INDIA BUSINESS WORLD - MAY - JUNE 2007
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NOW BROADCASTERS TO TAKE FIPB CLEARANCE FOR NEW FORAYS

Broadcasting sector companies working with a foreign partner may now have to take prior approval from Foreign Investment Promotion Board for undertaking any new activity in the sector even if it does not involve fresh foreign investment. The finance ministry has asked information and broadcasting (I&B) ministry not to grant licenses to such companies without prior approval from FIPB.

North Block also wants I&B to allow companies already having foreign investment to carry out additional activities only after FIPB's specific permission. This would apply in all areas where FDI is on FIPB route. The finance ministry's initiative is on behalf of the department of economic affairs since DEA secretary heads FIPB.

The move follows I&B's approval to ASC Enterprises for providing direct to home services and Hathway Cable & Datacom to operate as a multi system operator without the board's prior permission. According to a communication from the finance ministry, FIPB has also urged the I&B ministry not to grant licences to companies with foreign investment unless they have prior permission from the Board.

The move is aimed at keeping a tab on the foreign investment flowing into the sector as it has certain sensitivities involved. The finance ministry's contention on the issue is that any operator having FDI should get clearance from FIPB for undertaking any new activity and the I&B ministry should not grant licence to operate in cases where clearance has not been provided. According to FDI policy, foreign investment of up to 49% is allowed in both direct to home and cable network services under FIPB route. This includes both FDI and FII investment.

In case of direct to home, the FDI component cannot exceed 20%. Also, the sectoral guidelines issued by the I&B ministry have to be complied with.

Hathway, which had foreign investment of up to 26% under automatic route had approached the FIPB to bringing in additional FDI. Ministry of I&B had, in September 2006, allowed the company to operate as a MSO in Mumbai, Chennai and Delhi.

"The FIPB, in its 95th meeting, while considering the proposal of M/s Hathway Cable & Datacom Pvt Ltd. has also observed that ministry of I&B may be requested not to grant licence for the activities without specific approval of FIPB, in cases where FDI is involved. I would request you to kindly look into the matter and ensure that the company should obtain prior FIPB approval. In case, a company is already having FDI, permission may be granted only after obtaining specific FIPB approval for the addition activities in which FDI is on FIPB route," says the communication from an finance ministry official to the I&B ministry.