The government on Friday said it has started implementing liberal FDI rules under which proposals up to Rs 1,200 crore (Rs 12 billion) foreign equity would be cleared by the Finance Minister without seeking approval of the Cabinet Committee on Economic Affairs.
The Department of Industry Policy and Promotion (DIPP) has notified the changes in the Foreign Direct Investment (FDI) rules. Consequently, the proposals up to the threshold of Rs 1,200 crore would be considered by the Foreign Investment Promotion Board (FIPB). Earlier, a proposal above Rs 600 crore (Rs 6 billion) FDI was referred to the CCEA. While the FIPB gives its recommendations, the final clearance is given by the Finance Minister.
The new FDI norm was approved on February 11 by the CCEA, which would now consider cases of foreign equity above Rs 1,200 crore. According to the DIPP Press Note, cases below Rs 1,200 crore can be referred to the CCEA in special cases by the FIPB or the Finance Minister.
The special circumstances could relate to certain issues like national security, an official said. Besides, foreign investors need not seek fresh approvals from the government or FIPB in sectors which have been transferred to the automatic route or where FDI caps have been removed and also for additional investment.
With the policy relaxation, the foreign companies will not be required to obtain no-objection certificates (NOCs) from domestic firms for a second time for raising investment in the ongoing projects.
As per the Press Note 1 of 2005, foreign companies needed NOC from their domestic partners for taking up activities in the same sector through joint venture or technical collaboration with other entities.