Sunday, 9 July 2017

Abolition of Foreign Investment Promotion Board

Foreign Investment Promotion Board (“FIPB”) was set up in early 1990s to consider the foreign direct investment (“FDI”) proposals requiring government approval. FIPB, housed in the Department of Economic Affairs (“DEA”), Ministry of Finance, offered a single window clearance system for disposing off the FDI applications falling under the approval route in India.

Abolition of FIPB was proposed in the budget of 2017-18 in light of the following circumstances and the proposal was finally approved by the government on May 24, 2017:

     i.        More than 90% of the foreign direct investments were under the automatic route; and
   ii.        Reduction in number of sectors requiring government approval. A total of 11 sectors under the approval route have been notified in this regard.

Subsequent to the abolition of FIPB:

1. The administrative ministries/departments will be entrusted with the responsibility of dealing with:

(a)       the foreign direct investment proposals requiring government approval;
(b)   monitoring of compliance of conditions subject to which such approvals would have been granted;
(c)        RTI applications and appeals pending with the FIPB Secretariat; and
(d)     all the past, present and future litigations and liabilities, in various courts and adjudicatory forums. An affidavit to this effect will be filed in all such pending and ongoing cases.

2.      Department of Industrial Policy and Promotion (“DIPP”) will majorly be responsible for the following:

(a)      FDI by non-resident investors (“NRIs”) and export oriented units (“EOUs”);
(b) applications relating to issue of equity shares for import of capital goods/machinery/equipment;
(c)      applications for issue of equity shares against pre-incorporation expenses;
(d)   identification of administrative ministry/department in case there is a doubt about the administrative ministry/department concerned;
(e)   oversight of FIPB portal; and
(f)  development of a standard operating procedure with detailed guidelines ensuring uniformity of approach across sectors in consultation with the administrative ministries/department.

3.      Applications involving investments from countries of concern would require approval from the Ministry of Home Affairs;

4.      Foreign investments into core investment companies or investment companies engaged in investment in capital of Indian companies will be processed by DEA, irrespective of the sector in which the investment is made;

5.      Any decision of a competent authority to reject or subject an application to conditions not provided in the FDI policy, would require the consent of DIPP;

6.      During the transition period, the Secretary, DEA and the Secretary DIPP will meet quarterly to discuss the pendency of proposals with the government.

7.      Procedurally:

(a)      The control of FIPB portal will be transferred by DEA to DIPP within four weeks;

(b)      All the pending cases on FIPB portal will be transferred to the respective administrative ministry/department by DIPP;

(c)      The aforesaid administrative ministry/department will be given an access to the FIPB portal for processing the applications pending before them;

(d)      The administrative ministry/ department will seek the approval of the Minister-in-charge / Cabinet Committee on Economic Affairs (CCEA);

(e)      Ordinarily FDI applications, including those related to NRls, EOUs, food processing, single and multi brand retail trading, should be decided in sixty days.

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