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FDI ceiling raised from 49 to 74 percent in telecom

     New Delhi: Responding to the long-standing demand of the telecom sector, the government on Monday notified the enhancement of Foreign Direct Investment (FDI) limit in telecom sector from current 49 percent to 74 percent which was approved by the union cabinet last month. "In pursuance of the Government's commitment to liberalise the FDI regime, it has been decided to enhance the Foreign Direct Investment ceiling from 49 per cent to 74 per cent in certain telecom services such as Basic, Cellular, Unified Access Services, National/International Long Distance, V-Sat, Public Mobile Radio Trunked Services (PMRTS), Global Mobile Personal Communications Services (GMPCS) and other value added services," an official release issued by the Ministry of Commerce and Industry said. The total composite foreign holding including but not limited to investments by Foreign Institutional Investors (FIIs), Non- resident Indians (NRIs), Foreign Currency Convertible Bonds (FCCBs), American Depository Receipts (ADRs), Global Depository Receipts (GDRs), convertible preference shares, proportionate foreign investment in Indian promoters/investment companies including their holding companies, etc., herein after referred as FDI, will not exceed 74 per cent, it said. Thus 74 per cent FDI can be made directly or indirectly in the operating company or through a holding company with the remaining 26 per cent to be owned by resident Indian citizens or an Indian company. "FDI should not exceed 49 per cent and the management remains with the Indian owners," the release said clarifying that proportionate foreign component of such an Indian company would be counted towards the ceiling of 74 per cent.

    However, foreign component in the total holding of Indian public sector banks and Indian public sector financial institutions will be treated as 'Indian' holding. The licensee will be required to disclose the status of such foreign holding and certify that the foreign investment is within the ceiling of 74 percent on a half yearly basis, it said. The majority Directors on the Board including Chairman, Managing Director and Chief Executive Officer (CEO) shall be resident Indian citizens, enforced through licence agreement. The appointment to these positions from among resident Indian citizens shall be made in consultation with serious Indian investors. In order to ensure that at least one serious resident Indian promoter subscribes reasonable amount of the resident Indian shareholding, such resident Indian promoter shall hold at least 10 per cent equity of the licensee company. FDI shall be subject to laws of India and not the laws of the foreign country/countries.