The government has allowed the Foreign Investment Promotion Board (FIPB), under the commerce ministry, to clear foreign direct investment (FDI) proposals of up to Rs 1,200 crore. At present, all project proposals that involve investment of above Rs 600 crore are put up before the Cabinet Committee of Economic Affairs (CCEA) for approval.
Announcing the CCEA decision today, Home Minister P Chidambaram said the relaxation would expedite FDI inflow. “The Rs 600-crore cap was fixed in July 1996. Considering the investment requirement and the inflation factors, it has been decided that it should be increased to Rs 1,200 crore,” Chidambaram said.
While the total project cost, including the foreign equity inflow, is currently taken into consideration in deciding whether the proposal is to be put up for CCEA consideration, the new decision will see that only the proposals involving a foreign equity inflow of more than Rs 1,200 crore go to CCEA.
It was also decided that the cases where prior approval of FIPB or CCEA for making the initial foreign investment was taken would not require any fresh approval if those sectors had been brought under the automatic route in the subsequent years. In a separate briefing, Commerce and Industry Minister Anand Sharma said: “This is the first major change in the FDI policy since 1996. It has been done to relax some of the FDI norms. Our FDI inflows had been robust even during the global economic slowdown and this step will augment growth in the flows further…. It is quite likely that the inflows this year would exceed those received during last financial year.” Total FDI inflows during April-December was $20.92 billion, compared to $21.15 billion during the corresponding period of 200809. “This only shows that pace of inflows have been stable,” he said.
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