European Economic Community International Institutional Partners Scheme 1993
October, 06th 2010
NOTIFICATION NO. S.O. 719(E), DATED 29-9-1994
The Central Government hereby notifies the following scheme for facilitating investments by the European Economic Community for the benefit of establishment of joint ventures in India.
l.(i) This Scheme may be called the European Economic Community International Institutional Partners (ECIIP) Scheme, 1993.
(ii) It shall be deemed to have come into force with effect from 1st April, 1993.
2. In this Scheme, unless the context otherwise requires :-
(a)European Economic Community means the European Economic Community (EEC) established by the Treaty of Rome of 25th March, 1957.
(b) Institutional Partner means a financial institution approved in this behalf by the Central Government.
(c) Facility means any of the four facilities offered by the European Economic Community under its International Institutional Partners Scheme, as given in the annexure to this Scheme.
Structure of the Scheme.
3. (1) The European Economic Community has developed a financial instrumentcalledtheEuropean Community International Investment Partners(ECIIP) Scheme to promote joint ventures in Asia, Latin America and the Mediterranean countries. EEC signs framework agreements with financialinstitutions in the target country, and makes available its financial assistancethrough these partner financial institutions. ECIIP specifically aims its assistance at small and medium sized companies, but larger companies can alsobenefit, if their projects are particularly interesting for the development of thecountry.
(2) EEC has so far entered into Memoranda of Understanding (MOUs) withthree financial institutions in India, viz, ICICI, IDBI and the Exim Bank of India.EEC may in future decide to have similar MOUs with other financial institutions and/or banks in India.
(3) The European Economic Community has expressed an intention that thecommunity does not intend to repatriate interest, dividends, or capital gainsarising out of the investments under the ECIIP Scheme. Noting the expressedintention of the community that the community does not intend to repatriateproceeds of sale of shares or dividends arising out of the investments madeunder ECIIP Scheme, and intends to reinvest such proceeds in India, which,is also the preferred arrangement in so far as the Government of India isconcerned, the Government of India has inserted a new clause, (23BBB) insection 10 of the Income-tax Act to provide income-tax exemption on anyincome of the European Economic Community derived in India by way ofinterest, dividends or capital gains from investments made out of its fundsunder this Scheme. This exemption will take effect from 1st April, 1994, andwill, accordingly, apply in relation to the assessment year 1994-95 (relevant forthe income year 1993-94) and subsequent years. All such incomes derived bytheEuropean Economic Community on or after 1st April, 1993, would be taxexempt accordingly.
Investments and disinvestments.
4. (1) The investments made by the European Economic Communityunderthe ECIIP Scheme would be counted as domestic investments, and not foreigninvestments, for the purpose of the Statement on Industrial Policy, dated 24thJuly, 1991. Investments under the ECIIP Scheme would not be counted aspromoters quota for the purpose of Securities and Exchange Board of India(SEBI) guidelines. In all other sense also, investments of the EuropeanEconomic Community under the ECIIP Scheme would be treated at par withthe investments of the partner institutions.
(2) All the investments would be made by EEC through ECIIP approvedpartner institutions who would hold the investment instruments on behalf ofEEC. EEC would be able to disinvest also through the ECIIP partner institutions, in accordance with the disinvestment guidelines issued by the ReserveBank of India on September 15, 1992, as modified from time to time.Disinvestment when made would be made in suitable lots by these partnerinstitutions, so as to have minimum disturbance of dislocation of the stockexchange prices of the scrips unloaded. EEC has indicated to the Governmentof India that disinvestment proceeds, and funds realisedtherefrom, wouldalso be reinvested as investible funds of EEC for projects approved under thisScheme.
(3) This equity holding by ECIIP partner institutions on behalf of EEC out ofECIIP funds would be in addition to any equity which may be held by theseinstitutions out of their own funds, or equity of any foreign investors hailingfrom European countries.
Eligibility of partner institutions.
5. (1) The Indian Financial Institutions desiring to become partner institutionof EEC for any of its facilities under ECIIP, in order to seek loans and equityparticipation from EEC in industrial and financial ventures promoted by themwould be required to be approved in this behalf by the Government of India.
(2) It would be possible for the European Economic Community to enter intoany number of memoranda of understanding with partner institution amongbanks, financial institutions, the State Industrial Development Corporationsand the State Finance Corporations under the ECIIP Scheme. Once thememorandum of understanding/framework agreement is lodged with theGovernment of India and accepted, suitable modification to this Schemewould be announced accordingly.
Use of funds provided by ECIIP.
6. (1) All investments under the ECIIP facilities in joint ventures permitted inIndia will be made by the partner institutions without the requirement of anyapproval from the Central Government for such individual investments.
(2) The partner institutions shall maintain separate accounts in their books ofaccount for the funds under the ECIIP facilities handled by them on behalf ofthe European Economic Community and for depositing the sale proceeds ofits investments if any.
7. (1) The tax exemption would be available to EEC only in respect ofinvestments made out of ECIIP funds, which would be used by the EECthrough partner institutions as seed money for promoting industrial enterprises with the European Investors hailing from EEC member countries inIndia.
(2) The exemption from income-tax on dividend, interest and capital gains taxon disinvestment available to EEC under this Scheme will not be available inrespect of the equity held by foreign investors hailing from EEC membercountries, or the equity held by the ECIIP partner institutions out of their ownfunds.
Type of operation
Identification of potential joint venture projects and partners.
Operations prior to launching a joint venture.
Financing of capital requirements.
Human resource development : training and management assistance.
Chambers of commerce, professional associations, public agencies and ECIIP Financial Institutions, Individual companies may not benefit from facility 1.
Companies, either individually or jointly, local or European, wishing to undertake a joint venture investment project.
Joint ventures established by partners fromEEC and from eligible countries. Both partners must have ameaningful participation. Investments in local companies which operate under alicensing and technical assistance agreement with an EEC company.
The beneficiary may apply directly to the EEC or through a financial institution.
Application to be made through a financial institution.
Type of Finance
Interest free advance to be converted later either into a grant, a loan or equity.
Equity holding Interest free loan or equity loan
The financial institution must co- finance the projects.
Maximum of 10,000 ECU
Maximum of 2,50,000 ECU
Maximum of 10,00,000
Maximum of 2,50,000 ECU
The maximum total support per project is l0,00,000 ECU