Finance secretary to head FIPB

The government is planning to appoint the finance secretary as chairman of the Foreign Investment Promotion Board, in place of the secretary, department of industrial policy and promotion.

The move comes after the board was asked to report to Finance Minister Jaswant Singh instead of Commerce and Industry Minister Arun Jaitley. The FIPB was shifted to the finance ministry during the recent Cabinet reshuffle.

The department of industrial policy and promotion will continue to be the nodal department for policy formulation, but the secretariat for industrial assistance in the commerce and industry ministry is being shifted to North Block.

The secretariat for industrial assistance receives and processes all applications for foreign investments and is the interface between investors and the government.

Finance ministry sources said there was a meeting in North Block Tuesday to discuss the functioning of the FIPB and the changes required to make the body more responsive to foreign investors.

Surprisingly, DIPP officials said they had no knowledge of the meeting. DIPP Secretary and current Chairman, FIPB, V Govindarajan, is unwell and hospitalised.

The sources in North Block said the finance ministry had already made space within its premises to house the secretariat for industrial assistance. Weekly meetings of the FIPB will be held in the same building instead of the Udyog Bhavan.

The move to shift the secretariat out of Udyog Bhavan while keeping the DIPP there may create some confusion because the two work in tandem, and each proposal is first pursued by the secretariat and then by the department before it is taken up for consideration by the FIPB.

Comments for each proposal is also solicited from every administrative ministry before a final decision is taken.

In the past, the finance ministry has had differences with the DIPP over the definition of foreign direct investment as well as sectoral caps.

For instance, the department of economic affairs is strongly against allowing Indian companies to invest here by routing domestic funds through tax havens (round tripping) such as Mauritius, while the DIPP is of the opinion that round tripping should be counted as FDI like in China.

The department of economic affairs and DIPP also do not agree over allowing FDI in trading, retailing and cigarette manufacturing.

Before FIPB was moved to the industry ministry, it was a part of the Prime Minister's Office during the tenure of Prime Minister Narsimha Rao and Cabinet Secretary A N Varma. Varma was also the chairman of FIPB.