This article summarizes the latest Press Release issued by the Cabinet Committee on Economic Affairs (CCEA) on proposals requiring prior approval of the Foreign Investment Promotion Board (FIPB) and thereafter CCEA approval. As per the existing policy, the recommendations of FIPB for any proposal falling under approval route and involving total project cost of more than INR 6000 Million were referred to CCEA for approval.
This limit of 6000 Million was approved in July 1996 and was not revised thereafter to reflect the current economic realities. Further, there was no clarification on the constituents of the ‘total project cost’.
Policy Change/Announcement
With a view to expedite the foreign investment inflow into the country and also to save time and efforts for the FIPB/CCEA, it has been decided that henceforth:
- Finance Minister will approve proposals (recommended by FIPB) where the total foreign equity investment is less than INR 12000 Million.
- CCEA would consider the proposals where total foreign equity investment is INR 12000 Million and above.
- additionally, following cases, where prior approval of FIPB / CCEA for making initial investment has already been taken, would not require any further approval from FIPB/ CCEA:
- Proposals where activities earlier required prior approval of FIPB/ CCEA but subsequently such activities/ sectors have been placed under automatic route;
- Proposals where activities attracted sectoral caps earlier but subsequently such caps were removed or increased and the activity was placed under the automatic route; and
- Proposals where prior approval of FIPB/ CCEA had been obtained due to requirement of Press Note 18 (1998 Series)/ Press Note 1 (2005 Series) and are now proposing additional foreign investment.
Source: Press Release dated 11.02.2010 issued by Ministry of Commerce & Industry(Given below)
Review of cases requiring prior approval of the Foreign Investment Promotion Board
The Cabinet Committee on Economic Affairs today approved a proposal of the Department of Industrial Policy & Promotion, Ministry of Commerce & Industry to review the policy on cases requiring prior Government approval for foreign investment.
Presently, the recommendations of the Foreign Investment Promotion Board (FIPB) on proposals with total project cost up to Rs.600 crore are approved by the Finance Minister and proposals involving total project cost more than Rs.600 crore are put up to the Cabinet Committee on Economic Affairs. Further, presently the total project cost, including the foreign equity inflow, is taken into consideration in deciding whether the proposal is to be put up for consideration of CCEA. With today’s approval, only proposals involving total foreign equity inflow of more than Rs.1200 crore would be placed for consideration of CCEA. The recommendations of FIPB on proposals with total foreign equity inflow of and below Rs.1200 crore will be considered by the Finance Minister for approval.
Further, it has been decided that the cases where prior approval of FIPB/CCEA for making the initial foreign investment was taken, then the following types of cases would not require to approach FIPB/Government for fresh approval:
- Cases of entities whose activities had earlier required prior approval of FIPB/CCFI/CCEA and who had, accordingly, earlier obtained prior approval of FIPB/CCFI/CCEA for their initial foreign investment but subsequently such activities/sectors have been placed under automatic route;
- Cases of entities whose activities had sectoral caps earlier and who had, accordingly, earlier obtained prior approval of FIPB/CCFI/CCEA for their initial foreign investment but subsequently such caps were removed or increased and the activity placed under the automatic route;
- Cases where prior approval of FIPB/CCFI/CCEA had been obtained with reference to activities/sectors requiring such approval and also from the angle of provisions of Press Note 18/1998 or Press Note 1 of 2005.
With the Government’s further liberalization, the approval is expected to save time and efforts for the FIPB/CCEA and also expedite foreign investment inflow.
