In this article, Swati Garg, an Advocate and an LL.M. graduate from Gujarat National Law University discusses How approvals for government route investments is obtained in post Foreign Investment Promotion Board era.

In India, Foreign Direct Investments (FDI) can be made through Automatic Route or Government-Approval Route. By automatic route, it simply implies that the investor is not required to take permission from the government whereas in government-approval route, as the name suggests, there is a need to take permission from government. Till 2017, Foreign Investment Promotion Board (FIPB) was a nodal agency for 25 years for processing FDI applications for government-approval route. However, in May 2017, an office memorandum was issued which abolished FIPB and it gave the authority to the concerned departments. The important point to remember here is that the concerned department has to take a decision in consonance with the Department of Industrial Policy and Promotion (DIPP).

Important Points to Remember

The link here gives a comprehensive list of competent authorities for the government approval route FDI.

Competent authority/ministry/departments for sectors/activities requiring government approval route.

S. No.	Sectors/Activity	Competent Authority/Ministry/Departments
1	Mining	Ministry of Mines
2	Defence	Department of  Defence Production, Ministry of Defence and Ministry of Home Affairs
3	Broadcasting and Print Media	Ministry of Information & Broadcasting
4	Civil Aviation	Ministry of Civil Aviation
5	Satellites	Department of Space
6	Telecommunications	Department of Telecommunications
7	Private Security Agencies	Ministry of Home Affairs
8	FDI from countries of concern falling under automatic route requiring security clearance	Department  of Industrial Policy & Promotion
9	FDI from countries of concern falling under approval route requiring security clearance	Nodal Administrative Ministries/Departments
10	Trading	Department  of Industrial Policy & Promotion
11	FDI proposals by Non-Resident Indians (NRIs)/ Export Oriented Units (EOUs) requiring approval of the Government	Department  of Industrial Policy & Promotion
12	Application  relating to issue  of equity shares under  the FDI policy under the  Government route for import of capital goods/machinery/equipment (excluding Second-hand machinery) and for pre-operative/pre-incorporation expenses (including payments of rent etc.)	Department  of Industrial Policy & Promotion
13	Unregulated Financial services	Department  of Industrial Policy & Promotion
14	FDI in Investment Company	Department of Economic Affairs
15	Banking (Public and Private)	Department of Financial Services
16	Pharmaceuticals	Department of Financial Services

A list of sector/activities where foreign investment can be made automatically up to a certain extent but there after, if anyone needs to invest more than that, government approval is required.

If there is some sector/activity which is not mentioned in the list, the concerned Ministry/Department will be the competent authority. If still there is a confusion left, DIPP will identify the competent authority.

These authorities will also be responsible for monitoring the compliances of FDI regulations by these companies.

For foreign investment more than Rs. 5000 crore, the competent authority has to place the proposal before Cabinet Committee on Economic Affairs (CCEA) for their consideration. Ministry can also refer the proposals to CCEA for consideration.

Any rejection of the proposal has to be done by competent authority in consultation with DIPP.

Central government in consultation with Ministry of Corporate Affairs and DIPP has published Standard Operation Procedure for filing proposals for FDI which can be accessed here:

http://dipp.nic.in/sites/default/files/Standard%20Operation%20Procedure%20%28SOP%29%20for%20Processing%20FDI%20Proposals.pdf

Procedure for filing proposals for FDI

Government has tried to make the FDI procedure less complex and expeditious by making the whole procedure online, even clarifying all confusions over e-mail and by fixing the time period to process the proposal.

1. All the proposals for foreign investment requiring government approval has to be filed on Foreign Investment Facilitation Portal at http://www.fifp.gov.in/. There is no fees to file the proposal.

Mandatory documents which has to be attached with the proposal are:

1. Certificate of Incorporation of the Investee & Investor Companies/Entities
2. Memorandum of Association (MOA) of the Investee & Investor Companies/Entities
3. Board Resolution of the Investee & Investor Companies/Entities
4. Audited  Financial  Statement of  Last Financial  Year of the Investee  & Investor Companies/Entities
5. Article of Association of the Investee & Investor Companies/Entities
6. List of Names and addresses of all foreign collaborators along with Passport Copy/ Identification Proof of the Investor Company/Entity
7. Diagrammatic representation of the flow and funds from the original investor to the investee company and Pre and Post shareholding pattern of the Investee Company
8. Affidavit stating that all  information provided in hard copy  and online are the same and correct

Moreover, the format of approval letter and list of other documents which has to be attached can be found by visiting this link.

2. After filing, DIPP has to identify the right competent authority and e-transfer the proposal.

3. If the proposal is not digitally signed, one need to file physical signed copies of the proposal only after intimation by DIPP.

4. Other than the competent authority, DIPP has to forward the proposal to the following authorities within 2 days:

All these comments have to be send directly to competent authority/ministry. If comments has to be required from any other ministry, reasons has to be mentioned.

Security clearance from Ministry of Home Affairs is required in the following cases:

• Investments in Broadcasting, Telecommunication, Satellites – establishment  and operation;
• Investments in Private Security Agencies, Defence, Civil Aviation;
• Investments in Mining & mineral separation of titanium bearing minerals and  ores, its value addition and integrated activities; and
• Investments from Pakistan and Bangladesh.

5. If competent authority/ministry needs some clarification as to the FDI policy, they can ask for comments from DIPP. DIPP has to reply within two weeks.

6. After receiving all the comments, competent authority has to scrutinise and ask for clarifications from applicant, if any, by email. Applicant should reply within a week.

7. Once all the above aspects are covered, competent authority/ministry should process the proposal within two weeks and convey the same to applicant.

8. If it is the case of foreign investment more than 5000 crore, competent authority/ministry should send the proposal to CCEA for consideration and after their reply, competent authority/ministry should convey the decision within one week to the applicant.

9. Total expected time period for processing the proposal is 8 weeks and 10 weeks in case if security clearance is required.

10. If the proposal has to be rejected, DIPP must be consulted and that consultation may take an extra two weeks time.