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FDI in News - Govt plans to increase cap to 49%

03-October-2015
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FDI in News - Govt plans to increase cap to 49%

There seems to be some good news for the news media, in the pipeline, top sources in the Finance Ministry say that the proposal to raise the foreign investment cap in news media from 26% to 49%, is back on the drawing board.

A senior official on conditions of anonymity said that, “The Government is working round the clock to iron out the details in order to allow 49% Foreign Direct Investment (FDI) in news media sector.” So far the government allows only 26% FDI in the sector. Now to anyone working in the news industry that would be music to their ears. The news industry, though less acknowledged, has been one of the worst impacted sectors post the 2008 global economic downturn. This industry has also been largely neglected by successive governments, in terms of allowing any incentives for newer technology to take shape, a pre-requisite in this cut-throat sector.

The source quoted above added that, “While it is clear that this government is in favour of increasing FDI to 49% in media, what we are trying to work out is the issue of editorial control that will shape how organisations with FDI function once we open the doors.” The issue of which party (foreign or Indian) gets more say on the company’s ‘Board’ and in this case THE ‘Editorial Board’ was also one of the biggest issues in the Jet-Etihad deal, the multi-million dollar deal that has been the Indian aviation sector’s largest and most complicated deal so far. Once the details are finalised, a draft proposal will be sent to the various stakeholder ministries for their inputs, before it is sent to the Cabinet for a final approval. “We are still in the process of assessing if and how we can allow editorial control to the minority foreign partner in a news organisation” explained an official in the know of the matter. Sources indicate that a formula could be worked out in which the foreign directors on board a new organisation will have veto powers for all major decisions.

It is no surprise that the Government’s move to revive a long pending demand from major media companies come hot on the heels of Prime Minister Narendra Modi’s US visit. During his recent trip the PM met top media barons in New York and it is understood that concerns were raised about editorial control of foreign media houses, if they were to invest in India. “Most reputed foreign media houses looking at exploring Indian opportunities are concerned about things like image and editorial say” explained a top source in North Block that houses Finance Ministry.

So, why is this decision by the Government so crucial for the industry? The answer is simple. The media sector is severely cash-strapped and desperately looking for people who are willing to pour in the moolah. What this will also do is allow big foreign media houses to enter the Indian space with just enough say to shape the way they want their brands to grow here.

Without doubt, India has grown in prominence over the last decade, and more so now, given it is also one of the only emerging markets which is still drawing in enough foreign investments. A recent report ranked it at 55, ahead of China and the US, having collected over $ 37 billion dollars in FDI from Jan-June 2015. That goes a long way, simply because this means that increasingly more foreign companies see India a place safe enough to park in million dollar long-term investments

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