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European Economic Community International Institutional Partners Scheme 1993
October, 06th 2010

EUROPEAN ECONOMIC

COMMUNITY INTERNATIONAL

INSTITUTIONAL PARTNERS

SCHEME, 1993

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.

Definitions.

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 instrument  called  the  European Community International Investment Partners  (ECIIP) Scheme to promote joint ventures in Asia, Latin America and the Mediterranean countries. EEC signs framework agreements with financial  institutions in the target country, and makes available its financial assistance  through these partner financial institutions. ECIIP specifically aims its assistance at small and medium sized companies, but larger companies can also  benefit, if their projects are particularly interesting for the development of the  country.

 (2) EEC has so far entered into Memoranda of Understanding (MOUs) with  three 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 the  community does not intend to repatriate interest, dividends, or capital gains  arising out of the investments under the ECIIP Scheme. Noting the expressed  intention of the community that the community does not intend to repatriate  proceeds of sale of shares or dividends arising out of the investments made  under ECIIP Scheme, and intends to reinvest such proceeds in India, which,  is also the preferred arrangement in so far as the Government of India is  concerned, the Government of India has inserted a new clause, (23BBB) in  section 10 of the Income-tax Act to provide income-tax exemption on any  income of the European Economic Community derived in India by way of  interest, dividends or capital gains from investments made out of its funds  under this Scheme. This exemption will take effect from 1st April, 1994, and  will, accordingly, apply in relation to the assessment year 1994-95 (relevant for  the income year 1993-94) and subsequent years. All such incomes derived by  the European Economic Community on or after 1st April, 1993, would be tax  exempt accordingly.

Investments and disinvestments.

4. (1) The investments made by the European Economic Community under  the ECIIP Scheme would be counted as domestic investments, and not foreign  investments, for the purpose of the Statement on Industrial Policy, dated 24th  July, 1991. Investments under the ECIIP Scheme would not be counted as  promoters quota for the purpose of Securities and Exchange Board of India  (SEBI) guidelines. In all other sense also, investments of the European  Economic Community under the ECIIP Scheme would be treated at par with  the investments of the partner institutions.

(2) All the investments would be made by EEC through ECIIP approved  partner institutions who would hold the investment instruments on behalf of  EEC. EEC would be able to disinvest also through the ECIIP partner institutions, in accordance with the disinvestment guidelines issued by the Reserve  Bank of India on September 15, 1992, as modified from time to time.  Disinvestment when made would be made in suitable lots by these partner  institutions, so as to have minimum disturbance of dislocation of the stock  exchange prices of the scrips unloaded. EEC has indicated to the Government  of India that disinvestment proceeds, and funds realised therefrom, would  also be reinvested as investible funds of EEC for projects approved under this  Scheme.

(3) This equity holding by ECIIP partner institutions on behalf of EEC out of  ECIIP funds would be in addition to any equity which may be held by these  institutions out of their own funds, or equity of any foreign investors hailing  from European countries.

Eligibility of partner institutions.

5. (1) The Indian Financial Institutions desiring to become partner institution  of EEC for any of its facilities under ECIIP, in order to seek loans and equity  participation from EEC in industrial and financial ventures promoted by them  would 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 into  any number of memoranda of understanding with partner institution among  banks, financial institutions, the State Industrial Development Corporations  and the State Finance Corporations under the ECIIP Scheme. Once the  memorandum of understanding/framework agreement is lodged with the  Government of India and accepted, suitable modification to this Scheme  would be announced accordingly. 

Use of funds provided by ECIIP.

6. (1) All investments under the ECIIP facilities in joint ventures permitted in  India will be made by the partner institutions without the requirement of any  approval from the Central Government for such individual investments.

(2) The partner institutions shall maintain separate accounts in their books of  account for the funds under the ECIIP facilities handled by them on behalf of  the European Economic Community and for depositing the sale proceeds of  its investments if any.

Tax exemption.

7. (1) The tax exemption would be available to EEC only in respect of  investments made out of ECIIP funds, which would be used by the EEC  through partner institutions as seed money for promoting industrial enterprises with the European Investors hailing from EEC member countries in  India.

(2) The exemption from income-tax on dividend, interest and capital gains tax  on disinvestment available to EEC under this Scheme will not be available in  respect of the equity held by foreign investors hailing from EEC member  countries, or the equity held by the ECIIP partner institutions out of their own  funds.

ANNEXURE

 

Facility

Facility

Facility

Facility

 

(1)

(2)

(3)

(4)

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.

Beneficiaries

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 from  EEC and from eligible countries. Both partners must have a  meaningful participation. Investments in local companies which operate under a  licensing and technical assistance agreement with an EEC company.

Access

The beneficiary may apply directly to the EEC or through a financial institution.

 

Application to be made through a financial institution.

Type of Finance

Grant

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.

 

Amount Available

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

Limits

Up to 50 per cent of the cost

Up to 50 per cent of the cost.

20 per cent of the capital of the joint venture.

Up to 50 per cent of the cost.

 
 
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