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19 July, 2017
In May this year, the Union Cabinet approved the abolition of the Foreign Investment Promotion Board (“FIPB”) in a phased manner. Thereafter, all foreign direct investment (“FDI”) applications are considered by the relevant Ministry/Department which governs the area in which such relevant investment is being made. On June 29, 2017 the Department of Industrial Policy and Promotion (“DIPP”) released the Standard Operating Procedures (“SOP”), detailing the procedure for processing of the FDI proposals by relevant ministries.
Filing an FDI application
All new FDI applications shall now have to be filed on the Foreign Investment Facilitation Portal (“Portal”); and in case such application is digitally signed the applicant is not required to submit any physical copy with the competent authority. For applications which are not digitally signed, applicant is required to submit one signed physical copy of the proposal to the DIPP or such other authority as the DIPP may communicate to the applicant. The DIPP shall then, identify the concerned ministry and forward such application to the concerned ministry and the Reserve Bank of India within a period 2 (two) days for their comments.
In addition investments in broadcasting, telecommunication, establishment and operation of satellites, private security agencies, defence, civil aviation and mining & mineral separation of titanium bearing minerals and ores, its value addition and integrated activities and investments, and all FDI from Pakistan and Bangladesh, would require additional security clearance from the Ministry of Home Affairs (“MHA”) (“Security Clearance”).
Any comments that any authority may have on such proposal shall be uploaded on the Portal. In case the comments are received within the stipulated time it shall be presumed that such authority has no comments to provide. The only authority that can ask for additional time as per the stipulations of the SOP is the MHA.
The DIPP has set a time limit of upto 8 (eight) weeks for clearing an FDI application which does not require a Security Clearance and upto 10 (ten) weeks for an application which requires a Security Clearance.
Cabinet Committee Clearance
In case of proposals involving total foreign equity inflow of more than INR 50 billion/ 5000 Crore, the concerned ministry shall place the same for consideration of Cabinet Committee on Economic Affairs (“Cabinet Committee”) within the above timelines. After the receipt of the decision of Cabinet Committee, approval letter shall be issued within 1 (one) week.
Concerned ministries shall hold a monthly review to review the foreign investment proposals pending with them and the DIPP and the concerned ministries shall hold a joint quarterly meeting to review any pending applications.
Implications
Prima facie, the changes appear to be positive in nature. However, the binding nature of the timelines and whether DIPP can be held accountable to concluding the process within the prescribed time frame will be have to be analysed as it appears that the SOP is not in the nature of binding law.
That being said, what is commendable is the DIPP’s effort to bring transparency into the process by ensuring that all comments from ministries are on the online system, and has further streamlined the process by ensuring that ministries take a regular review on pending applications.
For more information, please contact:
Sameer Sibal, Partner, Jerome Merchant + Partners
sameer.sibal@jmp.law
