Home Ministry calls for FDI backtrack

4 Aug 2014

India’s Ministry of Home Affairs has called for the re-introduction of the 74% foreign ownership cap in the telecom sector on the grounds of security concerns, the Economic Times writes. In a note to the Department of Industrial Policy and Promotion, the Home Ministry claimed that foreign direct investment (FDI) rules should be re-evaluated, taking into consideration the information regarding surveillance programmes uncovered by former US National Security Agency (NSA) contractor Edward Snowden. The Ministry noted that the telecom sector was ‘sensitive’, adding that ‘remote access and encryption remain, and are of increasing concern.’ A reduction in the FDI cap to 74% would cause problems for Telenor and Sistema Shyam TeleServices (SSTL), the parent companies of which have applied to the Foreign Investment Promotion Board (FIPB) for permission to increase their ownership to 100%. The government has stressed, however, that it has no intention of making policy changes retrospective, as such action has proved highly disruptive to business. Nevertheless, any backpedalling is likely to harm the sector, bringing to the fore issues of regulatory uncertainty that have plagued the market in recent years.

India, Department of Telecommunications (DoT), Sistema Shyam TeleServices (SSTL, MTS India), Telenor India