The revamp of the Foreign Investment Promotion Board (FIPB) has begun with the industry ministry asking the ministries concerned to identify the core and non-core areas under their respective jurisdictions.
Confirming this move, FIPB chairman T R Prasad said these inputs would be considered by the government while finalising its policy on foreign direct investment. Such a revamp was expected ever since the BJP-led coalition government released its National Agenda, which states that foreign investment will be encouraged only in core areas.
Once the core and non-core areas are identified by the ministries, investments in the non-core areas will be discouraged by clearing them only on merit. The FIPB will also speed up core sector clearances by putting them on the automatic approval list if they are not there already or raising the threshold for automatic approvals.
While the new policy is being finalised, the FIPB has informed the concerned ministries that they should bear the new directions in mind while giving their opinion on applications.
As a norm, the FIPB refers all foreign investment applications to the ministry concerned before granting clearance. Department secretaries are also invited to the FIPB meetings when an application concerning investment in their sector is to be discussed.
By asking the departments concerned to bring in their comments to the FIPB meeting, the FIPB is ensuring that there is no discontinuity in the process of clearances while the FDI policy is being finalised.
Prasad said the ministry had decided to opt for the consensus approach as it would not be possible for the committee of secretaries to decide what constitutes core and non-core sectors for a particular ministry. We expect that the concerned ministries will be able to convey to us the exact thinking of their minister.
Confusion on the issue stems from the fact that the National Agenda does not specify which industries fall under the classification of core areas. Members of the BJP think-tank point out that in the party parlance, core connotes infrastructure sectors like power, telecom, roads, ports etc, while the rest, particularly consumer goods, are considered non-core. However, it is not yet clear if the partys line of thinking is the same as the governments, considering the views of its coalition partners.
The United Front government had faced a similar dilemma while trying to make this differentiation in order to decide the level of disinvestment. It finally adopted the Planning Commissions definition, used by the Nehru government in the second plan document, under which steel, cement, fertiliser, railways, telecom, roads etc were classified as core areas.
The Disinvestment Commission too debated this issue while deciding the level of disinvestment. It identified arms and ammunition, atomic energy, minerals specified in the schedule to the Atomic Energy (Control of Production and Use) Order, 1953, and railways as the strategic sectors, which should be reserved for the public sector. It further identified capital or technology-intensive sectors like telecom, power generation, transmission, petroleum exploration and refining as core sectors, while the rest were identified as non-core sectors, from which the government could exit over time.
