Commission endorses 100 percent FDI in telecom sector

NEW DELHI (Reuters) - The Telecom Commission has endorsed a proposal to increase foreign holding ceiling in phone carriers to 100 percent, a senior government official said on Tuesday.

A panel headed by a senior finance ministry official earlier proposed to allow more foreign investment in sectors like defence, telecom, retail and commodity exchanges to revive investments and attract long-term investment as the government strives to contain its widening current account deficit.

India currently allows foreigners to hold a maximum 74 percent in local phone carriers. Allowing full foreign ownership will mean companies such as Vodafone Group Plc , Telenor ASA and Sistema will not need Indian partners to operate in the country.

The Telecom Commission, the highest decision-making body in the telecommunications ministry, will send its recommendations to the Department of Industrial Policy and Promotion (DIPP), the government official said. The DIPP after consulting other ministries will send a final proposal to be approved by the federal cabinet, the official added.

"We have said it should be done in consultation with home and other concerned ministries," the official said.

Media reports have said the home ministry has raised security concerns over further opening up sectors like telecom, defence and civil aviation.

However, another senior government official, who deals with foreign investment issues, said the licensing rules for telecom companies already took care of security concerns.

Sistema's Indian unit said in a statement on Tuesday it supports 100 percent foreign holding in telecoms companies, calling it a pro-industry and pro-consumer move.

(Reporting by Devidutta Tripathy and Manoj Kumar; Editing by Anand Basu)