Mayaram asks DoT to examine FDI decline in telecom

Also requested for Mayaram's perspective, suggestions on the matter

Concerned about the steep decline of foreign investments in telecom, economic affairs secretary Arvind Mayaram has written to M F Farooqui, secretary, department of telecommunications, requesting him to examine how to address this.

His letter says this decline has also affected the country’s current account deficit (CAD).

According to an internal analysis by the department of economic affairs,  foreign investment in telecom dropped by 81 per cent in 2012-12 from the previous year. Between April 2000 and March 2013, the sector attracted a total foreign direct investment (FDI) of Rs 58,732 crore, seven per cent of the country’s cumulative FDI during the period.

Telecom attracted Rs 12,270 crore of FDI during 2009-10, of Rs 9,012 crore in 2011-12 and dropped to just Rs 1,654 crore in 2012-13, the analysis noted, citing data from the department of industrial policy and promotion.

Mayaram’s communication notes most of the top global telecom companies do not have a presence in India. These include Nippon Telegraph & Telephone, South Korea-based SK Holdings, China Mobile Communications, and Deutsche Telekom. According to Mayaram’s analysis, 12 of the top 18 telecom companies in terms of revenue in the Global-500 list do not have a presence in India. None of the six Fortune-500 companies are present.

Britain-based Vodafone Plc holds 64 per cent stake in Vodafone India, Norway-based Telenor has 74 per cent stake in Telewings Communications, Malaysia-based Maxis holds 74 per cent in Aircel and Russian conglomerate Sistema has a 56.68 per cent stake in CDMA operator Sistema Shyam Teleservices.

Last month, the Union cabinet approved a proposal to allow 100 per cent FDI in telecom. However, for more than 49 per cent of equity, companies would have to get approval from the Foreign Investment Promotion Board (FIPB). Earlier, up to 74 per cent FDI in the sector was allowed, 49 per cent through the automatic route and the rest after FIPB approval.

Earlier, a panel headed by Mayaram had proposed that the FDI cap be raised for several sectors, including defence, telecom, retail and commodity exchanges, to attract long-term investments and help the government contain its widening CAD.