Centre clears decks for 74% telecom FDI

NEW DELHI: Two years after the government gave its nod for hiking the foreign direct investment (FDI) ceiling in the telecom sector from 49% to 74%, the Union Cabinet on Thursday formalised the guidelines for the same. In the past two years, the Cabinet gave several extensions to the sector to comply with the norms.

At a media briefing after the Cabinet meeting, information & broadcasting minister PR Dasmunsi said approval had been given for replacing the conditions set in Press Note 5 relating to remote access to telecom networks by a revised set of guidelines.

The Cabinet note elaborates on the riders linked to remote access, but is silent on other aspects of the guidelines that were believed to have been cleared  a few months ago. Some of these are for allowing foreigners as CEOs, CFOs and CTOs in telecom companies, and taking away the veto powers from Indian shareholders with 10% equity in telecom joint ventures.

On the tricky issue of remote access, the Cabinet has laid down five safeguards. One, remote access to networks in India will be allowed only from approved locations.

Two, remote access will only be offered to equipment suppliers, manufacturers and affiliates. Three, remote access cannot be used for monitoring content. Four, a mirror image of remote access information must be made available online in India to the security agencies. Five, a complete audit trail of remote access activities must be maintained for six months.

The Cabinet note adds that the changes would help in implementing the FDI policy notified on November 3, 2005.

Now, with so many foreign players in the Indian telecom market, the government has cleared the guidelines for higher FDI while introducing certain safeguards. The deadline for telecom firms to meet the current norms on FDI expires on April 2.

Among the tricky points in Press Note 5 was that the majority of the directors on the board, including chairman, managing director and CEO, shall be resident Indian citizens. It also barred remote access.

Tata Teleservices has a foreigner as CEO - Darryl Green. In this regard, Tata group chairman Ratan Tata had made a representation to the government saying that companies with up to 49% FDI should not be made to comply with Press Note 5 norms. As per Press Note 5, the CTO and CFO also have to be resident Indians.

Besides, the foreign CEO/CFO/CTO guideline, the industry was upset with the stiff security norms.