The following are brief guidelines for individuals/companies interested in setting set up MT operations in India.

1) Indian Citizen/Company

An individual and citizen of India can set up MT operations in India through the following:

- as an Individual/Proprietor
- as a Partnership/Firm/Trust
- as a Company registered under the Companies Act, 1956

No prior permission of the Government of India is required to set up MT units in India. Moreover, to encourage units in this sector, the Government of India has announced many schemes.

- Export Processing Zones (EPZ):
These zones are located at various places including Cochin, Falta (Near Calcutta), Kandla, Chennai, Noida, Santacruz (Mumbai), Vishakhapatnam and Surat. A unit can be set up in these zones subject to availability of space. No import duty, special 10 years income tax holiday are some of the incentives provided. There is no restriction on the quantity of domestic sales.

- 100% Export Oriented Unit (EOU):
This is similar to the EPZ scheme. However, in this scheme, there is no need to be physically located at EPZ. All other incentives are the same as provided to EPZ units.

- Software Technology Park (STP):
A very special scheme under the Department of Electronics. STPs are located at Noida, Navi Mumbai, Pune, Gandhinagar, Hyderabad, Bangalore, Chennai, Bhubaneshwar, Calcutta, Jaipur, Mohali and Thiruvanathapuram. Some of the incentives offered by this scheme are zero import duty on import of all capital goods, special 10 years income tax holiday, availability of infrastructural facilities like high speed data-communication links etc.


2) Overseas Company

A foreign company or individual planning to set up MT business operations in India can do so as under:

A. As a foreign company through a Branch Office.
B. As an Indian company through a Joint Venture or a Wholly Owned Subsidiary.

A foreign Company is one that has been incorporated outside India and conducts business in India. These companies are required to comply with the provisions of Companies Act, 1956.

Branch Office

Foreign companies engaged in manufacturing and trading activities abroad may set up Branch offices in India, with the permission of RBI, to promote possible technical and financial collaborations between the Indian companies and overseas companies. A branch office is not permitted to carry out production activities on its own but is permitted to sub-contract these to Indian manufacturers.


As an Indian Company

A foreign company can commence operations in India through incorporation of a company under the provisions of Indian Companies Act 1956. Foreign equity in such Indian companies can be up to 100% depending upon the business plan of the foreign investor, the prevailing investment policies of the Government and on receipt of requisite approvals.

- Joint Venture with an Indian partner
Foreign companies can set up their operations in India by forging strategic alliances with Indian partners. Setting up of operations through Joint Venture may entail the following advantages to a foreign investor:

- Available financial resources of the Indian partner.
- Established contacts of the Indian partner that help to smoothen the process of setting up operations.

Foreign investments are approved through two routes as under:

- Automatic Route
Approvals for foreign equity up to 50%, 51% and 74% are given on an automatic basis subject to fulfillment of prescribed parameters. RBI accords automatic approval to all such cases.

- Government approval
Approval in all other cases where the proposed foreign equity exceeds 50%, 51% or 74%.

- Wholly Owned subsidiary
The foreign investor has the option of setting up an wholly owned subsidiary, wherein the foreign company owns 100% share of the Indian company. All such cases are subject to prior approval from the FIPB.