Govt split on 26% FDI cap in channels

The ministries of finance and commerce have suggested an increase in the limit on foreign investment in news broadcasting companies, now capped at 26 per cent.

The two ministries have also objected to the move to make it mandatory for the single largest Indian shareholder in a news broadcaster to own at least 51 per cent of the company.

However, the information and broadcasting ministry is not convinced. I&B ministry sources said the group of ministers, headed by Defence Minister Pranab Mukherjee, would be going into these issues in detail.

The Department of Industrial Policy and Promotion , which is a part of the commerce and industry ministry, has said that the I&B ministry's stand favouring a limit of 26 per cent on the composite foreign investment, clubbing together FDI and foreign institutional investment, would be restrictive.

Sources said, DIPP wanted to take the FII investments out of the foreign investment cap and allow 24 per cent FII investments in listed companies, as allowed in the various present policies governing investment in listed companies. If allowed, this would take the overall foreign investment limit in news broadcasters to 50 per cent.

The finance ministry has pointed out that, to take care of the concerns of the domestic companies, it would be preferable to restrict FDI to 49 per cent in the Indian news channel companies.

The ministry also wants the I&B ministry to clarify if there would be an overall ceiling for FDI and FII investments taken together.

The I&B ministry, however, says the proposal to include FII and FDI investment within the foreign investment limit of 26 per cent is not restrictive. It said that the requirement of the largest Indian shareholder, holding 51 per cent equity, is imperative to ensure Indian control of companies.

The ministry of commerce has also pointed out that monitoring of indirect FII equity in TV channel companies for the purpose of pro-rata reckoning of foreign direct holding to arrive at 26 per cent equity as foreign investment limit would be difficult.

The finance ministry has also said that it would be preferable not to calculate FDI on a pro-rata basis.