Govt to raise FDI in cable industry to 74%

After the Cabinet nod for cable digitisation, the government is all set to hike the foreign direct investment (FDI) limit in the distribution platforms from 49 per cent to 74 per cent. It will also moot for uniform FDI cap across various carriage platforms like DTH, IPTV, mobile TV, HITS and cable companies.

A draft note to this effect, prepared by Department of Industrial Policy and Promotion, has already been sent to various ministries for their comments and inputs. They include information and broadcasting ministry and the department of telecommunications.

An official with the information and broadcasting ministry said his ministry and the Telecom Regulatory Authority of India are expected meet the task force next week to discuss on the implementation part of the matter. “Soon, it will be placed before the Cabinet for its consideration,” he told Business Standard.

An 18-member task force headed by Rajiv Takru, additional secretary in the I&B ministry, was set up in May this year to oversee and facilitate the implementation of digital addressable cable TV systems in the country.

Of the proposed 74 per cent, 49 per cent will be put under automatic route. The remaining will be through Foreign Investment Promotion Board. At present, the current norms for FDI differ on various platforms. For mobile TV, HITS and IPTV, it is 74 per cent, but the the permissible foreign investment cap for cable distribution companies is 49 per cent. Of this, up to 20 per cent can be FDI. The balance can be from foreign institutional investors and non-resident Indians among others.

In June last year, Trai had made suggestions to raise FDI for broadcast carriage services like DTH to 74 per cent. The broadcast sector regulator had also recommended reducing the FDI cap for analogue cable firms from 49 per cent to 26 per cent, but the I&B ministry did not agree to it.

So, the latest move will bring smiles to the cable distribution industry. Experts say around Rs 20,000 crore to Rs 25,000 crore will be required for the complete digitalisation. “The government’s proposal to raise the FDI in cable from 49 to 74 per cent will open the gates for overseas investments,” notes Ravi Mansukhani, managing director, Hinduja-owned IndusInd Media and Communications. “This will help us raise funds for our requirements.”

A KPMG report on the media and entertainment industry says the country had — in 2010 — 103 million cable homes. Of this, 68 million were connected by analogue cables, while 28 million used DTH. Five million switched to digital cable.

In the past few years, digitisation has been mainly driven by consumers switching to DTH, while digital cable is yet to gain momentum.

However, domestic cable firms were finding it tough to raise money from home-grown lenders owing to analogue cable distribution services, under-declarations and fractured business practices.