Walt Disney’s proposal to set up a wholly owned subsidiary in India for operating its pay channel has been deferred by two weeks by the Foreign Investment Promotion Board (FIPB). According to industry sources, ministry of information and broadcasting as well as the department of industrial policy and promotion (DIPP) is examining the proposal.
Disney has proposed to set up the new subsidiary for its pay channel (TWC) while it has an existing joint venture with the KK Modi group for distributing Disney television software to other free-to-air channels. The Modis have opposed the proposal.
As per a policy guideline (popularly known as Press Note 18), a foreign firm is not permitted to set up a separate subsidiary if it has an existing joint venture in the same line of business.
In case the JV has been terminated, there has to be a cooling off period of at least six months.
On previous occasions, the Indian joint venture partners have been asked to give no-objection certificates when their foreign collaborators wanted to set up another subsidiary.
In Disney's case too, the KK Modi group has an existing joint venture. In its application to the government, Walt Disney has claimed that the Disney group has signed a non-binding MoU with the Modi group.
Since the project was not feasible, it has decided not to proceed with the project and that neither party will have any claims against the others if the project did not proceed.
Walt Disney also intends to launch TDC as a pay channel. So the proposed activity does not clash with the existing activities of the JV with the Modis which has a license to distribute Disney programmes on free-to-air TV until late 2002.