Prime Minister Narendra Modi has stepped in to end a turf battle between the department of industrial policy and promotion (DIPP) and the finance ministry on the issue of control over foreign investment approvals.
He has decided that the Foreign Investment Promotion Board (FIPB), the inter-ministerial body that vets overseas investment proposals, will continue to be housed at North Block, the finance ministry, turning down DIPP's bid to regain control over it.
DIPP is part of the ministry of commerce and industry. "It has been decided that FIPB will
remain with the finance ministry," a senior government official told ET. The new government wants to make sure that the policy regime encourages overseas investors to come to India.
Modi had sought to ensure effective coordination between key ministries by giving Nirmala Sitharaman independent charge of commerce and industry while also making her minister of state for finance and corporate affairs. DIPP had pitched for moving FIPB back into its fold soon after the Modi overnment took over.
Modi had sought to ensure effective coordination between key ministries by giving Nirmala Sitharaman independent charge of commerce and industry while also making her minister of state for finance and corporate affairs. DIPP had pitched for moving FIPB back into its fold soon after the Modi overnment took over.The department of economic affairs (DEA), part of the finance ministry, had on the other hand sought complete control of the foreign investment regime, including the policy on foreign direct investment (FDI).
DIPP housed FIPB until 2003, when it was moved to North Block by the then NDA government. The Prime Minister's Office has directed that the status quo shall be main ained with respect to FIPB, said the official, who's privy to the development.
Finance minister Arun Jaitley had said in an interview to ET on Saturday: "You see when I became the commerce minister, FIPB was taken away from the commerce and industry ministry and given to the finance ministry. Now, that I have become the finance minister, I hope the opposite does not happen."
The finance minister is the final clear ing authority for FDI proposals after FIPB recommends them for approval. DIPP administers FDI policy though management of the Foreign Exchange Management Act (Fema) lies with the finance ministry.
Fema provides the legal framework for the foreign investment regime. A fierce turf war broke out during the tenure of the previous Manmohan Singh-led government between DIPP and DEA after the first didn't consult the second over the investment component of the India-Asean Comprehensive Economic Promotion Agreement.
A formal Cabinet note on the issue was forwarded to the finance ministry by the Prime Minister's Office after its views were found to be absent. North Block had some serious reservations on the investment treaty that seeks to accord pre-establishment national treatment to investors from the region.
However, the finance ministry had been overruled by the cabinet, which cleared the draft of the agreement earlier this year. Department of industrial policy and promotion then sought to claim the authority to negotiate bilateral investment promotion agreements, something that has been the finance ministry's prerogative.
Both departments have had serious differences over FDI policy. DIPP's move to impose curbs on FDI in the pharma sector came in for intense criticism.
Press notes 2 and 3 issued by DIPP in 2009, despite the opposition of the Reserve Bank of India, could not come into effect for several years in absence of the Fema notification. FDI policy guidelines are issued in the form of such press notes.Source: http://economictimes.indiatimes.com/
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