The new policy initiative would enable companies to retain highly skilled employees in these sector, according to a government press release.

The liberalised norms would also be available to multi-product diversified companies which do not conform to the criteria of 80 per cent of its turnover from the IT, pharma and biotech sectors. They can still benefit if they fulfill the condition of average annual export earnings of Rs 100 crore from these sectors in the three previous financial years.

The new guidelines will come into force with immediate effect.

Earlier, the guidelines were issued on June 23, 1998, containing operational parameters and modalities for the issue of ADR- and GDR-linked stock options to its employees by the Indian software companies. To expand the scope of the application to the Indian companies engaged in IT software and IT services, modifications were issued on September 16, 1998.

These guidelines were further modified by the government on June 16 this year, further expanding the coverage of employees who would be entitled to the ESOPs.

Earlier, guidelines were issued on March 23, 2000, liberalising the norms for overseas business acquisitions by Indian companies. The norms were later extended to IT and entertainment software, biotechnology, pharmaceuticals and any other activity with the knowledge-based sector.