Finance Minister P Chidambaram is set to revisit the issue of continuing with the Foreign Investment Promotion Board, which approves proposals for equity investment by overseas ventures in India.
According to finance ministry sources, the new minister has been apprised of an earlier proposal to the Cabinet for doing away with some of the routine clearances like non-resident stake transfers and gift of shares, required by joint ventures from the FIPB.
The proposal was likely to be placed before the Cabinet soon, they said.
The sources said in the current context, where countries were fiercely vying with each other to attract foreign investment, there was an urgent need to simplify rules and procedures.
It was, hence, felt that a separate clearing agency, like the FIPB, should not find a place in the liberalised environment.
Moreover, the sources said significant time was being lost in approving routine proposals, adding that policy decisions were rarely discussed in the FIPB.
The sources pointed out that cases that required clarity on policy aspects could be directly referred to the FDI policy wing of the government.
At present, FDI policy is decided by the department of industrial policy and promotion under the commerce and industry minister.
During Jaswant Singh's tenure as finance minister, the FIPB continued to dilute many of the investment norms.
For instance, it decided to permit issuance of equity shares against a lump-sum fee, royalty and external commercial borrowings in convertible foreign currency already due for payment or repayment. Earlier, it was allowed only against cash.
The sources said that Press Note 18, which required a foreign company to get a no-objection certificate from its domestic partner before floating a new venture, was also being reviewed.
The review was necessitated following certain instances of Indian companies in defunct joint ventures blocking their foreign partners' move to start afresh.
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