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What is FIPB and why is it replaced by the Foreign Investment Facilitation Portal (FIFP)

The Foreign Investment Promotion Board (FIPB) is being replaced by the Foreign Investment Facilitation Portal (FIFP) to speed up the FDI inflow and to increase the transparency in the FDI approvals in the country. FIFP replaced FIPB in May, 2017.
Aug 22, 2019 13:20 IST
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What was Foreign Investment Promotion Board (FIPB)

The Foreign Investment Promotion Board (FIPB) was an inter-ministerial body under the Department of Economic Affairs in the Ministry of Finance. 

Earlier if the Foreign Direct Investment (FDI) amount exceeds Rs3,000 crore then it must be approved by the Finance Minister and subsequently by the Cabinet Committee on Economic Affairs (CCEA) on the recommendations of the FIPB.

Worth to mention that the FDI proposals above Rs 5,000 crore would continue to be cleared by the Cabinet Committee on Economic Affairs.

Currently, only 11 sectors, including defence, small arms and retail trading, require government approval for FDI and about 91 to 95% FDI proposals are under the automatic route.
FIPB was chaired by the economic affairs secretary and other permanent members includes; secretary, Department of Industrial Policy and Promotion (DIPP), commerce secretary etc.

Ex Finance Minister Arun Jaitley had announced in the budget speech in Lok Sabha that FIPB will be abolished and government issued notification (vide O.M No. 01/01/FC12017) to abolish the FIPB on 5th June 2017.

The FIPB is being replaced by the Foreign Investment Facilitation Portal (FIFP) in May 2017.
What is Foreign Investment Facilitation Portal (FIFP)

Foreign Investment Facilitation Portal (FIFP) is the online single point interface of the Ministry of Finance to facilitate Foreign Direct Investment (FDI) in the country.This portal is administered by Department of Industrial Policy & Promotion (DIPP).

Functions of FIFP

1. To impart greater transparency in the approval process of the FDI.

2. To improve the communication, reduced paperwork, speed up processing and inform the investor through SMS/email.

3. To upload the approval letters in standard format on the Portal itself for the benefit of the investors.

4. To transmit the guidelines and press release related to FDI Policy to the investors.

Why FIFP replaced the FIPB?

The basic reason behind the replacement of the FIPB is to increase the transparency and speed up the clearance procedure in the FDI proposals so that FDI inflow can be increased in the country.

After the abolition of the FIPB now individual departments of the government have been empowered to clear FDI proposals in consultation with Department of policy and Promotion (DIPP) which will also issue the Standard Operating Procedures (SOPs) for processing applications. 

Now timeline will be fixed for approving FDI proposals by the competent authorities. The rejection of the application is made tougher as it will now mandatorily require concurrence of DIPP. 

As per new procedure the Ministry of Home Affairs is entitled to give nod if the FDI application comes from Pakistan and Bangladesh and FDI proposals require approval by the private security agencies and manufacturing of small arms take place.

This move is seen as a simplification of the existing procedure to provide speedy clearance to FDI proposals. Although experts have also raised doubts whether line ministries are equipped to take such decisions speedily.

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