The Telecom Commission (TC), the highest decision-making body in the telecom ministry, on Tuesday endorsed a proposal to increase foreign direct investment (FDI) ceiling in the sector to 100%.
“TC has approved raising of FDI limit to 100% from the current 74%, where 49% of investment in an entity can be done through automatic route and FIPB’s (Foreign Investment Promotion Board) approval will be required to raise further stake,” said a senior government official.
All eyes are now on the cabinet, which has to approve this as well. “We will send a detailed note to the department of industrial policy and promotion, which will take it forward for inter-ministerial consultations before placing it before the cabinet,” said the official.
So, what will this move mean for India? Allowing full foreign ownership will ease the huge burden on the telecom sector, which was sitting on a debt of Rs1,85,720 crore in 2011-12. It will ensure that fresh funds flow in.
“Foreign investors will no longer need to partner with Indian investors in order to comply with regulatory requirements,” said Goldie Dhama, executive director of tax and regulatory services at PricewaterCoopers. “They will be able to induce equity based on business needs, instead of taking debts to fund growth.”
Russian conglomerate Sistema, which runs its telecom business in India under a joint venture with Shyam Teleservices, said dubbed the policy decision a “pro-industry and pro-consumer move”.
A government panel had earlier proposed allowing more FDI in sectors like defence, telecom, retail and commodity exchange in order to contain the current account deficit.