DoT to press for pre-PN5 status in telecom FDI

NEW DELHI: It’s now official: The department of telecom (DoT) will urge the Union Cabinet during its meet on Friday to revert to the pre-Press Note 5 regime of 49% cap in the foreign direct investment in telecom.

Justifying the move, the DoT, in its fresh Cabinet note, has said that as many as 63 applications for Universal Service Access Licence could not be processed on account of the uncertainty over numerous clauses prescribed in Press Note 5 for enhancing the FDI cap to 74%.

Additionally, as many applications for national and international long-distance licences, especially those of international players, were also on hold as they did not comply with all the norms prescribed by Press Note 5.

The DoT has also pointed out that growth momentum in the Indian telecom sector is in a fast phase, with close to 6m new subscribers being added on a monthly basis. Any delays to new applications on account of further extension or suspension of Press Note 5 will be a roadblock that can have a severe impact on future growth, the note added.

Reiterating that the move was not a rollback on the FDI cap, the DoT has said the limit would be raised to 74% as soon a “broad consensus emerges between different ministries”. It explained that reverting to the earlier regime would have no major impact on companies whose composite foreign holding was over 49%. This is because the direct holding in such companies is less than the prescribed 49%. Besides, the earlier regime also addresses key industry concerns such as permitting remote access to network vendors and overhauling data bases outside the country.

The DoT clarified that it was left with no other option but to initiate its latest move as there was no consensus among the ministries concerned on this issue. It also added that a few ministries had opposed its amendments to the earlier Press Note 5, which came after wide consultations with various stakeholders.

“We have prepared the draft note to make the guidelines transparent, equitable and conducive for the growth of telecom and IT sector with a view to attracting more FDI inflow into the country. The proposals also provide a level-playing field to the service providers,” the DoT note stated.

Press Note 5 was first issued on November 3, ’05, but following representations from various industry associations including Nasscom, Investment Commission, COI, ASPIC, CII and the American Chambers of Commerce, the same was put on hold till October 2, ’06, so that corrections could be effected.