Telecom FDI deferred, courtesy Advani

Deputy Prime Minister LK Advani directly intervened to defer a decision on raising the ceiling on foreign investment in telecommunications companies from 49 per cent to 74 per cent in Cabinet yesterday.

Highly placed sources said as the agenda item for opening up the sector came up for discussion, Advani said he had received a detailed report from the home ministry raising serious objections to the proposal.

"Let me read the report then we will discuss this issue," Advani is learnt to have told the Cabinet.

Sources admit that though Advani did not talk about the nature of the objections raised by the ministry, there were enough indications they pertained to the internal security concerns of intelligence agencies.

The delay is a blow to the plans of Bharti Tele-Ventures and Hutchison-Essar because the foreign holding in these companies is at the 49 per cent ceiling.

It is, however, good news for Indian companies like Reliance Infocomm and Bharat Sanchar Nigam Ltd, which could have been threatened if Bharti and Hutchison-Essar were able to raise more funds.

Officials in the department of telecommunications, however, said they would pursue the matter because all security-related concerns were put at rest by a proposal to allow only a hike in the foreign investment cap while keeping the FDI limit at 49 per cent.

"The deferment happened because some of the ministers had not gone through the proposal in detail. The matter is likely to be taken up in the next Cabinet meeting," said an official said.

The delay is embarrassing for the ministry of communications because raising the foreign investment cap was part of the deal worked out with cellular telecom operators for allowing a unified licence.

"The delay is a double whammy for cellular operators, which have withdrawn their case from the Supreme Court in the hope that the government will relax the investment cap. Though we feel let down, hopefully the issue will be taken up soon," a cellular telecom company executive said.

This is the third time a decision to hike foreign investment cap in the sector has been put off over security concerns.

Earlier, a group of ministers looking at the issue had put off a decision after security agencies raised objections.

What appears significant in the present political context is the fact that the raising of the foreign investment cap in the telecom sector has been strongly resisted by the Sangh Parivar and its swadeshi faction.

The Swadeshi Jagran Manch has already cautioned the government against such a move as it would trigger a direct conflict between the BMS-SJM combine and the government - an embarrassing political situation which the government cannot afford on the eve of Lok Sabha elections.