KDWP) is a part of the Kakinada

Port located on the southern part of the east coast of India in the state of Andhra Pradesh.

The Kakinada Port is the second largest port in the state after Visakhapatnam.

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Kakinada Port

Kakinada Anchorage Port

Kakinada Fishing HarbourShip Breaking Unit

KDWP

13PPP Structure of KDWP In order to improve operational efficiency, KDWP was privatized

through PPP route on OMST basis.

College Of Engineering, PuneDepartment of Civil Engineering

L&T Limited, India

Stevedoring Services of

America, USA

Precious Shipping

Company, Thailand

International Seaports Pvt.

Ltd (ISPL)

GoAP

KPB, Malaysia KSPL

14Details of Agreement The concession agreement was signed on the 19th March 1999

with M/s International Seaports Pvt Ltd (ISPL). KSPL commenced port operations from 1st April 1999 for an

initial period of 20 years (expiring on March 31, 2019) with an option of two extensions of five years each. Under the original concession agreement, KSPL was to:

1. Operate and manage the existing three berths at the already existing deep water port on OMST basis (Phase 1).

2. Construct, operate and manage a fourth berth at a later date, contiguous to the existing three berths after 70% berth occupancy was reached on BOMST basis (Phase 2).

College Of Engineering, PuneDepartment of Civil Engineering

15Other Details KSPL is permitted to levy, collect and retain appropriate charges

from port users. Since KDWP is a minor port, it has flexibility in tariff determination and is not governed by the Tariff Authority of Major Ports regulations.

It has to pay GoAP a 20-22% revenue share annually subject to a minimum guaranteed amount (MGA) specified on a year-wise basis. Lease to GoAP for use of the land for the port is also payable by KSPL. Further, all movable assets at the port were sold to KSPL by GoAP.

College Of Engineering, PuneDepartment of Civil Engineering

16References http://toolkit.pppinindia.com/ DV: 3/12/15 http://dipp.nic.in/English/policies/FDI_Circular_2015.pdf DV:

2/12/15 http://www.investopedia.com/terms/g/greenfield.asp DV: 5/2/15 http://www.makeinindia.com/sectors DV: 4/12/15 http://www.fdiintelligence.com/ DV: 1/12/15

College Of Engineering, PuneDepartment of Civil Engineering

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Thank You

College Of Engineering, PuneDepartment of Civil Engineering