Frequently Asked Questions

1. How business can be conducted by a foreign company in India?
Foreign companies can make investments or operate their business in a number of ways as given below:

· Liaison/representative office

· Project Office

· Branch Office

· 100% Wholly owned subsidiary

· Joint venture company

2. Is foreign company treated as domestic company?
Yes, a foreign company incorporated under the Companies Act is treated at par with any domestic Indian company within the scope of approval and subject to all Indian laws.


3. How does a foreign company invest in India?
A foreign company can invest in India either through

· Automatic Approval - by the country's Central Bank, the Reserve Bank of India (RBI), Mumbai, or

· Through the Foreign Investment Promotion Board (FIPB)

4. How are 100% Export Oriented Units (EOUs) registered?
There are four schemes for such units. They are the 100% EOUs / Export Processing Zones (EPZ), Electronics Hardware Technology Parks (EHTPs), Software Technology Parks (STPs) and Special Economic Zones (SEZ)


5. Is investment by Non-Resident Indians (NRIs) permitted?
The Government attaches importance to investments by NRIs and Overseas Corporate Bodies (OCBs) i.e. corporate bodies in which NRIs hold at least 60% of equity. Government has provided a liberalised policy framework for approval of NRI investments through both the Automatic and the Government route.


6. What proposals require an Industrial License (IL) and how is it obtained?
Products given below and those reserved for the Small Scale Sector require Industrial License

Schedule I: Industries Reserved for the Public Sector

i. Atomic energy.
(The substances specified in the schedule to the notification of the Government of India in the Department of Atomic Energy number S.O.212(E), dated the 15th March, 1995.)

ii. Railway transport.

Schedule II: Industries for which Industrial Licensing is Compulsory

i. Distillation and brewing of alcoholic drinks.

ii. Cigars and Cigarettes of tobacco and manufactured tobacco substitutes.

iii. Electronic Aerospace and Defense equipment: all types.

iv. Industrial explosives including detonating fuses, safely fuses, gun powder, nitrocellulose and matches.

v. Hazardous Chemicals.

vi. Drugs and Pharmaceuticals (according to modified Drug Policy issued in September, 1994 as amended in 1999 and in 2005).

The projects located within 25 kms from the standard urban area of a city with a population of more than one million according to 1991 census also required Licensing under locational policy.

The application in form IL-FC should be filed with the SIA. Approvals normally granted within 6-8 weeks.


7. What is the procedure for a delicensed sector?
An Industrial undertaking exempted from licensing needs only to file information in the Industrial Entrepreneurs Memorandum (IEM) with the SIA , which will issue an acknowledgement. No further approvals are required.


8. How is the value of plant & machinery computed?
Broadly speaking, the following points may be kept in mind while computing value of plant and machinery:

i. Consider original price irrespective of whether the machinery is new or second hand.

ii. Exclude cost of land and building.

iii. Exclude cost of pollution control equipment, generator sets, bank charges, cable, storage tanks and fire fighting equipment.

iv. Exclude cost of installation, wiring, transportation charges, and charges for technical know-how.

v. For imported machinery include import duty, shipping charges and custom clearance charges.


9. What is a woman enterprise and what are the benefits provided to it by the Government?
A woman enterprise is a small scale unit where one or more women entrepreneurs have not less than 51% financial holding.

i. SIDO conducts various programmes such as entrepreneurship development
programmes exclusively for women.

ii. A special prize to outstanding woman entrepreneur of the year is also given to
recognise achievements made by women entrepreneurs.

iii. SIDBI operates two special schemes for women namely Mahila Udyam Nidhi which is an exclusive scheme for providing equity to women entrepreneurs and the Mahila Vikas Nidhi which offers development assistance for pursuit of income generating activities to women. See SIDBI for more details.


10. Can an industry be set up under self-employment?
A small-scale industry or a tiny unit can easily be set up for self-employment. You can choose an activity depending upon your interest and suitability not only to become self-employed but also to generate employment for others.


11. Who will assist in identifying the activity?
District Industries Centers / Commissionerate of Industries facilitate in identification of a suitable activity. SISI, APITCO can assist you in identifying the activity based on the Industrial Potential Survey and product specific market studies.


12. What steps are required for identifying the activity?
A preliminary market study of product(s) or service(s) needs to be undertaken to analyse consumption and availability pattern. If there is a gap in demand and supply, the activity considered ideal for selection.


13. Where is market information available?
Market Survey reports on various items and Industrial potential surveys of particular areas provide the information about the market potential of items. Industry and Trade associations, specialized institutions like APITCO can also provide such information.


14. How can market potential be ascertained?
Market potential can be ascertained by conducting preliminary study to estimate local demand, demand within the state or country, export market and future prospects of product(s)/service(s). Visit to wholesale and retail markets, bulk consumers etc. provides accurate information on market potential.


15. Which are the agencies providing financial assistance?
Financial assistance is available from institutions such as Nationalized Banks, Scheduled and commercial banks, Regional Rural Banks, SIDBI, NSIC, APSFC etc. Financial assistance will be as term loan for fixed capital such as plant and machinery, land and building and working capital loan to meet day to day operational cost of the production.


16. What are the eligibility criteria for getting a loan?
Profitability of the project proposed to be set up and the return on the investment is the criteria for getting a loan. Any financial institution will support the project if repayment is assured in terms of surety / collateral security.


17. How much money the entrepreneur is required to invest out of his own resources?

Debt – Equity Ratio

Some portion of total investment has to be contributed by the Entrepreneur out of own sources. This is called margin money. Financial Institutions insist on 10 to 25 per cent margin money depending upon the category of the entrepreneur, risk factor and existing scheme under which the project will be financed.


18. What is the cost of borrowing money?

Rate of Interest

The cost of borrowing money depends upon the size of loan required. Lesser the amount of loan, lesser is the cost of borrowing. Normally, loans involving an amount of Rs. 25,000/- are available at a rate of interest of about 12.5 %. For loans of higher amount upto Rs. 2 lakhs, the rate may be 13-14% and for amount higher than that, it may be 3-4 % more.


19. What is the procedure for getting a loan?
An entrepreneur should approach the concerned finanical institution Application in prescribed proformae has to be submitted along with project report.


20. How is a Project Report prepared?
A project report is prepared with the help of prescribed guidelines available industries department & financial institutions. Information about prices of machinery & equipment, raw material and other various inputs required for setting up an enterprise need to be collected from the market.


21. Is there any standard model for preparing the project report?
Every financial institution has its own loan application along with bankable report. However contents of all the proforma are similar.


22. Is a model project report available?
Yes, Model project profiles are available at Commissionerate of Industries & DIC’s for the guidance of entrepreneurs. However, these project profiles have to be recast in accordance with specific needs of the entrepreneurs and the current prices of inputs.


23. Which agency assists in preparation of Project Report?
You can also prepare the Project Report yourself by collecting detailed information on various points. However institutions like APITCO, SISI, NSIC and other agencies such as APTDC can help you in preparing the Project Report.


24. What details are required for preparation of Project Report?
Information is required about the technical process, plant and machinery, raw materials, manpower, market information and statutory representations (like pollution control and public safety) etc. The details of power and water tariff, land/shed/building and selling prices etc. needs to be collected.


25. Which are the agencies providing training?
Entrepreneurship Development Programme (EDP) are conducted by SISI, NISIET, NIRD, and State Government developmental agencies like APPC, APITCO etc.


26. Are there institutions providing consultancy for development or setting up of project?
APITCO, SISI, APTDC and FAPSIA - SSI centre can provide consultancy for development or setting up of project. Suitable technologies and consultancy services are also offered by CSIR Laboratories, PPDC’s, NRDCs, R&D institutions.


27. Which institutions provide details of pollution control guidelines?
A.P. Pollution Control Board, Department of industries provides details of pollution control guidelines.


28. Does any agency help in promoting exports?
ITPO, DGFT, FIEO & Chambers of commerce in different countries Ministry of Commerce provide assistance in promoting exports. Office of the Development Commissioner (SSI), Government of India provides financial assistance to small scale entrepreneurs to display their products in overseas fairs and also for sales-cum-study tours abroad.


29. What is single window? And how it is useful?
All the approvals / clearances from various agencies will be obtained by filing a common application form with Single window Cell. Time slots / Deemed approval provisions are unique in Single Window clearances act. For projects worth above Rs. 5 crores the cell is operational from Commissionerate of industries and for the projects below Rs. 5 crores the cell is operational at District Industries Centre.


30. What are scarce raw materials? How they can be procured?
Coal, Coke, Molasses, Alcohol (Rectified Spirit, Denatured Spirit) are some of the scarce raw materials. These materials can be procured from the respective agencies only after getting the allotment / linkage from the industries department.


31. MSMED act 2006

· Came into force from 2nd October,2006

· Govt of A.P issued G.O.Ms 311 dt 14.11.2006 for implementation of this act

· Enterprises are classified as manufacturing and Service enterprises

· Investment limit enhanced

· Two stage registration of enterprises is replaced by submission of Entrepreneur Memorandums (EM)

· Mandatory for filing EM for a medium scale manufacturing enterprises. It is optional in case of other enterprises

· The EM Application is in two parts i.e Part I and Part II. Part I has to be filed before the commencement of production and Part II after the commencement of production

· Acknowledgements for EM application shall be given within 1 day in case of applications filed in person and within 5 days incase of applications filed by post

· There is no fee for processing the memorandum.

32. Investment limits

33. Industrial Facilitation Council

Ø Industry Facilitation Council has been constituted under the Interest on the delayed payments to Small Scale and Ancillary Industrial Undertakings Act 32/93 (subsequent amendment of 23/98.). Based on this Act, in A.P. constituted APIFC in 1999 and started functioning from 2000

Ø The main aim of the APIFC to assess the effectiveness in talking the problems of delay payments to SSI and Ancillary Industrial Undertakings. APIFC proceedings being conducted on every Monday of the month (working day).

Ø “Micro Small and Medium Enterprises Development (MSMED) Act. 2006 is in force w.e.f. 02-10-2006 and the Government is yet to formulate Industrial Facilitation Council as per the new act.

Ø Micro & Small Enterprises Facilitation Council Constituted under MSMED act 2006

Delayed Payments Act to Micro & Small Enterprises