New Mechanism To Clear Foreign Investments In 60 Days As Sun Sets On FIPB
The new mechanism for approving foreign investment proposals will require ministries concerned to take a decision within 60 days after an application is filed, as the Foreign Investment Promotion Board now ceases to exist.
This would be part of a standard operating procedure which the Department of Industrial Policy and Promotion will issue to guide administrative ministries to clear such proposals with transparency and uniformity across sectors. The Ministry of Finance notified the abolition of FIPB on Tuesday.
“The SOP will also recognise that ordinarily FDI applications, including those related to Non Resident lndians/Export Oriented Unit (EOU), food processing, single-brand retail trading and multi-brand retail trading proposals, should be decided in sixty days,” the notification said. Export-oriented units are like special economic zones which get various duty exemptions and have better infrastructure for export production.
The Union Cabinet had on May 24 cleared the abolition of FIPB, which was a Budget announcement. Formed in the 1990s to boost foreign investments after liberalisation, the board was scrapped to boost ease of doing business.
Earlier, FDI proposals on average took three to four months, and sometimes even longer when a proposal entailed security clearance, said Akash Gupt, partner, regulatory services, at PwC.
Now, there will be quarterly review by a committee co-chaired by secretarys of economic affairs division and DIPP on proposals pending with government. “With the 60-day clearance of FDI proposals and quarterly review, there will be enough checks and balances in the process to ensure speedy clearance,” Gupt told BloombergQuint.
Under the new mechanism, respective ministries will clear foreign investment proposals for 11 sectors.
The administrative ministry or department will have to seek approval of the minister in charge or the Cabinet Committee on Economic Affairs (CCEA), as under the existing FDI policy. Currently, all FDI proposals over Rs 5,000 crore are approved by the CCEA.
The applications that require the government’s approval will continue to be received by the existing FIPB portal, but the oversight will be transferred to the DIPP from the department of economic within four weeks, the notification said. The administrative ministries concerned will monitor compliance of conditions under the FDI approvals, including the past cases approved by FIPB, it added.
In cases where there is a doubt about the administrative ministry, the DIPP will identify the department or the ministry where the application will be processed. The proposals rejected by the respective ministry will require concurrence with DIPP.
“The concurrence of DIPP would be mandatory with reference to the FDI applications which are proposed to be rejected by the competent authority or where approval is proposed by competent authority subject to additional conditions not provided in the FDI policy,” the notification said.
Applications for foreign investment into a core investment company or an lndian company engaged only in investing in capital of other lndian companies shall be processed by the department of economic affairs irrespective of the sector in which the investment is being made, the notification said.
Litigation To Be Handled By Respective Ministries
Pending or past litigation cases in various forums shall be handled by the respective ministries. “An affidavit to this effect will be filed accordingly in all such pending and ongoing cases,” the notification said.
It also said there are around 4,500 files currently with the FIPB Secretariat, which are important for reference, record and examination by investigating agencies. These files will also be transferred to the ministries concerned by the FIPB Secretariat.