New Delhi, July 3: Inter-ministerial body Telecom Commission on Tuesday gave its nod for raising foreign direct investment (FDI) limit in the sector from 74 per cent to 100 per cent, subject to Cabinet approval.
"The Telecom Commission has approved raising of FDI limit to 100 per cent from 74 per cent at present, where 49 per cent of investment in an entity can be done through automatic route and FIPB approval will be required for raising further stake. The decision will come in force only after the Cabinet approves it," a senior government official said.
The official said that the Department of Telecommunications (DoT) will send a detailed note to the Department of Industrial Policy and Promotion (DIPP), which would take it forward for inter-ministerial consultations before moving it to the Cabinet.
At present, FDI limit in the sector is at 74 per cent where 49 per cent is done through automatic route and the rest requiring nod from Foreign Investment Promotion Board (FIPB). The idea behind the proposal to increase FDI limit in telecom sector is to help the industry get fresh funds to lower financial burden. Reacting to the proposal, telecom operator Aircel's spokesperson said, "The move will help the industry to bring in more FDI to fund the high Capex demands of this sector especially in areas where coverage needs to be enhanced, and launch new 3G and broadband wireless access (BWA) services. This will undoubtedly have a huge benefit for our customers and higher licence fee for the government." Malaysian firm Maxis Communication holds 74 per cent stake in Aircel with rest of the stake being held by Sindya Securities & Investments Private Limited.
Russian conglomerate Sistema controlled SSTL's spokesperson said, "Sistema Shyam TeleServices is supportive of 100 per cent FDI in telecom. The much needed policy decision is certainly a pro industry and a pro-consumer move." Reliance Communications said, "100 per cent FDI in telecom will enhance value for all stakeholders."
According to a presentation by the GSM industry body COAI to DoT, the debt of telecom sector stood at Rs 1,85,720 crore at end of 2011-12. This included debt of Rs 93,594 crore from domestic and Rs 92,126 crore from external sources.
The Telecom Commission also discussed creation of Telecom Finance Corporation (TFC) to address the sector's funding challenges and "sought a detailed project report on it". The TFC is proposed to be set up on the lines of sectoral finance bodies such as Power Finance Corporation and Tourism Finance Corporation of India.
The proposed TFC is targeting financing Rs 38,000 crore in a five-year period.
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