The government plans to raise Foreign Direct Investment (FDI) limit in FM radio broadcasters and direct-to-home (DTH) service providers, despite reservations expressed by several departments, including the Planning Commission of India.

“The regulatory issues connected with raising FDI levels will also be taken into account while making any changes. A convergence of the telecommunications and broadcasting sectors had led TRAI to review the policy.” Ambika Soni, the Information and Broadcasting Minister said in the Lok Sabha on July 21, 2009.

The Department of Industrial Policy and Promotion (DIPP) has proposed that FDI ceiling for FM broadcasters be raised to 24 per cent from the current 20 per cent, and to 74 per cent from the existing cap of 49 per cent in the case of DTH service providers.

DIPP has also proposed simpler FDI rules for Internet Service Providers (ISPs), while it has not recommended raising the FDI limit for the print media beyond 26 per cent. However, Soni said in her personal opinion that 49 per cent was safe bet on print media and would not give control to anyone from outside to control the media.

The proposal has been discussed among several government departments and a Cabinet note has been circulated. The proposal is likely to be taken up by the Cabinet soon, said a government official, who wished not to be named.

The proposals are expected to go through since key nodal departments are in favour of easier FDI norms in these sectors. There is broad support for these amendments that have been discussed several times over, the official said.

The proposals are in line with the new rules on direct and indirect foreign holding. All forms of foreign investment including GDRs, ADRs and FCCBs would be taken into account, while calculating FDI.

The proposals come close on the heels of the Information and Broadcasting Ministry’s clearance to 22 new TV channels from more than a hundred pending applications. This is the first major move on FDI liberalisation since Anand Sharma took over as the commerce and indus try minister.

DIPP has suggested that up to 24 per cent foreign investment be allowed in FM radio, subject to the approval of the Foreign Investment Promotion Board (FIPB). The current policy allows FDI and FII only up to 20 per cent.

For broadcasting infrastructure activities, DTH as well as earth stations, the proposed FDI limit is 74 per cent, and FIPB approval is needed for FDI beyond 49 per cent. Currently, 49 per cent foreign investment is allowed in this segment with FIPB approval. In the case of DTH, the FDI component is not allowed to go beyond 20 per cent.

DIPP has also proposed that FDI regime for ISPs without gateways be simplified. Currently, 100 per cent FDI is allowed, but FIPB approval is needed beyond 49 per cent. However, ISPs have to divest 26 per cent of their equity in favour of Indian public if they are listed overseas.

The proposal seeks to raise foreign investment limit to 74 per cent with prior FIPB approval beyond 49 per cent. This will do away with the distinction between ISPs with and without gateways.

The government does not seem to be in a mood to allow more than 26 per cent FII and FDI investment in news channels. TRAI has recommended increasing the limit to 49 per cent to enable news channels to access more resources without diluting editorial control. However, DIPP is not in favour of changing the current FDI limit. For general channels, 100 per cent FDI has been permitted.

There is no proposal to change FDI limits in telecom services. But for satellite radio services and head-end-in-the-sky (HITS), direct and indirect foreign investment limit has been proposed at 74 per cent with FIPB approval beyond 49 per cent.

In the case of cable networks also, no change has been recommended and FDI and FII investment will continue to be at 49 per cent with prior approval from the FIPB. Telecom regulator TRAI had recommended that foreign investment limit be raised to 74 per cent since cable Tv network is essentially a carriage platform like telecommunication networks where the limit is 74 per cent.

The view within the DIPP is that if the investment limit is increased to 74 per cent, an amendment would be required in the Cable Television Networks Regulation Act.

Moreover, the I&B Ministry is concerned that if the limit is increased then control could be passed on to the foreign partner, raising national security concerns. It has also been suggested in the Cabinet note that foreign investment caps in both broadcasting and telecommunication sectors will be composite caps.