Govt approves phasing out of 25-year-old Foreign Investment Promotion Board

The Union Cabinet on Wednesday approved phasing out of the 25-year-old Foreign Investment Promotion Board (FIPB). The FIPB is the inter-ministerial body — or a single window clearance mechanism for applications on foreign direct investment (FDI) in India in sectors under the government approval route.

The move to phase out the FIPB is aimed at making India a more attractive FDI destination and increasing FDI inflows by providing greater ease of doing business and promoting the ‘Maximum Governance and Minimum Government’ principle.

The proposal entails abolishing the FIPB and allowing administrative Ministries/Departments to process applications for FDI requiring government approval, an official statement said.

It added: “Henceforth, the work relating to processing of applications for FDI and approval of the Government thereon under the extant FDI Policy and Foreign Exchange Management Act, shall now be handled by the concerned Ministries/Departments in consultation with the Department of Industrial Policy & Promotion (or the DIPP, in the) Ministry of Commerce, which will also issue the Standard Operating Procedure for processing of applications and decision of the Government under the extant FDI policy.”

In his 2017-18 Budget speech on February 1, Finance Minister Arun Jaitley had said: “More than 90% of the total FDI inflows are now through the automatic route. The FIPB has successfully implemented e-filing and online processing of FDI applications. We have now reached a stage where FIPB can be phased out. We have therefore decided to abolish the FIPB in 2017-18. A roadmap for the same will be announced in the next few months.”

Addressing the media after the decision taken by the Cabinet chaired by Prime Minister Narendra Modi, Mr. Jaitley said in cases of applications where there are security concerns, the home ministry’s approval will be required. He added that proposals pending with the FIPB will be taken up by the concerned ministries.

The minister said currently around 91-95% of FDI inflow happens through the automatic route, adding that there are only 11 sectors (including defence and retail) needing government approval.

The FIPB was initially set up under the Prime Minister’s Office following the economic liberalisation in the early 1990s.

It shifted under the DIPP in 1996, and then in 2003 to the department of economic affairs in the finance ministry.

In the new mechanism, a quarterly review of pending proposals by the economic affairs secretary and annual review by the finance minister are liekly. The Cabinet Committee on Economic Affairs will continue to clear FDI proposals above Rs 5,000 crore.
[“Source-ndtv”]