Documentation: The FDI hike

IN Law and Policy | 19/09/2012
Last week's FDI decision raises the cap on foreign investment in broadcasting hardware, but not in news and FM radio.
Text of the government’s announcement.

 The Cabinet Committee on Economic Affairs on 14th September approved the proposal of the Department of Industrial Policy & Promotion for review of the policy on Foreign Investment (FI) in companies operating in the Broadcasting Sector. It hiked the cap on foreign investment in the broadcast sector to 74 per cent. Earlier, 49 per cent FDI was allowed in cable TV and direct-to-home, and 74 per cent in Head-end in the Sky (HITS).

 Enhanced access to foreign investment is expected to expand the reach of broadcasting services, thereby improving accessibility of these services, and bring in international best practices. The proposal will make the foreign investment policy for the broadcasting sector consistent with that of the telecom sector, because of the convergence of technologies involved in these two sectors, and thereby bring in greater investments into quality infrastructure for the broadcasting carriage services.

 The CCEA, after review, has liberalised the policy on foreign investment, for companies operating in the broadcasting sector, as below:

1. Teleports (setting up up-linking HUBs/Teleports)- Direct to Home (DTH); Cable Networks (Multi-System-Operators operating at National or State or District level and undertaking upgradation of networks towards digitalization and addressability):

Currently, foreign investment, up to 49 percent, is permitted in these activities. It has been decided to now increase the foreign investment limit from 49 percent to 74 percent, with the proviso that:

a)      Up to 49 percent be permitted under the automatic route and

b)      Beyond 49 percent and up to 74 percent be permitted under the Government route

2.  Mobile TV:

There is no specific dispensation under FDI policy for mobile TV. It has now been decided to permit Foreign Investment (FI) up to 74 percent, with the proviso that:

a)      Up to 49 percent be permitted under the automatic route and

b)      Beyond 49 percent and up to 74 percent be permitted under the Government route

3.  Headend-in-the Sky Broadcasting Service:

The existing limit of 74 percent foreign investment - automatic route up to 49 percent and Government route beyond 49 percent and up to 74 percent - would continue

a)      In respect of Cable Networks (Other Multi-System-Operators not undertaking up-gradation of networks towards digitalization and addressability and Local Cable Operators), the existing limit of 49% foreign investment, under the automatic route, would continue.

b)      Similarly, for up-linking of ‘News & Current Affairs’ TV channels / FM Radio, the existing limit of 26 percent foreign investment, under the Government route, would continue and for up-linking of Non-‘News & Current Affairs’ TV Channels / Down-linking of TV Channels, the existing policy of 100 percent foreign investment, through the Government route, would continue.

 Foreign investment, in companies engaged in all the aforestated services, will be subject to sectoral and security conditionalities and guidelines, as may be specified from time to time, by the concerned Ministries.

 In the case of companies operating in the telecom sector, the calculation of the direct foreign investment limit includes FDI, investment by Foreign Institutional Investors (FIIs), Nonresident Indians (NRIs), Foreign Currency Convertible Bonds (FCCBs), American Depository Receipts (ADRs), Global Depository Receipts (GDRs) and convertible preference shares held by foreign entities. For companies operating in the broadcasting sector, however, the foreign investment (FI) limits for different activities include different components. It has been decided to rationalise the methodology of calculation of direct investment and the methodology, as applicable to the telecom sector, would also be made applicable across the l&B sector. Accordingly, as in the case of the telecommunications sector, the foreign investment limit in companies engaged in various activities of the I&B sector shall include, in addition to FDI, investment by Foreign Institutional Investors (FIIs), Non Resident Indians (NRIs), Foreign Currency Convertible Bonds (FCCBs), American Depository Receipts (ADRs), Global Depository Receipts (GDRs) and convertible preference shares held by foreign entities.

 The existing Foreign Investment (FI) limits in companies engaged in the activity of providing broadcasting services are not uniform. TRAI had earlier recommended different Foreign Investment (FI) limits for companies engaged in providing 'carriage' and 'content' services. It had also stressed the need for a holistic review of the extant Foreign Investment (FI) limits for companies operating in different segments of the broadcasting sector, in order to bring about consistency in the policy, as also to promote a level playing field between competing technologies, in view of the convergence of technologies across the telecommunication and broadcasting sectors.

 At present, it is possible to provide broadcasting 'carriage services" using either telecommunication networks or broadcasting networks. Keeping in view the convergence of technologies in the broadcasting and telecom sectors, uniformity has been proposed in respect of companies providing carriage services (except cable services). For the same reason, uniformity is necessary in the method of calculation of direct foreign investment, in companies operating in the telecom and broadcasting sectors.

 

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