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Ministry sets rider for FDI cap in telecom

New Delhi, July 8: The communications ministry is in favour of raising the sectoral cap on foreign investment in telecom from 49 per cent to 74 per cent — but feels that most of the new investment should come from foreign financial institutions (FFIs), rather than direct investors.

A note in this respect has been sent to the various ministries like finance and law. Most of the FFI investment comes through the portfolio investment route, and is being favoured because this will allay concerns in sections of the government that an increase in foreign capital in telecom will compromise national security.

This will also address the concerns of cash-strapped Indian promoters of telecom companies, who are being forced by mounting competition to widen the capital base of their firms to meet investment requirements.

“We will wait for the response from all concerned (to our proposal) and then a final decision can be taken by the Cabinet to raise the sectoral cap for a few telecom services,” communications minister Arun Shourie said.

At present, the 49 per cent cap on foreign direct investment (FDI) covers fixed-line telephony, cellular mobile services, very small aperture terminals, national long distance, international long distance and global mobile personal communications services. The cap is being reviewed by the government, depending on the investment requirements and security considerations.

Shourie said the government had an open mind on the industry’s proposal to allow the acquisition of telecom companies within the same circle. “Only an amicable and viable solution can help resolve this issue.”

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