FIPB abolished: What happens to foreign investors now?
Now individual departments of the government have been empowered to clear FDI proposals in consultation with DIPP
New Delhi: The Foreign Investment Promotion Board (FIPB) that the government abolished on Wednesday probably held its 245th and last meeting on 17 April.
FIPB was an inter-ministerial body housed in the Department of Economic Affairs in the finance ministry responsible for processing foreign direct investment (FDI) proposals and recommending for approval to the finance minister and subsequently to the Cabinet Committee on Economic Affairs if the investment amount exceeded Rs3,000 crore.
FIPB was chaired by the economic affairs secretary and its other permanent members included secretary, Department of Industrial Policy and Promotion (DIPP), commerce secretary, economic relations secretary in the ministry of external affairs and overseas Indian affairs secretary. The small, medium and micro enterprises secretary and the revenue secretary were co-opted on the board.
The board used to co-opt other secretaries in the Central government and when a matter pertaining to their department was scheduled to be discussed in the meeting.
That now has changed forever.
Now individual departments of the government have been empowered to clear FDI proposals in consultation with DIPP which will also issue the standard operating procedures for processing applications.
Briefing reporters on Wednesday, finance minister Arun Jaitley said the decision of the cabinet will be implemented immediately and pending FDI proposals before the defunct FIPB will be sent back to individual line ministries for necessary action.
Now timelines will be fixed for approving applications regarding FDI by competent authorities and a rejection by the department concerned has been made difficult as it will now mandatorily require concurrence of DIPP. So will the imposition of additional conditions other than provided in the FDI policy. All FDI from Pakistan and Bangladesh and FDI proposals requiring approval in private security agencies and manufacture of small arms have to be approved by the ministry of home affairs.
While the cabinet’s decision is seen as a simplification of the existing procedure to seek clearance on FDI proposals, experts have also raised doubts whether line ministries are equipped to take such decisions on an expedited manner.
Devraj Singh, an executive director at EY India, said the move would help ease the processing of foreign investment approvals. “It will be interesting to see how quickly the line ministries get well versed with the nuances of the FDI policy and maintain consistency/transparency and continuity, which is paramount for the foreign investors,” he added.
Radhika Jain, director, Grant Thornton Advisory Private Ltd, said it is hoped that DIPP comes out with clear guidelines and operating procedures defining the parameters that should be considered for clearance of proposals. “This is required to ensure that there is alignment in the approach of different ministries,” she added.
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