Cabinet likely to take up FIPB abolition today

Illustration: Binay Sinha
The Union Cabinet, led by Prime Minister Narendra Modi, is likely to consider the abolition of the Foreign Investment Promotion Board (FIPB) on Wednesday.

Once the proposal is approved, the finance ministry could be given a month to wind up the FIPB. Since the early 1990s, it has been the single window for allowing foreign direct investments (FDI) that need official approval.

After it is wound up, the nod would be given by sector regulators, licensing authorities or ministries concerned.

In the Union Budget for the financial year 2017-18, Finance Minister Arun Jaitley had announced that the FIPB would be dismantled. “We have now reached a stage where the FIPB can be phased out. We have decided to abolish it in 2017-18,” he had said during his Budget speech on February1 .

Senior government officials said the final note on the matter was ready for Cabinet approval. It had been circulated among ministries and their views had been incorporated. 

“In the meantime, further liberalisation of FDI policy is under consideration,” Jaitley had said.

The FIPB’s powers have been systematically depleted under the current government. Most notably, in June 2016, the government had announced relaxed FDI norms in single-brand retail, civil aviation, airports, pharmaceuticals, animal husbandry and food products. This means, investors in these sectors do not need seek approval from the FIPB.

The board was set up in the early 1990s; it was then under the Prime Minister’s Office. In 1996, it was transferred to the commerce ministry’s department of industrial policy and promotion, and to finance ministry’s department of economic affairs in 2003. Economic Affairs Secretary Shaktikanta Das heads it at present.

After the FIPB is abolished, the government might ease FDI norms further in a few sectors. There could be an increase in the FDI limit in print news media to 49 per cent from the current 26 per cent and single-brand retail could be on the full automatic route.

Sectors where industry players have asked for further easing of rules include aviation, defence and pharmaceuticals. The government had allowed full FDI in defence after approval; investors can pump in up to 49 per cent through automatic route. For brownfield projects in the pharmaceutical sector, automatic approval had been extended to 74 per cent.

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