New Delhi: In a significant move in sync with the government’s aim to make India an investment destination with greater “ease of doing business”, the Union Cabinet on Wednesday approved the abolition of the 25-year-old Foreign Investment Promotion Board (FIPB), which vets foreign direct investment proposals of various ministries with total foreign equity inflow upto Rs 3,000 crore.
Finance minister Arun Jaitley told reporters after the Cabinet meeting that the FIPB will now be replaced by a new system under which the proposals will be approved by the ministries under a standard operating procedure approved by the Cabinet.
This will cut down the time ministries take to clear FDI proposals, as they had to send them for FIPB clearance. Mr Jaitley said proposals on sensitive sectors will need home ministry clearance, while other pending cases lying with FIPB will be sent back to the ministries.
Explaining the rationale, Mr Jaitley said around 90 to 95 per cent of FDI proposals came under the automatic route, thus it was decided to shorten the procedure given the government’s pledge to make doing business easier. At present only 11 sectors, including defence and retail trade, need government approval for getting FDI.
The FIPB was set up in the early 1990s under the PMO after economic liberalisation was ushered in. It was shifted to the department of industrial policy and promotion in 1996, and then came under the department of economic affairs of the finance ministry in 2003.
FDI proposals with equity inflow of over Rs 3,000 crore need approval by the Cabinet Committee on Economic Affairs. The finance minister had said in his Budget speech on February 1 that the FIPB will be scrapped.
The FIPB is headed by the secretary, department of economic affairs, and includes the commerce secretary, DIPP secretary, MEA’s secretary (economic relations) and the secretary, overseas Indian affairs ministry.