Foreign Exchange Regulation Act
The Foreign Exchange Regulation Act (FERA) was legislation passed by the Indian Parliament in 1973 by the government of Indira Gandhi and came into force with effect from January 1, 1974. FERA imposed strict regulations on certain kinds of payments, the dealings in foreign exchange and securities and the transactions which had an indirect impact on the foreign exchange and the import and export of currency.[1] The bill was formulated with the aim of regulating payments and foreign exchange.[2]
Coca-Cola was India's leading soft drink until 1977 when it left India after a new government ordered the company to turn over its secret formula for Coca-Cola and dilute its stake in its Indian unit as required by the Foreign Exchange Regulation Act (FERA). In 1993, the company (along with PepsiCo) returned after the introduction of India's Liberalization policy.
FERA was repealed in 1998 by the government of Atal Bihari Vajpayee and replaced by the Foreign Exchange Management Act, which liberalised foreign exchange controls and restrictions on foreign investment.
FERA :
- Regulated in India by the Foreign Exchange Regulation Act(FERA),1973.
- Consisted of 81 sections.
- FERA Emphasized strict exchange control.
- Control everything that was specified, relating to foreign exchange.
- Law violators were treated as criminal offenders.
- Aimed at minimizing dealings in foreign exchange and foreign securities.
FERA was introduced at a time when foreign exchange (Forex) reserves of the country were low, Forex being a scarce commodity. FERA therefore proceeded on the presumption that all foreign exchange earned by Indian residents rightfully belonged to the Government of India and had to be collected and surrendered to the Reserve bank of India (RBI). FERA primarily prohibited all transactions, except one’s permitted by RBI.
OBJECTIVES :
- To regulate certain payments.
- To regulate dealings in foreign exchange and securities.
- To regulate transactions, indirectly affecting foreign exchange.
- To regulate the import and export of currency.
- To conserve precious foreign exchange.
- The proper utilization of foreign exchange so as to promote the economic development of the country.