Government May Soon Allow 100% FDI In Telecom

The government is finalising a plan to allow 100 per cent FDI for telecom services through the automatic route which allows firms to attract foreign funds without its approval, sources said today. The proposal is likely to be considered by the Telecom Commission, the apex decision making body of the Department of Telecom, at its meeting scheduled for tomorrow, they said.

"The TC is likely to consider raising of FDI limit up to 100 per cent for all telecom services including infrastructure through automatic route," a source said. At present 100 per cent FDI is allowed, of which up to 49 per cent investment in a company can be done through the automatic route. The inflow of overseas investment beyond that requires government approval because of security reasons.

The panel is also likely to discuss the relief package recommended by an inter-ministerial group (IMG) for the telecom sector which is reeling under debt of around Rs. 4.5 lakh crore. In its September meeting, the Telecom Commission had in- principle approved the extension of time period for the payment of spectrum bought in auctions by telcos to 16 years from the current 10 years, as recommended by the IMG.

It had also approved the IMG recommendation to lower the interest rate charged over penalties imposed on service providers with slight modifications. The commission had sought a legal opinion on some of the points it approved at its previous meeting in September-end before firming up its view. The panel had also sought views of the Telecom Regulatory Authority of India (Trai) on IMG's proposal to relax spectrum cap as it will provide exit path to loss-making mobile service providers and ease consolidation in the sector.

Trai last month recommended that the ceiling on spectrum held by mobile operators within a particular band should be removed, while suggesting a 50 per cent cap on combined radiowave holding in efficient bands like 700 MHz, 800 MHz and 900 MHz. If these suggestions are accepted by the DoT, they would provide a major relief for the soon-to-be-merged Idea Cellular and Vodafone, as they would have breached the spectrum caps in certain locations under the existing rules.

It would also enable aggressive newcomer Reliance Jio to pick up additional spectrum, if needed, in bands like 800 MHz. Trai has also suggested that the overall cap on holding spectrum should be raised from the current 25 per cent to 35 per cent. According to the source, the panel may also consider approving of grants for IITs to set up lab for indigenous development and testing of 5G technologies.