The Telegraph
Since 1st March, 1999
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Telecom FDI bogey buried

New Delhi, June 26: The communications ministry and financial institutions have convinced the home and commerce ministries that increasing the cap on foreign direct investment (FDI) in telecom to 74 per cent will not, in any way, compromise the security shield.

The home ministry was told that government could bring in safeguards, such as ensuring the Indian partner(s) in a joint venture wielded technical control of the network.

The debate over whether 74 per cent foreign investment should be allowed in companies running telephone networks started when security agencies warned that this could lead to control by foreign powers over communications in the country — a situation that throws up the threat of espionage and sabotage.

To address this concern, the communications ministry has devised an arrangement that hands “technical control” to Indians, even if foreign firms own more equity.

“We will meet again next week to finalise a draft that will be sent to the committee of secretaries constituted to examine the issue. The discussions and points made today will be incorporated. A Cabinet note will be penned after the secretaries have studied it,” officials said.

There is a possibility, however, that the panel will lob the issue back to the group of ministers (GoM) on telecom, before sending it to the Cabinet, the official said. “It is not binding on the committee of secretaries or GoM to send drafts to the Cabinet. There may be more discussions if a few aspects need to be examined again.”

Today’s meeting was attended by Telecom Commission chairman Vinod Vaish and DoT deputy director-general (production and industrial promotion) Vijay Kumar, apart from senior officials from the commerce ministry and several security agencies. The financial institutions were represented by ICICI.

Currently, there is a 49 per cent FDI cap on foreign capital in areas like fixed-line, cellular phones, very small aperture terminals (V-sat), national long distance, international telephony and global mobile personal communications services. The government is reviewing this limit against the backdrop of the need to bring in fresh investments while balancing security considerations.

Telecom companies have long been clamouring for a hike in the ceiling. The Centre’s FDI policy sets limits varying from 49 per cent to 100 per cent in various segments of telecom.

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