India received a record $61-billion FDI (including reinvested earnings) in 2016-17, up from $55.6 billion in the previous fiscal, both highest among all countries.
After setting in motion the dismantling of the Foreign Investment Promotion Board (FIPB) and assigning the work of processing FDI applications to the administrative ministries concerned, the Narendra Modi government has now put in place a time-bound system for approval of these investment proposals. With a stress on digital filings, the new regime would be “simpler in execution and expeditious in disposal”, according to a note sent by the department of industrial policy and promotion (DIPP) to all ministries concerned. India received a record $61-billion FDI (including reinvested earnings) in 2016-17, up from $55.6 billion in the previous fiscal, both highest among all countries. “After the proposals are filed online, DIPP will identify the concerned administrative ministry/department and e-transfer the proposal to the concerned administrative/ department within two days,” the note said. A maximum of 10 weeks should suffice to grant approval even in case the proposal requires security clearance and eight weeks for proposals where security clearance is not required, the DIPP, the nodal agency for FDI policy, added. Calculation of time limits for disposal of applications would be with reference to the date of filing of the online application.
Detailing the standard operating procedure for processing FDI proposals, the DIPP said once a proposal is received online – on the revamped FIPB portal renamed as Foreign Investment Facilitation Portal–, the same shall be circulated by the competent authority through the portal within 2 days of the receipt of the proposal to the Reserve Bank of India for comments.
However, proposals for foreign investment in sectors like broadcasting, telecom and satellites requiring security clearance would have to be additionally referred to the home ministry. Investments from Pakistan and Bangladesh as well as investments meant for the North-East region and Jammu & Kashmir will also require security clearance from the home ministry.
Currently, applications that are not eligible for automatic route are considered by the FIPB, housed in the department of economic affairs (DEA) in the finance ministry and the board comprises various secretaries to government of India.
In case of digitally-signed applications, the applicant is not required to submit any physical copy with the competent authority. However, where it is not digitally-signed, DIPP would inform the applicant through online communication to submit one signed physical copy of the proposal.
The draft SOPs for processing of FDI applications also state that for items requiring government approval (hitherto vetted by FIPB), FDI proposals in the mining sector will be evaluated by the mining ministry and those requiring industrial licence by the department of defence production. FDI for manufacturing of small arms and ammunition will have to be approved by the home ministry.
Applicant will be required to submit the copy of the application within the 5 days of such communication from DIPP. If the signed copy is not filed within the next 7 days, the date of filing of the physical application would be reckoned as the reference date for calculation of time limits.
In respect of applications in which there is a doubt about the administrative ministry concerned, DIPP shall identify the administrative ministry/department where the application will be processed.
“Specific issues of proposals requiring circulation from the point of view of FDI policy will be referred to DIPP for clarification. Consultation with DIPP will hence be need-based and not routine and regular,” the note said, adding that consultation with any other ministry/department will require full justification and approval from the secretary concerned.
The draft SOP also said that the ministries/departments consulted on the proposal shall upload their comments on the portal within 4 weeks from the online receipt of the proposal. Comments by home ministry on proposals for investments in sectors requiring security clearance would be uploaded on the portal within 6 weeks of the receipt. In case, there are no comments within the time-frame, it would be presumed that there are no comments to offer.
“DIPP will provide clarification within 15 days on specific issues of FDI policy as may be referred by the competent authority,” it said. Within a week, the competent authority shall scrutinise the proposal and attached documents and ask the relevant additional information, if required.