The which the total investment in the project upto

The FIPB  (Foreign Investment Promotion Board)  is a national agency of government of India,
it is housed in Department of Economics Affairs , Ministry  of Finance, it is an inter ministerial body
responsible for FDI proposal and recommendation of government  for approval. In extant FDI policy , press
note and notified guideline are being formulated by   Department of industrial policy and
promotion (DIPP)   in the ministry of
commerce and industry are the bases of FIPB decision .  FIPB provides significant inputs for FDI
policy making in the process of giving suggestion .

Approval under PMO: The FIPB was
initially constituted under the Prime Minister Office (PMO) to operate the
economic liberalization  in the  wake of early 1990s. The guidance of FIPB
body through 3-tire approval mechanism viz. FIPB as a committee of senior
official to examine and make recommendation , empowered committee  on foreign investment  (ECFI)  
deciding on the suggestion of the FIPB for the project on which  the total investment in the project upto Rs.
300crore  and  the Cabinate 
Committee on Foreign Investment for deciding on the recommendation of
FIPB for  project in which the total
investment is more than 300 crore .

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Transfer to DIPP: The board was
reconstituted in 1996 and FIPB was transfered to DIPP and all approval  levels were under it. The recommendation of
FIPB in respect project proposal , each involve a total investment of Rs 600
crore, less would entertain by Industry Minister  and above that would by Cabinet Committee of
foreign investment  (CCFI) ,  where as CCFI will also entertain those
proposal which has been rejected by Industry Minister  According to press Note7 of 1999 there is no
need to obtain  price approved from FIPB .
The FIPB  was transferred to Department
of Economic Affairs , Ministry of Finance in term of the presidential order .
dated 30.01.2003 .The level of approved , notified vide order dated 11.07.1996  were 
essential retained, expect to the extent that the  FDI proposal involving the total proposal of
less the Rs 600 crore would be considered and approved by the  finance and company affair ministry and those
investment which is beyond Rs 6000 crore will be entertain  by the Cabinet Committee of Economic  Affairs for decision1.

After reforms  FIPB

The foreign investment promotion
board house in department of economics affairs 
, ministry of finance is an inter ministerial body responsible for
FDI  proposal and making recommendation
for government approval , for FDI policy Press note and other related notify
guideline  are formulated by DIPP
department of industry policy and promotion in the ministry of  commerce and industry are the bases of FIPB




FIPB comprises to the following
secretaries  to the government of India.

1 secretary of government,
Department of economic affairs , ministry of finance.

2 secretary of government, Department
of industry policy and   promotion , ministry of economic affairs.

3 secretary of government,
economic relation ,ministry of external affairs.

4 secretary of government ,
ministry of overseas Indian affairs.2


 Foreign direct investment (FDI) is a direct investment into
production or business in a country by an individual or company of another
country, either by buying a company in the target country or by expanding
operations of an existing business in that country. FDI in India is subject to
certain Rules and is subject to predefined limits in various sectors which
range from 20% to 100%.


Foreign investment was introduced in 1991
under Foreign Exchange Management Act (FEMA), driven by then finance minister
Manmohan Singh. India imposes cap on equity holding by foreign investors in
various sectors. For instance: current FDI limit in aviation sector is maximum


The FDI limits are reviewed by the Government
from time to time and as and when the need is felt and FDI is allowed in new
sectors where the limits of investment in the existing sectors are modified


Benefits of FDI:

Improves forex (foreign exchange)
position of the country;

Employment generation and increase in

Helps in capital formation by bringing
fresh capital;

Helps in transfer of new technologies,
management skills, intellectual property;

Increases competition within the local
market and this brings higher efficiencies;

Helps in increasing exports;

Increases tax revenues.

FDI via two routes

An Indian company may receive FDI under the
two routes as given under: Automatic
route and government route.


Automatic Route: FDI is allowed under the automatic route
without prior approval either of the government or the Reserve Bank of India in
all activities/sectors as specified in the FDI Policy, issued by the Government
of India from time to time.


Government Route: FDI in activities not covered under the
automatic route requires prior approval of the Government which are considered
by the Foreign investment Promotion Board (FIPB), Department of Economic Affairs,
Ministry of Finance.3 



Sectors under which FDI is not allowed in

There are also some sectors in which FDI is
prohibited. FDI is not allowed in sectors such as atomic energy, lottery
business, gambling and betting, business of chit fund and Nidhi company. FDI is
also not allowed in agriculture and plantation activities other than tea


FDI is also not allowed under housing and
real-estate business (except development of townships, construction of residen­tial/commercial
premises, roads or bridges). It is also not allowed in the manufacture of cigar
or cigarettes
of tobacco or of tobacco substitutes4.


New FDI policies and abolishment

With the motive of Make in India
project the (DIPP) Department of Industrial policy and promotion had revised
and issued certain changes  in FDI policy
of 2017-18  on 27 august 2017, the FDI
policy 2017 incorporated various notification 
issued by the government of India over past few years

New Streamlined Procedure for Government

Foreign Investment Promotion Board (FIPB) will
soon become a history said by the Finance Minister Arun Jaitly  in the budget  the reason being 90% of the FDI approval is
coming from the Automatic Route  not from
the approval route , hence the approval route require  government approval and a lot of red tapism
which taking much time in clearing their proposal On the other hand
introduction of  FIFP (Foreign Investment
Facilitation portal) it is an administrative  body which facilitate  FDI proposal

Ø  Introduction
of Component authority: The FDI Policy 2017 defines and
lists sector-specific administrative ministry / department as ‘Competent
Authorities’ empowered to grant government approval for FDI. Competent
Authorities listed in the FDI Policy 2017 include the DIPP in respect of
applications for FDI in the Single Brand, Multi Brand and Food Product retail
trading and the Department of Economic Affairs of India for FDI in the
financial services sector5

Ø  Introduction
of Standard Operating Procedure: The DIPP 
has also introduce the standard operating procedure  (SOP) 
for the process of FDI proposal 
it is basically issued to overcome from detailed  procedure and timeline for the application as
well as the list of the component for processing government approval for FDI in

Ø   Standard operating  procedure for processing government approval:

1 Proposals for foreign investment in sectors/activities requiring
Government approval as per the Consolidated FDI Policy Circular of 2016, as
amended from time to time, would be filed online on the restore FIPB portal,
rechristened as Foreign Investment Facilitation Portal.

 2. The applicant would be required
to submit the proposal for foreign investment in the format as available on the
portal and upload documents as per the list at

. 3. After the proposals are filed online, DIPP will identify the
concerned Administrative Ministry/Department and e-transfer the proposal to the
concerned Administrative Ministry/Department (Competent Authority) within 2

3.1 In case of digitally signed applications, the applicant is not
required to submit any physical copy with the competent authority. For
applications which are not digitally signed, DIPP would inform the applicant
through online communication to submit one signed physical copy of the proposal
to the Competent Authority. Applicant would be required to submit the signed
physical copy of the application within 5 days of such communication from DIPP.

3.2 Calculation of time limits for disposal of applications would be with
reference to the date of filing of online application. However, if the signed
physical copy is not filed with the Competent Authority within 7 days of the
communication from DIPP, the date of filing of the physical application would
be reckoned as the reference date for calculation of time limits.6


changes approved  Cabinet  in FDI policy:

Single Brand Retail
Trading (SBRT)

The current FDI Policy on SBRT allows 49%
FDI under the automatic route, and FDI beyond that and up to 100% through the
Government approval route. Earlier, a sourcing norm was also attached to such
an investment. This meant that investors were required to directed 30% of the
value of goods purchased for their Indian businesses through local sources.
as per the new definition of ‘incremental sourcing’, whatever increase occurs
in the entity’s sourcing from India for global operations every year would be
included in the figures for ‘local sourcing’ for Indian operations. More
important, the amendment now allows 100% FDI under the automatic route, helping
today’s investors enter the Indian market without having to seek approval.7


As per the
current FDI Policy, overseas’ carriers are allowed to invest under the
Government approval route in the capital of Indian companies operating
scheduled and non-scheduled air transport services, up to the limit of 49% of
their paid-up capital. However, this provision was not applicable to Air India
(India’s national carrier, which is currently in the process of being sold by
Central Government). This implied that foreign airlines could not invest in the
national carrier. The amendment removes this restriction, and permits foreign
airlines to invest up to 49% under the approval route in Air India, which was
long considered as being a burden on the state-exchequer. This move by the
Government is a bold one, chiefly because it had previously dis favoured the
purchase of Air India assets by foreign investors.8


FDI in Investment/ Holding Companies

In a very
welcome move, foreign investment into an Indian company, engaged only in the
activity of investing in the capital of other Indian companies / limited
liability partnerships and in ‘Core Investing Companies’ has been liberalised.
In cases where such companies are regulated by any financial sector regulator,
then foreign investment up to 100% under the automatic route shall be allowed.
Whereas, in the absence of a financial sector regulator, where only part is
regulated, or where there is doubt regarding regulatory oversight, foreign
investment up to 100% will be allowed under the approval route, but it will be
conditional upon the minimum capitalisation requirement and other terms, as may
be decided by the Government.9


The current FDI
Policy for the Pharmaceuticals sector inter-alia provides
that the definition of ‘medical device’ as contained in the FDI Policy would be
subject to the amendment in the Drugs and Cosmetics Act, 1940. The Government
has decided to remove references to the Drugs and Cosmetics Act, 1940 from the
FDI Policy and the definition of ‘medical devices’ as contained in the FDI
Policy will soon be amended. In the case of medical devices, the Government has
permitted a wide range of items that can attract up to 100% FDI via the
automatic route. This will certainly benefit health services in the country, as
India will now gain access to modern equipment and machineries.

Power Exchange

Currently, 49%
of FDI under the automatic route is permitted in Power Exchanges registered
under the Central Electricity Regulatory Commission (Power Market) Regulations,
2010. However, purchases by foreign institutional investors (FIIs) /
foreign portfolio investors (FPIs) were restricted to the
secondary market only. The Government has now decided to do away with this
restriction and has allowed FIIs / FPIs to invest in Power Exchanges through
the primary market as well10.


FIPB, a national
agency of Government of India, offered a single window clearance for
applications on FDI in India. The sectors which came under the automatic method
did not require any prior approval from FIPB and were subject to only sectoral
laws. Secretary, Department of Economic Affairs, Ministry of Finance was the
chairman of the board which consisted of

1. Secretary to
Government, Department of Industrial Policy & Promotion, Ministry of
Commerce & Industry,

2. Secretary to
Government, Department of Commerce, Ministry of Commerce & Industry

, 3. Secretary to
Government, Economic Relations, Ministry of External Affairs,

 4. Secretary to Government, Ministry of
Overseas Indian Affairs. The Board was empowered to co-opt other Secretaries to
the Central Government and top officials of financial institutions, banks and
professional experts of Industry and Commerce, as and when necessary11

The proposal to wind up FIPB was thereafter
approved by the Union Cabinet in its meeting held on May 24, 2017. The
government also issued a press release on the same day followed by an Office
Memorandum dated June 5, 2017 providing a road map for transition process. The
Office Memorandum clearly laid down the responsibilities of various ministries/
departments in evaluating FDI proposals under the government route. DIPP
issued the SOP which provides the detailed procedure for filing and processing
of FDI applications, timelines for approval/ rejection of the proposals,
parameters for evaluation of proposal, etc. by the competent authority. 


Alternative steps taken by government   for the previous proposal and reforms
through SOP


Key provisions of SOP

Filing of online application 

i. Online submission 
Earlier, the applications for foreign investment
in sectors falling under the government route in terms of the extant FDI Policy
were filed on the FIPB portal. Now, DIPP has taken the charge of FIPB portal.
The same is now renovated and renamed as Foreign Investment Facilitation Portal

ii. Identification of ministry and e-transfer of proposal 
Once the online proposal is received, DIPP has
to identify the concerned administrative ministry or department for its
evaluation and e-transfer it to such administrative ministry/department
(Competent Authority) within two days of its receipt. 

iii. Digital
Signing and Physical Application 
Where DIPP receives an application which is not
digitally signed, DIPP has to inform the applicant to submit one signed
physical copy of the proposal directly to the Competent Authority within five
days of receiving such communication from DIPP. In cases where the application
is digitally signed, no separate physical copy is required to be submitted with



2. Designating the
Competent Authority/ Department 
A comprehensive list of Competent Authorities
for evaluation of FDI proposal requiring prior government approval has been
provided under the SOP. For instance, proposals relating to Defence sector has
to be evaluated by Ministry of Defence, proposals relating to Mining sector has
to be evaluated by Ministry of Mines, etc.12 

3. Special cases 
For proposals in sectors that are currently
under the automatic route, but required government approval earlier, the
Competent Authority will grant a post-facto approval. Further, on proposals
where there is a doubt as to which administrative ministry or department will
evaluate the proposal, DIPP has to identify the Competent Authority. 

3. Special cases 
For proposals in sectors that are currently
under the automatic route, but required government approval earlier, the
Competent Authority will grant a post-facto approval. Further, on proposals
where there is a doubt as to which administrative ministry or department will
evaluate the proposal, DIPP has to identify the Competent Authority. 













No. 1/8/2016-FC-1 Government of India Ministry of Commerce & Industry
Department of Industrial Policy & Promotion 29 th of June, 2017.




rishab sahroff  10 january 2018

10 ttps://