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FIPB abolished : Road ahead for FDI (under approval route)

August 5, 2017     by Anupama

 

In the light of easing FDI policies a recent step taken by Government of India is to abolish 25 year old FIPB [Foreign investment and promotion board]. The proposed mechanism i.e. applicable from year 2017-18, has been introduced to make India a far more investor-friendly destination and to reduce unnecessary administrial hassle in the route of FDI.

FIPB a brief history:

FIPB was the inter-ministerial body housed in Finance Ministry formed following liberalisation policy in early 1990’s. The primary function of FIPB was to recommend, in consultation with the ministries concerned, on FDI proposals under the government approval route. So FDI proposals had to deal with several players to get the approval i.e. Ministry of commerce, DIPP, FIPB, RBI, Ministry of Finance which resulted as a time consuming process.

Road ahead:

In a move to reduce red tape in government and to promote the ‘Maximum Governance and Minimum Government’ principle, the government had recently abolished the Foreign Investment Promotion Board (FIPB). During the last three years, 91-95% of foreign direct investment (FDI) into India came through the automatic route. Only in 11 sectors, like Defense, Retail, Banking, etc there is need for prior government approval. Now onwards FDI via prior approval route will be dealt by the departments of the respective ministries. Going forward instead of going to multiple bodies FDI proposals will be handled by one concerned department and that department will take the final decision on the application received.

Highlights:

  • Applications for FDI be now handled by the concerned Ministries/Departments in consultation with the Department of Industrial Policy & Promotion (DIPP) Ministry of Commerce,
  • The Standard Operating Procedure (SOP) for processing of applications has been issued by DIPP on June 29th 2017 for processing the FDI proposal.
  • In respect of applications in which there is a doubt as to which is the concerned Administrative Ministry/Department, DIPP shall identify the Administrative Ministry/Department where the application will be processed for decision.
  • DIPP or Department of Economic Affairs will undertake a quarterly review of FDI proposals
  • Proposals that are pending before the FIPB will be sent back to departments concerned for approval
  • While foreign investments by non-resident Indians and FDI in retail and export oriented units will be approved by DIPP, FDI in banks will be approved by the Department of Financial Services
  • All FDI from Pakistan and Bangladesh and FDI proposals requiring approval in Private Security Agencies and manufacture of small arms, Investments in Broadcasting, Telecommunication, Satellites to be approved by Ministry of Home Affairs.
  • Now the FIPB portal would be linked with the e-business portal

 

New procedure for proposing FDI:

  • Now proposals for foreign investment in sectors/activities requiring Government approval would be filed online on the revamped FIPB portal, rechristened as Foreign Investment Facilitation Portal. http://fipb.gov.in/Authenticate/Login.aspx
  • After the proposals are filed online, DIPP will identify the concerned Administrative Ministry/Department and e-transfer the proposal to the concerned Administrative Ministry/Department (Competent Authority) within 2 days.
  • Ministries/Departments consulted on the proposal shall upload their comments on the portal within 4 weeks from the online receipt of the proposal. Approval letters have to be issued by the Competent Authority in the format prescribed
  • Comments by Ministry of Home Affairs on proposals for investment in sectors requiring security clearance would be provided to the Competent Authority within 6 weeks from the online receipt of such proposals.
  • Timelines has been fixed for approving applications regarding FDI by competent authorities and a rejection by the department concerned has been made difficult as it now will mandatorily require concurrence of DIPP
  • It also said FDI proposals would be cleared within 60 days of the application.
  • Detailed list of documents and procedure has been provided under SOP issued by DIPP. Below is the link to get all the information in this regards.

Link-Standard Operating Procedure (SOP) for Processing FDI Proposals

 

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