End of Foreign Investment Promotion Board – Maximum Governance minimum Government

India has a very well formulated Foreign Direct Investment (FDI) policy. FDI is channeled into India subjected to entry regulations. FDI entry can be made under two categories – Approval route and Automatic route. The FDI Policy, Press Notes and other related notified guidelines formulated by Department of Industrial Policy and Promotion (DIPP) in the Ministry of Commerce and Industry and Reserve Bank of India are the bases of the FDI investments in India.For evaluating proposals under approval route the government formulated the Foreign Investment Promotion Board (FIPB). FDI proposals above Rs.5000 crore are taken care of by the Cabinet Committee on Economic Affairs (CCEA).

The Foreign Investment Promotion Board (FIPB), housed in the Department of Economic Affairs, Ministry of Finance, an inter-ministerial body, has been responsible for processing of Foreign Direct Investment (FDI) proposals and making recommendations for Government approval. FIPB has been the single window for allowing foreign direct investments (FDI) that falls under approval route since 1990s.

Finance Minister Mr. Arun Jaitley had announced in his budget speech in the Union Budget for the financial year 2017-18 that the FIPB would be dismantled. He said “We have now reached a stage where the FIPB can be phased out. We have decided to abolish it in 2017-18”.

The FIPB’s powers had been systematically depleted under the current regime of government. For example, in June 2016, the government had announced relaxed FDI norms in single-brand retail, civil aviation, airports, pharmaceuticals, animal husbandry and food products.

As a further bold step towards ‘Maximum Governance and Minimum Government’ FIPB has been abolished by the government with effect from 5th June, 2017. Subsequent to the abolition of the FIPB, the work of granting government approval for foreign investment under the extant FDI Policy and FEMA Regulations, shall be entrusted to the concerned Administrative Ministries/Department. 7. ln February 2015, Government had launched a new

user friendly and secured website i.e. fipb.gov.in. Since then, all applications for seeking approval of the Government are being filed through this online portal. Subsequent to abolition of the FIPB, the management and responsibility for running the website shall be that of the DIPP. The administrative Ministries/Departments shall be granted access to the online

portal from where they can download and process their respective applications.

In result of the abolishment, the 11 notified sectors will be granted approval by their respective ministries/departments.

Sr. No. Sector/Activity Administrative Department/ Ministry
1. Mining Ministry of Mines
2. Defence Department of Defence Production, Ministry of Defence
2A. FDI  in small arms Ministry of Home affairs
3. Broadcasting Ministry of Information and Broadcasting
4. Print media Ministry of Information and Broadcasting
5. Civil aviation Ministry of Civil Aviation
6. Satellites Department of Space
7. Telecom Department of Telecommunications, Ministry of Communications
8. Private security agencies Ministry of Home Affairs
9. Trading (single & multi brand and food products retail trading) Department of Industrial policy & Promotion, Ministry of Commerce and Industry
10A. Financial services not regulated by a regulator or where there is more than one regulator in respect of which there is a doubt about the regulator (As per FDI policy) Department of Economic Affairs, Ministry of Finance
10B. Banking (Public and Private) (As per FDI policy) Department of Financial Services, Ministry of Finance
11. Pharmaceuticals Department of Pharmaceuticals, Ministry of Chemicals and Fertilizers

 

With the abolishment of FIPB, the functional and regulatory responsibilities in relation to the applications requiring approval of the government are transferred to DIPP or the concerned Administrative Ministry/Department as the case may be.

The following lists of applications requiring the approval of the government along with the concerned ministry having authority to deal with the proposals are as under: –

Sr. No. Sector/Activity Administrative Department/Ministry
1. FDI proposals by NRI/Export oriented units (EOU) requiring prior approval of the government DIPP
2. Applications relating to issue of equity shares under the Government route for import of capital goods /machinery/equipment (excluding second hand machinery) DIPP
3. Applications relating to issue of equity shares for pre-operative /pre-incorporation expenses DIPP
4.

Applications of investments from Countries of Concern, requiring clearance under the current FEMA Act.

(Investments falling under automatic route)

Ministry of Home Affairs
5.

Applications of investments from Countries of Concern, requiring clearance under the current FEMA Act.

(Investments falling under approval route)

Nodal administrative ministries/ departments in consultation with Ministry of Home Affairs
6. Application of FDI into core investment company of an Indian company engaged only into investing capital in other Indian companies DEA, Ministry of Finance

 

  • ln respect of the applications in which there is a doubt about the Administrative Ministry concerned, the DIPP shall identify the Administrative Ministry/Department where the application will be processed.
  • The applications requiring approval of the government shall continue to be received by the existing FIPB portal which shall be transferred to DIPP from the Department of Economic Affairs within four weeks. On receiving the application the concerned ministry/department shall process the said application.
  • The Government has planned to develop a Standard Operating System (SOP) with detailed guidelines laid down by the DIPP. SOP shall guide the respective Administrative Ministries/Departments/Sector regulators regarding the processing of FDI approvals.
  • The main objective behind creating SOP is to adopt a uniform and consistent process. The SOP shall involve the process of Inter-Ministerial consultations wherever necessary. It shall also recognize the ordinary FDI applications, including those related to NRI, EOU, SBRT, and MBRT which should be decided in sixty days.
  • The concurrence of DIPP is made mandatory in cases where the concerned authority has rejected the application or has granted permission subject to additional conditions. The respective Administrative Ministries/Departments are burdened with an additional duty to monitor compliance of conditions under the FDI approvals including the past cases where approval was granted by FIPB.
  • The 4500 files which are currently held by the FIPB secretariat are of permanent nature and shall be transferred to the concerned Ministry. All present, past and future cases in relation to approvals of FDI shall be handled by the respective Administrative Ministries/ Departments. The RTI applications pending with the FIPB secretariat shall be transferred to the concerned Administrative Ministry/Department. All applications pending with the FIPB portal as on the date of abolition of FIPB shall be transferred to the respective Admi nistrative Ministry/Department by the DlPP immediately upon receipt thereof.

It is very good and bold move by the Government. Most of the sectors have already been liberalized to come through the “automatic” route, without needing FIPB clearance. This should bring in more FDI in India. There is certainly an ignited ray of hope that India will become more attractive place for Foreign Investment and it will attract more inflow of FDI.

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