New Delhi, Feb. 2: The Centre snatched the telecom agenda from the Left in the morning and, when night fell, put back in its hands a lollipop big enough for 40 million people.
The government today permitted foreign investors to hold up to 74 per cent in telecom companies. Foreign direct investment (FDI) has been capped at 49 per cent of the equity capital at present.
Some hours and the customary protest of the Left later, the government announced that it is restoring the interest rate on Employees Provident Fund (EPF) to 9.5 per cent with retrospective effect from 2002-03. This represents a one percentage point rise from the interim rate prevailing now.
Both decisions were announced a day before the Assembly polls in three states ' Bihar, Jharkhand and Haryana.
But a spokesperson for the Prime Minister's Office defended the decisions, asking: 'How can the government shut shop in a country where there are elections frequently' The elections are in three states and the central government has to keep functioning.'
The Left had been clamouring for a rise in the EPF rate and the Centre had been saying that it did not have the means to meet the demand. The government's decision today is expected to push up the deficit on the earnings from EPF investments to Rs 900 crore.
The EPF covers over 3.93 lakh establishments and 40 million subscribers ' evidently a much larger number than the Left constituency that will take note of the telecom investment rule relaxation.
Last July, when finance minister Chidambaram had unveiled the proposal to raise the limit on foreign investment in telecom, it had sparked howls of protest, especially from the Left which felt that the security of the nation could be badly compromised.
While clearing the proposal today, the Union cabinet worked in several riders to ensure that telecom companies continue to be run by Indians.
'I can assure everyone, including the Left parties, that all security concerns have been very carefully addressed,' Chidambaram told reporters, but the Left parties remain far from convinced. The Left is meeting tomorrow to decide on its response.
The investment decision is expected to spark a small wave of consolidation within the industry which has been demanding a higher foreign investment cap in order to bankroll the expansion of its overcrowded networks. Telecom analysts spoke about an immediate inflow of $2 billion into the industry.
The government said the 74 per cent limit would serve as an overarching umbrella that would cover all overseas investors ' foreign institutional investors, NRIs and overseas telecom players.
'The achievement of a national target of 250 million phones by 2007 would require funding of Rs 1,60,000 crore. This mind-boggling amount is not available in India. The decision to raise the FDI limit will help increase flow of funds,' said T.V. Ramachandran, the director-general of the Cellular Operators' Association of India.
'From an end customer's point of view, it will drive faster accessibility to the latest telecom technology,' said Rajan Bharti Mittal of Bharti Tele-Ventures.