The Cabinet today cleared the decks for allowing 74 per cent foreign investment in basic and mobile phone service companies and decided that foreign shareholding in state-run banks and financial institutions will not be counted in the cap on investments.
It also approved IBP Ltd's merger with Indian Oil Corporation, a decision pending with the government for months. What had held up matters was a swap ratio worked out by the boards of the two companies, which allowed IBP shareholders to get 125 IndianOil shares for every 100 shares held by them.
The ratio was questioned by the finance ministry as the government shareholding was getting reduced. IndianOil holds 53.58 per cent in IBP Ltd.
The Cabinet also cleared a proposal to allow foreign news broadcasters to air India-specific advertisements and content. It proposed a similar move for the Indian editions of foreign news publications.
A new uplinking policy has also been approved. This policy mandates private broadcasters to share content with state-run Prasar Bharti for events of national importance with 75 per cent advertisement revenue going to private players.
Information and Broadcasting Minister S Jaipal Reddy told reporters that foreign portfolio investments would be allowed in news channels within the existing 26 per cent cap on foreign investment in the sector. A decision on creating four subsidiaries of Air India, Indian Airlines and Airports Authority of India was, however, deferred.
The decision on telecom will mean foreign shareholding in private sector banks such as ICICI, IDBI and HDFC will be considered foreign equity for the purpose of determining the 74 per cent ceiling.
“The decision to raise the foreign investment limit to 74 per cent from 49 per cent will spur a fresh round of investments, especially from the Asia-Pacific region and Europe, in the world's fastest growing mobile market,” said a Bharti Tele-ventures executive.
The move paves the way for foreign investors to raise their holdings in companies like Bharti Tele-ventures and Hutch. Foreign investors hold over 48 per cent stake in Bharti.
The government has, however, retained the condition that a majority of directors on boards of telecom companies with foreign stake, and the senior management of such companies, including chairmen, managing directors, chief executive officers, chief technical officers and chief financial officers, should be resident Indian citizens.
The move is expected to affect companies like Bharti, which has a foreigner as its CTO, and Tata Tele, whose CTO is also a foreigner.
SOPS & STICKS
FDI in Telecom
Foreign stake in state-run banks excluded from 74 per cent limit
Sharing of feed for events of national importance with Prasar Bharti mandated; 75% advertisement revenue to go to private players
Foreign news channels can air India-specific content