Fipb Defers Walt Disney Proposal By 2 Weeks

The Foreign Investment Promotion Board (FIPB) today deferred by two weeks its decision on Walt Disney's proposal to set up a wholly owned subsidiary in India for operating its pay channel (The Walt Disney Channel) and for creating a platform for its other businesses such as theme and amusements parks, etc.

Sources said the case was deferred at the FIPB's meeting here as it is still being examined by the ministry of information and broadcasting as well as the department of industrial policy and promotion (DIPP) in the ministry of industry.

The contentious issue of whether or not an existing Indian partner of a foreign company should have the right to give the go-ahead to a new independent project by the foreign firm is also yet to be solved.

Disney has proposed to set up the new subsidiary for its pay channel (TWC) while it has an existing joint venture with the KK Modi group for distributing Disney television software to other free-to-air channels. The Modis have opposed the proposal. It has brought to the notice of the government that like in previous cases, the Modis should be asked to give their no-objection. It is likely that the Modis will not furnish a no-objection certificate.

As per a policy guideline (popularly known as Press Note 18), a foreign firm is not permitted to set up a separate subsidiary if it has an existing joint venture in the same line of business. In case the JV has been terminated, there has to be a cooling off period of at least six months.

On previous occasions, the Indian joint venture partners have been asked to give no-objection certificates when their foreign collaborators wanted to set up another subsidiary. For instance, when FTR Holdings (a Phillip Morris subsidiary) wanted to set up a 100 per cent arm for research and leaf development, the government asked it to get the approval of the KK Modi group with which the US firm has a cigarette manufacturing venture.

In Disney's case too, the KK Modi group has an existing joint venture. Modi's son, Lalit Modi, who is the vice chairman of WD India Pvt Ltd.

In its application to the government, Walt Disney has claimed that the Disney group has signed a non-binding MoU with the Modi group. Since the project was not feasible, it has decided to not to proceed with the project and that neither party will have any claims against the others if the project did not proceed.

Walt Disney also said that it intends to launch TDC as a pay channel. So the proposed activity does not clash with the existing activities of the JV with the Modis which has a license to distribute Disney programmes on free-to-air TV until late 2002.