17 June 2024

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Cabinet approved the proposal for scrapping of FIPB


Union Cabinet has approved phasing out of 25 years old Foreign Investment Promotion Board. With this decision, administrative Ministries/Departments will be allowed to process applications for FDI requiring government approval. Decision is based on hope that, scrapping of FIPB would help in ease of doing business and enhance FDI inflow. More than 90% of total FDI inflows are coming from automatic route. However, FDI proposals above Rs 5,000 crore would continue to come under the purview of Cabinet Committee on Economic Affairs (CCEA). As of now, only 11 sectors, including defence and retail trading requires government approval for foreign direct investment (FDI). These 11 sectors that require approval would be dealt directly by concerned ministry by following standard operating procedure approved by Cabinet. FIPB will be replaced by a new mechanism. However, proposals related to security or sensitive sector, would require approval of Home Ministry. Further, proposal pending with FIPB would go back to ministries concerned.

Foreign Investment Promotion Board (FIPB), is an inter-ministerial body, responsible for processing of FDI proposals and making recommendations for Government approval. Extant of FDI Policy, Press Notes and other related notified guidelines formulated by Department of Industrial Policy and Promotion (DIPP) in Ministry of Commerce and Industry are bases of FIPB decisions. In the process of making recommendations, FIPB provides significant inputs for FDI policy-making. FIPB was initially constituted under Prime Minister's Office (PMO) in wake of economic liberalization. A 3-tier approval mechanism approves FIPB’s Recommendations consisting of FIPB as a committee of senior officials to examine and make recommendations; Empowered Committee on Foreign Investment (ECFI) chaired by Finance Minister for deciding on recommendations of FIPB for projects in which total investment in project was up to Rs. 300 Crore; and Cabinet Committee on Foreign Investment (CCFI) for deciding on recommendations of FIPB for projects in which total investment was more than Rs. 300 Crore.

Henceforth, work relating to processing of applications for FDI and approval of Government thereon under extant FDI Policy and FEMA, shall now be handled by concerned Ministries/Departments in consultation with Department of Industrial Policy & Promotion (DIPP), Ministry of Commerce, which will also issue Standard Operating Procedure (SOP) for processing of applications and decision of Government under extant FDI policy. At present, applications are considered by FIPB in Department of Economic Affairs (DEA), Ministry of Finance consisting of various Secretaries of Government of India for making recommendation on FDI applications. After this decision of cabinet, it would be handled independently by Administrative Ministries as per Sector.

Tags : FIPB Abolition Approval

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