Core group may take up plan to limit FIPB role

NEW DELHI: The Foreign Investment Promotion Board’s (FIPB) core group of secretaries will meet on December 29 to discuss the department of economic affairs’ (DEA) proposal to waive FIPB approval for a few categories of FDI proposals and place them on the automatic approval route.
The core group, headed by the secretary of DEA, would consider the proposals to waive the board’s approval for conversion of external commercial borrowing (ECB) into equity and for transfer of minority equity shares in companies to relatives residing abroad. The DEA has proposed to allow automatic approval for such FDI proposals.
The agenda note for the core group meeting further proposes to abolish the stipulation under press note 18, that the foreign direct investor will require an NOC from the existent or former Indian partner for setting up new ventures such as wholly-owned subsidiaries in case the Indian partner is sick and/or bankrupt. The DEA proposes to do away with the NOC condition if the agreement between the domestic and foreign partners is limited to a period that has expired.
Sources said the DEA has made these proposals by an agenda note for the meeting sent to other departments, with a view to avoiding hassles to the foreign investor. The department thinks that there is no need to create impediments to FDI, without any commensurate gain to the country or the domestic industry.
Meanwhile, the finance ministry’s move has created some schism within the government. The Department of industrial policy and promotion (DIPP), under which comes the FDI policy, is not fully convinced about the DEA’s pro-active role with regard to FDI. “The DEA may be seeking to interpret the existing policy,� an official said when asked if the DEA has the mandate to frame FDI policies.