New Delhi: The government proposes to revamp the existing approval letter issued by the Foreign Investment Promotion Board (FIPB) to companies. The proposed changes make it explicitly clear that the board has the power to revoke approval in the event of non-compliance by investors.
Clear instructions: Finance secretary Ashok Chawla. FIPB, headed by the finace secretary, will have the power to revoke approvals. Ramesh Pathania / Mint
As part of the proposed changes, several clauses in the existing foreign collaboration approval letter will either be dropped or amended. One key result of the changes would be that companies will not have to approach FIPB repeatedly in cases where they increase the foreign equity beyond the original approved level.
Currently, even in sectors where 100% foreign direct investment (FDI) is allowed on the automatic route, companies approach FIPB for further increasing their stake. This causes hardship to companies as well as FIPB, which has to deal with repeated amendment requests.
In addition, the new approval letter will contain specific references to the Foreign Exchange Management Act, 2000, and the Money Laundering Act, 2002, so as to ensure that all the conditions of these laws are automatically applicable to companies. Several other changes are aimed at removing superfluous clauses, and removing deficiencies in the existing approval letter.
The FIPB, which is under the purview of the finance ministry’s department of economic affairs, has since January 2003 proposed the revamp in light of the changed economic and legal scenario over the past decade. The existing foreign collaboration approval letter has not been revised since the late 1990s.