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News |  16 Jan 2010 13:05 |  By BhushanNagpal

Trai recommends FDI limit of 49 per cent in FM radio

NEW DELHI: The Telecom Regulatory Authority of India has recommended that the foreign investment limit for FM radio should be revised to 49 per cent and that for news and current affairs television channels in the Uplinking guidelines be increased from 26 to 49 per cent.

In a consultation paper on the subject of foreign direct investment in the broadcasting sector, Trai has also called for a hike in the limits of foreign investment for cable networks from 49 per cent to 74 per cent and said that the total foreign investment including FDI for DTH should be 74 per cent as in case of HITS and teleports.

The Authority has reiterated its earlier recommendations that the total foreign investment including FDI for HITS should be 74 per cent, as in case of telecom sector in view of convergence of technologies  Similarly, the total foreign investment including FDI for Teleport should be 74 per cent as in case of HITS.

The consultation paper on foreign investment in the broadcasting sector was issued following a letter from the Information and Broadcasting Ministry on 30 September 2009 that TRAI should re-examine its recommendations of 26 April 2008 where the methodology of calculation of indirect foreign equity was based on the proportionate method in broadcasting sector. This had been placed on the Trai website on 19 October 2009 to elicit preliminary views of stakeholders on the subject.

At the outset, Trai noted that foreign investment has an important role in the economic development as an important source of funding. Foreign investment has other benefits also such as bringing in new technology, international best practices, and access to export markets.

The Department of Industrial Policy and Promotion in the Union Commerce and Industry Ministry had issued Press Note No 2. in 2009 regarding the methodology to be used for calculating foreign investment including foreign direct and indirect investment. Recognizing the need to bring in clarity, uniformity, consistency and homogeneity into the exact methodology of calculation across sectors/activities for direct and indirect foreign investment in Indian companies, the Government proposed the guidelines for calculating direct and indirect foreign investment.

The Authority has invited all stakeholders to respond to the issues raised in this consultation paper by 30 January, 2010. The comments will be posted on TRAI's website and counter comments are to be sent to TRAI by 8 February, 2010.

The Authority has recommended that as laid down in Press Note No. 3 of 19 April, 2007 issued by the Department of Industrial Policy & Promotion, both direct and indirect foreign investment in the licensee company will be counted for the purpose of foreign investment ceiling. Foreign Investment will include investment by Foreign Institutional Investors (FIIs), Non-resident Indians (NRIs), Foreign Currency Convertible Bonds (FCCBs), American Depository Receipts (ADRs), Global Depository Receipts (GDRs) and convertible preference shares held by foreign entity. Indirect foreign investment will mean foreign investment in the company/ companies holding shares of the licensee company and their holding company/companies or legal entity (such as mutual funds, trusts) on proportionate basis. Shares of the licensee company held by Indian public sector banks and Indian public sector financial institutions will be treated as `Indian holding'. In any case, the `Indian' shareholding will not be less than 26 percent.

The Authority says that for carriage segments (cable TV, DTH, HITS, teleport, mobile TV etc.) of broadcasting sector, foreign investment up to 49 percent should be on the automatic route. Foreign investment in the licensee company/ Indian promoters/ investment companies including their holding companies, will require approval of the Foreign Investment Promotion Board (FIPB) if it has a bearing on the overall ceiling of 74 percent. While approving the investment proposals, FIPB will take note that investment is not coming from countries of concern and/or unfriendly entities.

It says that the FIPB approval would be required for foreign investment in content segments of broadcasting sector.

The methodology used in telecom sector for calculation of foreign investments as outlined in the 2007 Press note should be adopted for the broadcasting sector, says TRAI.

The Authority recommends that the conditions listed in sub paras 3.1.6 to 3.1.12 of the Uplinking Guidelines dated December 2, 2005 be made applicable to all the carriage segments of broadcasting sector also where the composite foreign investment limits have been recommended to be enhanced to 74 per cent.

All security related issues should be addressed in consultation with the concerned agencies and the 2007 press note should be considered as a basis for formulating further guidelines/ terms and conditions, wherever appropriate for the broadcasting sector.

The current limits for foreign investment in different segments of broadcasting sector are as follows:

Sub-sector - Limit - Entry Route

FM Radio - 20 % (FDI + FII) - FIPB approval required

Cable network - 49 % (FDI + FII) -  FIPB approval required

DTH - 49 % (FDI + FII) FDI component not to exceed 20 % - FIPB approval required

Uplinking Hub/ Teleports - 49 % (FDI + FII) - FIPB approval required

News & Current Affairs TV broadcaster - 26 % (FDI + FII) - FIPB approval required

Non-News TV Broadcaster - No limits laid down - FIPB approval required

In view of its recommendations, Trai has raised certain questions for stakeholders. It wants to know whether there be any change required in the foreign investment limits recommended by Trai for different carriage services in Broadcasting Sector, and if any change is required in the foreign investment limits recommended by TRAI for different content services in Broadcasting Sector 

It seeks to know whether any differentiation is required in terms of methodology used for calculation of foreign investments for Carriage Services, and for Content Services in broadcasting Sector.

Trai has also asked if there is any need to exclude the content services involving news and current affairs out of ambit of Press Notes No. 2 and 4 (2009 Series).

Having regard to the fact that there are now different sectoral caps for different activities in the broadcasting sector, Trai wants to know if there is any need to provide for any additional safeguards in the application of the principle contained in para 5.2.1 of DIPP's Press Note 2 of 2009 to the broadcasting sector, particularly in its application to activities for which a sectoral cap of more than 49 per cent on FDI has been prescribed; and whether the stipulation for recommended procedure for approval for carriage segments needs any modification in view of Press Note No. 2. 4. of 2009.