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The Foreign Investment Promotion Board's (FIPB) disbanding will lower foreign investment and cause lack of uniformity in policies of the administrative ministries.

PricewaterhouseCoopers executive director Vivek Mehra said what was considered by foreign investors as a single-window clearance approach "" in the form of FIPB "" would mean investors running from pillar to post and interacting with over 30 windows.

The Centre yesterday has opened the foreign direct investment (FDI) gates wider for the banking and petroleum sectors, but did not touch the telecom sector. Further, the government has also reduced the scope of discretionary approvals by FIPB.

"Disbanding the FIPB in the current policy framework will cause confusion as different administrative ministries may end up taking different views on the same matter," said Mehra. FIPB is a promotion board, not a regulator and has been doing yeoman services in facilitating approvals in accordance with FDI policies for each sector.

The government streamlined the policy on sectoral caps yesterday, allowing for automatic clearance. However, proposals involving complications, including the applicability of Press Note 18, purchase of shares either from the market or directly from promoters, not to mention ambiguities in policy issues, will need consultation. "The so-far streamlined FDI approval process can in-effect give rise to uncertainties with the disbanding of FIPB," said Mehra.

It has been proposed that foreign investment cases that do not fall under the automatic approval route, would now be routed to the Reserve Bank of India (RBI). However, since the central bank does not necessarily have the ability to take decisions related to other industries, the concerned administrative ministries would need to be approached.

This would mean having to approach 20-30 ministries, which do not necessarily consider foreign investment as a priority and where there could be differences in policy decisions.

The FIPB needs to be strengthened and given more teeth as it has helped in the interpretation of FDI in the past and suggestions for policy changes. "The problem lies in the policy level and not with FIPB, which has so long been playing the role of a facilitator," said Mehra.