Telecom: Govt proposes, disposes

That withdrawal, in fact, was based on several assurances from the Government, one being higher FDI caps.

Sources said that at today’s Cabinet meeting, hardliners bolstered by opposition from the Swadeshi Jagran Manch and the RSS, cited ‘‘security reasons’’ to defer the issue at least for now with elections around the corner. The markets responded by shedding 130 points as telecom scrips tumbled.

Ironically, no such reservations were expressed when the Cabinet hiked FDI limits in banking and petroleum sectors today.

This was surprising given that the Communications Ministry had built in several safety clauses to ensure the security angle of the communications systems in the country.

The Ministry had said that while raising FDI limits from the present 49 per cent to 74 per cent, the additional equity would only be allowed through Foreign Institutional Investors (FIIs) so that no foreign telecom company owned a majority stake in an Indian telco.

Not only this, the Ministry also stated that a single Indian’s equity would not be allowed to fall below 26 per cent and management would always remain in Indian hands. It had also committed that the security agencies and the Communications ministry would hold periodic security checks in each of the companies to ensure the security concerns were addressed.

Yet, despite a long discussion on the issue with Communications Minister Arun Shourie presenting the safety clauses, the Cabinet deferred the move.

Moreover, not all telecom players were equally enthusiastic. Only Bharti and Hutch were rooting for higher FDI limits while others like Tatas, Reliance, BPL Mobile and Spice Telecom and Essar have been cold to the proposal. Added to this was the fact that American company AT&T Wireless which just withdrew from BPL Mobile has only a 33 per cent stake in Idea Cellular and has not shown much keenness to raise this to the available cap of 49 per cent.