Over the past few years, several high-profile investments, such as Mylan’s $1.8 billion-takeover of Strides Arcolabs’ injectables business, have got stuck in the Foreign Investment Promotion Board (FIPB) due to a difference of opinion between key ministries—even now, greenfield pharma investments don’t require any clearance while the takeover of existing units do. In the case of the Jet-Etihad deal, similarly, inter-ministerial wrangling delayed approvals for a long time. Given how, in the current government, many of the top economic ministries are headed by Arun Jaitley, the same level of confusion may not prevail as did during the UPA’s tenure. But there is still a case of housing the FIPB where it was originally, in the Prime Minister’s Office (PMO).
The main advantage of this is that, with the PMO directly looking into matters, line ministries will be that much more prompt in reacting to proposals, and the chances of confusion and delays are that much less. When it was under the PMO earlier, the foreign investment proposals were cleared by the FIPB through a three-tier approval mechanism—FIPB as a committee of senior officials examined and made recommendations; the Empowered Committee on Foreign Investment (ECFI) headed by the finance minister decided on the recommendations of the FIPB for projects in which the total investment was up to R300 crore and the Cabinet Committee on Foreign Investment (CCFI) decided on the recommendations of the FIPB for projects with more than R300 crore investment. Going back to this structure, with merger of even ECFI and CCFI, would help bring in the much-required clarity and predictability in the FDI policy of the government. In the long run, of course, what would help the most is the government clarifying policies enough so that recourse in FIPB is not needed that often. Removing the artificial distinction between greenfield and brownfield pharma or allowing 100% FDI in defence instead of case-by-case approvals is a good idea.