The department of telecommunications (DoT) is said to be working on a draft Cabinet note that does away with various security-related restrictions that were incorporated into the draft law for allowing foreign equity limits in the sector to go up from 49 per cent to 74 per cent. Since few countries practise such restrictions, this will be a welcome move, though it must be pointed out that the draft proposal has to be cleared by the National Security Council and then the Cabinet. Though the current proposal relates only to telecom, once approved, there is no reason why it should not be extendable to other sensitive sectors like aviation. The law says that if a telecom firm is to have more than 49 per cent foreign investment, its chairman, managing director, CEO, CFO, CTO, etc. have to be resident Indians. Implicit in this is the assumption that if a functionary is an Indian, he's kosher; if he's a foreigner, he's not. This is not necessarily a sound proposition when there is evidence of Indian nationals being involved in terrorist activity. A more sensible proposition, surely, would be to ensure that all those in responsible positions in sensitive industries like telecom and aviation have security clearance. That would also ensure that the country has wiggle room to keep out nationals of countries, like Pakistan, in whose cases there must be a natural inclination to be wary. | |
| While it is true that no major overseas telecom investor has refused to invest in the country because of this clause (ironically, it is Indian players like the Tatas that are exercised about this), there are other restrictions that threaten to derail their investments. The November guidelines, for instance, do not allow firms to access their Indian network operations from anywhere outside the country""allowing such access, however, is standard international practice, even in countries like the US and Israel, which have heightened security consciousness. Indeed, Indian firms are trying to win contracts to maintain/repair global networks from here in India. |
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| Other rules, such as those relating to investor rights, are xenophobic and violative of the standard rules of shareholder democracy. According to the guidelines, if a foreign investor which owns 74 per cent of a telco operating in the country wants to hire a new chairman, managing director, CEO, CTO, etc. (even if the persons being considered are third generation bona fide Indian nationals), this has to be done "in consultation with serious Indian investors", and a serious Indian investor is defined as someone who owns at least 10 per cent of the company's equity. In which case a foreigner has two choices""not invest in the country, or to do so in partnership with an Indian who will operate as a flunkey, doing exactly what he's asked to do in return for a reasonable price. How such a criterion can further the cause of Indian security is unclear, though it is obvious that this increases the ransom that pliable Indian partners can hope to get from serious global investors. Being security conscious is a good thing, but rules must be logical and meaningful so that they do not end up becoming tools in the hands of those who want to keep competitors out of the country. |
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