Ministries to decide on FDI proposals within 60 days: Finance Ministry
Finance ministry in an official memorandum said subsequent to the abolition of the FIPB, concerned administrative ministries have been allotted the work of granting approval for foreign investment in the specific sector.
The Union Government on 6 June 2017 said that Ministries will have to decide on FDI proposals within 60 days of the application and any rejection will need concurrence of the Department of Industrial Policy and Promotion (DIPP).
Earlier in May 2017, India had scrapped the 25-year old foreign investment advisory body named Foreign Investment Promotion Board (FIPB). It was scrapped with an aim to attract more FDI by providing quick approvals.
In an office memorandum, the Finance Ministry said subsequent to the abolition of FIPB, concerned administrative ministries have been allotted the work of granting approval for foreign investment in the specific sector.
The Industry Ministry, in consultation with the administrative ministry, will come out with a detailed guideline for processing of the FDI proposals and ensure a “consistency of treatment and uniformity of approach”.
It said, the Standard Operating Procedure will involve the process of inter-ministerial consultation for the examination of FDI proposals, wherever necessary.
It memorandum also said, “the SOP will also responsible for recognising that ordinals FDI applications, including those related to non-resident Indian (NRI)/Export Oriented Unit (EOU), food processing, single brand retail trades and multi brand retail trading proposals, should be decided in 60 days”.
Key facts/highlights about the new decision
• All pending applications with the FIPB would be transferred to the administrative ministry and oversight of the FIPB portal shall be transferred to the DIPP from Department of Economic Affairs (DEA). This should be done within four weeks.
• FDI approval decisions in majority of the sectors have been relegated to concerned ministry and those relating to private security agencies would be decided by the Home Ministry. While DEA will be responsible for clearing the proposals of financial services or there is a doubt about the regulator.
• The memorandum also says that any FDI proposal related to banks will be approved by the Department of Financial Services.
• The memorandum says that FDI proposals by NRIs/EoUs requiring approval of the government will be dealt with by the Department of Industrial Policy and Promotion (DIPP). In this case, the DIPP will continue to be the administrative ministry for this purpose. DIPP will also be responsible for handling the applications seeking import of capital goods or machinery.
• Applications of investments from countries of concern will require security clearance as per the FEMA guidelines and FDI policy. These applications will be processed by the Home Ministry. In this case, the Home Ministry will only process those applications that reach them via automatic route but requiring security clearances, cases pertaining to approval route sectors requiring security clearance will be processed by the concerned administrative ministry.
• In cases of FDI application where there will be a doubt about the administrative ministry, DIPP will also be responsible for identifying the ministry where application will be processed. The memorandum said, that the concerned ministry will have to seek Cabinet nod wherever required.
• The memorandum says, “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”.
Besides, the format of security clearance form has been changed and has been made available on the FIPB portal. The government has asked applicants to upload the new form failing which application will not be entertained.
In addition to this, to review the pendency of proposals with government a joint quarterly meeting will be undertaken. The meeting will be undertaken b y a committee which will be co-chaired by DEA and DIPP Secretary. Apart from this, all past and future litigations and liabilities will be handled by the administrative department.