To whittle the veto power wielded by the Ministry of Home Affairs (MHA) over investment proposals, the government will frame rules and guidelines and rewrite several laws in the next two months.
Top government sources confirmed that a subjective, anecdotal, case-by-case approach to a raft of investments that were stuck seeking mandatory ‘security clearance’ will be revisited. The process began with the Foreign Investment Promotion Board nixing the home ministry’s security concerns about a proposal by Verizon Communications — a telecom company headquartered in the US. The ministry had reservations about Verizon being allowed to set up shop in India, as the company shared data with US’ law enforcing agencies, such as the Federal Bureau of Investigation (FBI), and its India arm might as well be required to do so.
MHA’s reservations were rejected after it could not produce any evidence of Verizon being in violation of any Indian law. But this realisation took more than a year to dawn.
| MHA ROADBLOCKS |
| * 2009 Rejects Swiss firm ByCell's Rs 2,500-cr proposal to start telecom services in India, citing lack of clarity on funding source. |
| * 2010 Voices concern that Chinese telecom equipment makers may be embedding spyware technology in their exports to India, giving intelligence agencies access to the country's telecom networks. Huawei and ZTE are most affected. |
| * 2011 Objects to Etisalat-DB’s proposal to raise its foreign equity beyond 49%, citing Etisalat’s 2009 attempt to mount spyware on BlackBerry in the UAE, its presence in Pakistan and Afghanistan and its technical tie-up with the Chinese Army-linked firm, Huawei. |
“The home ministry will now have to prove to whom and how an investment proposal is a threat. The approach today is subjective and the home minister agrees this won’t do,” said a highly-placed source in the Prime Minister’s Office (PMO). He added a policy decision governing MHA vetoes on investment would be announced in the next two-three months.
This will be followed by a set of transparent rules and guidelines that will require security agencies to clearly state their objections.
The objections raised by security agencies relate to countries where the investment proposals originate, besides the nature of the proposals. Although a Chinese company was the lowest bidder for the dredging of Bombay Docks, the proposal was shelved over security concerns due to proximity to Indian Navy installations.
Similar concerns were cited in the case of the Vizhinjam Port. The Kerala government last month decided to award the port operator contract for the Rs 7,800-crore Vizhinjam Port to the Welspun-led consortium, after MHA denied security clearance to the other bidder, Adani Ports, formerly Mundra Ports, without citing any specific reason.
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The government brought in a “security clearance” requirement after a host of Chinese companies successfully bid for India’s port projects. A few years back, a joint venture between Mumbai-based Zoom Developers (under corporate debt restructuring now) and two Chinese partners had won the mandate to develop Vizhinjam Port. The Indian Navy objected to this. The home ministry also had reservations with the Cairn Vedanta deal. While giving the security no-objection certificate in December last year, the ministry highlighted eight areas of concern, including 64 legal proceedings against Vedanta and its subsidiaries in various courts. The ministry’s letter to the oil ministry pointed to the Vedanta Group’s involvement in cases of “default of payment, human rights violation, damage to environment in its mining and metal projects in India and abroad”.
Several telecom proposals were also held up on the ground that the companies involved were operating in Pakistan too. “There has to be transparency and accountability when you say ‘no’ to a proposal on security grounds,” the official said. The government is also working to cover the areas that are currently not governed by any law. The National Security Advisor (NSA) is working on a model cyber security law, and rules relating to telecom investments are being framed by the Department of Information Technology and Telecom. The PMO will align all these rules.
India doesn’t have a comprehensive cyber security law. There have been reports of violations of human rights in the cyberspace. There have also been reports of online social networking platforms, such as Facebook, engaging in censorship.
There have been complaints about the BlackBerry messenger services of Research In Motion (RIM) in India becoming a virtual e-surveillence tool. However, this does not extend to the enterprise Virtual Private Network (VPN) solution, provided through the BlackBerry Enterprise Server (BES) product.
A new Data Protection and Privacy act is also in the works. There are several companies that are reluctant to invest in India because of their vulnerability on the data protection front. “Today, if somebody hawks credit card details over the internet, Indian laws are not strong enough to punish the offender,” said the official.
Officials say, once the laws are simplified, the highest volume of business to flow into the country will be from china, followed by the US and some Gulf countries.