Date July 6, 2017
Post FIPB: DIPP releases Standard Operating Procedure for processing FDI proposals

Less than a month after the Foreign Investment Promotion Board (FIPB) published an office memorandum setting out the roadmap for the post-FIPB abolishment period, the Department of Industrial Policy and Promotion (DIPP) of the Ministry of Commerce and Industry has on 29 June 2017 published a standard operating procedure (SOP) for processing foreign direct investment (FDI) proposals in India.

The SOP, inter-alia, sets out the process for online filing of applications for the FDI proposal, the procedure for processing the application, the time-lines, and the list of documents to be submitted by applicants. The SOP states that after the applicants submit FDI proposals through the Foreign Investment Facilitation Portal (Portal) in the format as available there, the DIPP will identify the concerned administrative ministry/ department and e-transfer the proposal to the administrative ministry/ department within two days.

The SOP also states that the competent authorities shall not replicate an inter-ministerial body in the respective ministries/ departments to grant FDI approval(s). Further, once a FDI proposal is received, the DIPP is required to circulate the same online within two days to the Reserve Bank of India for comments from the perspective of the Foreign Exchange Management Act, 1999. The proposals for FDI in sectors requiring security clearance will additionally be referred to the Ministry of Home Affairs (MHA) for comments. The SOP sets out that all proposals will also be forwarded to the Ministry of External Affairs and the Department of Revenue for information, and these ministries may give their comments within a stipulated time. Comments will then be given directly to the concerned administrative ministry/ department.

Specific issues of proposals that require clarification from the perspective of the extant FDI policy may be referred to the DIPP for seeking clarification and such consultation would be only need based. The DIPP is required to provide clarification within fifteen days on such specific issues. Also, consultation with other ministry/ department will require approval of the concerned secretary.

The ministries/ departments/ regulatory bodies consulted on the proposal are required to upload their comments on the Portal within four weeks from the online receipt of the proposal, failing which it will be presumed that no comments have to be made. For comments required from the MHA on proposals for investment in sectors requiring security clearance, the same have to be provided to the competent authority within six weeks from the online receipt of such proposals. However, the MHA will have to intimate the concerned administrative ministry/ department of the expected time-frame where it cannot provide its comments within six weeks. The competent authority is required to scrutinize the proposal and documents attached within one week, and if needed, may ask the applicant for relevant additional information/ documents, online or through email.

For proposals involving foreign equity inflow of more than INR 50 billion the competent authority is required to place the same for consideration of the Cabinet Committee on Economic Affairs. The SOP clarifies that the cumulative time period for providing approval shall be between eight to ten weeks (excluding time taken in removing deficiencies or supplying additional information by the applicant), subject to an additional time of two weeks given to the DIPP for consideration of the proposals which are proposed for rejection or where additional conditions which are not provided in the FDI policy are proposed to be imposed by the competent authority.

The SOP requires, inter-alia, the following mandatory documents to be submitted along with the FDI proposal application:

1. The certificate of incorporation, memorandum and articles of association of the investee and the investor companies/ entities (collectively, the Parties);

2. Board resolution of the Parties;

3. Audited financial statement of the last financial year of the Parties;

4. A list of names and addresses of all foreign collaborators along with the passport copy/ identification proof of the investor company/ entity;

5. A diagrammatic representation of the flow and funds from the original investor to the investee company, and the pre and post shareholding pattern of the investee company; and

6. An affidavit stating that all information provided in hard copy and online are the same and correct.

The full text of the SOP may be accessed through the following link:

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