Feb 7, 2000|
Foreign equity in telecom sector may rise to 100%
The department of industrial policy and promotion has decided to recommend that 100% foreign direct investment (FDI) in the telecom sector be permitted. Currently, the cap on FDI investment in major telecom service ventures is at 49%, while majority FDI is permitted in the telecom-manufacturing sector.
The recommendation if implemented would remove an unnecessary regulation as foreign holding, in case of a holding company structure, can go up to 74%. This would make the India telecom market more attractive to foreign companies looking at making substantial and significant investments in this sector, while staying within the purview of existing regulations.
A number of domestic partners in various telecom licenses have been unable to cough up the their portion of the needed investment. This has led to the situation in which there has either been a delay in expansion plans or a gradual dilution of the domestic partner's share. Permitting 100% FDI will do away with this hurdle.
The telecom sector has failed to take off post liberalisation. Policy guidelines also failed to make the environment conducive for fresh investment. The need for improved telecom services has become all the more necessary in order to sustain growth in the booming Internet sector. The recommendation, if accepted, will go a long way in improving the prospects of the telecom sector.
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