FIPB-Foreign Investment Promotion Board: Historical Background & Present Situation

Historical Background of FIPB

The Foreign Investment Promotion Board (FIPB), housed in the Department of Economic Affairs, Ministry of Finance, is an inter-ministerial body, responsible for processing of FDI proposals and making recommendations for Government approval. The extant FDI Policy, Press Notes and other related notified guidelines formulated by Department of Industrial Policy and Promotion (DIPP) in the Ministry of Commerce and Industry are the bases of the FIPB decisions. In the process of making recommendations, the FIPB provides significant inputs for FDI policy-making.

Approvals under PMO: The FIPB was initially constituted under the Prime Minister's Office (PMO) in the wake of the economic liberalization drive of the early 1990s. The recommendations of the FIPB were approved through a 3-tier approval mechanism, viz. FIPB as a committee of senior officials to examine and make recommendations; Empowered Committee on Foreign Investment (ECFI) chaired by the Finance Minister for deciding on the recommendations of the FIPB for projects in which the total investment in the project was up to Rs. 300 crore; and the Cabinet Committee on Foreign Investment (CCFI) for deciding on the recommendations of the FIPB for projects in which the total investment was more than Rs. 300 crore.


Transfer to DIPP in 1996: The Board was reconstituted in 1996 with transfer of the FIPB to DIPP and approval levels were as under: Recommendations of FIPB in respect of the project proposals each involving a total investment of Rs. 600 Crore or less would be considered and approved by the Industry Minister. The recommendations in respect of the projects each with a total investment of above Rs. 600 Crore would be submitted to the Cabinet Committee on Foreign Investment (CCFI) for decision. The CCFI would also consider the proposals which may be referred to it or which had been rejected by the Industry Minister. According to Press Note 7 of 1999, there would be no need for obtaining prior approval of FIPB / Government for increase in the amount of foreign equity within the percentage of foreign equity already approved in all cases in which the original project cost was up to Rs. 600 crore. Any company could infuse additional funds by way of foreign equity as a result of financial restructuring (provided there is no change in the percentage of foreign equity) and notify the same to the Secretariat of Industrial Assistance (SIA) within thirty days of receipt of funds as also allotment of shares to non-resident shareholders.

This procedure, however, did not apply in cases of increase in the percentage of foreign equity as also where initial approval was granted by CCFI. Such cases required prior approval of the FIPB / Government as per the existing procedure.

The FIPB was transferred to the Department of Economic Affairs; Ministry of Finance in terms of the Presidential Order dated 30.01.2003. The levels of approval,notified vide Order dated 11.07.1996 were essentially retained, except to the extent that recommendations of FIPB for project-proposals involving a total investment of less than Rs. 600 Crore would be considered and approved by the Finance and Company Affairs Minister and those with a total investment beyond Rs. 600 Crore would be submitted to the Cabinet Committee on Economic Affairs for decision.

The permanent members of the Board are the following:
  1. Secretary to the Government of India, DEA, Ministry of Finance - Chairman
  2. Secretary to the Government of India, Department of Industrial Policy and Promotion (DIPP).
  3. Secretary to the Government of India, Department of Commerce (DoC).
  4. Secretary to the Government of India (Economic Relations), Ministry of External Affairs (MEA).
  5. Secretary to the Government of India, Ministry of Overseas Indian Affairs (MOIA)
  6. Secretary, Department of Revenue (DoR), Ministry of Finance (co-opted permanently).
  7. Secretary, Ministry of Small and Medium & Micro Enterprises (co-opted permanently).


The Board may co-opt other Secretaries to the Government of India and officials of financial institutions, banks and professional experts in industry and commerce, when required. The Secretary to the Government of India, Ministry of Small, Medium and Micro Enterprises and the Secretary to the Government of India, Department of Revenue have been co-opted on the Board.

Present FIPB

The Foreign Investment Promotion Board (FIPB), housed in the Department of Economic Affairs, Ministry of Finance, is an inter-ministerial body, responsible for processing of FDI proposals and making recommendations for Government approval. The extant FDI Policy, Press Notes and other related notified guidelines formulated by Department of Industrial Policy and Promotion (DIPP) in the Ministry of Commerce and Industry are the bases of the FIPB decisions. In the process of making recommendations, the FIPB provides significant inputs for FDI policy-making.

FIPB comprises of the following Secretaries to the Government of India:
(i) Secretary to Government, Department of Economic Affairs, Ministry of Finance – Chairperson
(ii) Secretary to Government, Department of Industrial Policy & Promotion, Ministry of Commerce & Industry
(iii) Secretary to Government, Department of Commerce, Ministry of Commerce & Industry
(iv) Secretary to Government, Economic Relations, Ministry of External Affairs
(v) Secretary to Government, Ministry of Overseas Indian Affairs.

The Board would be able 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 necessary. The Secretary to the Government of India, Ministry of Small, Medium and Micro Enterprises and the Secretary to the Government of India, Department of Revenue have been co-opted on the Board.

Levels of Approvals for Cases under Government Route

1. The Minister of Finance who is in-charge of FIPB would consider the recommendations of FIPB on proposals with total foreign equity inflow of and below Rs. 5000 crore.

2. The recommendations of FIPB on proposals with total foreign equity inflow of more than Rs. 5000 crore would be placed for consideration of Cabinet Committee on Economic Affairs (CCEA).

3. The CCEA would also consider the proposals which may be referred to it by the FIPB/the Minister of Finance (in-charge of FIPB).


Source: http://fipb.gov.in/AboutUs.aspx