MP demands probe

HUTCH HITCH

Mobile telephony pioneer and Rajya Sabha parliamentarian Rajeev Chandrasekhar has called for an investigation into the role of Indian and foreign financial institutions in aiding and abetting "complex multi-layered financing transactions that circumvent the spirit of sectoral caps."

In an oblique reference to mobile operator Hutchison-Essar Ltd, which has IDFC as one of the shareholders, Chandrasekhar wants "these rogue financial institutions be identified."

Raising the demand in a letter to Prime Minister Manmohan Singh on March 27, Chandrasekhar also sought the Ministry of Finance and Reserve Bank of India ensure that such institutions are "actively discouraged and disincetivised."

The letter to the PM, also sent to Finance Minister P. Chidambaram and Ananth Kumar, the chairman of the Parliamentary Standing Committee on Finance, follows earlier attempts by Chandrasekhar to raise the issue in Parliament.

Chandrasekhar told Business Standard that while his questions had not been replied to in the last session of Parliament, he planned to raise the issue strongly in the coming session. "Our country needs to have a less ambiguous and ad-hoc approach to foreign investment in sensitive sectors," he said. "I am escalating the matter on grounds of principle to ensure transparency and consistency in FDI spanning all businesses."

The crux of the Hutch-Essar matter revolves around a 19.54 per cent shareholding held by Hutchison Telecom International Ltd's (HTIL's) three Indian partners including IDFC.

The entire shareholding has been aggregated under one company, christened JV Company.

HTIL held 52 per cent in Hutch-Essar (in February it entered into an agreement to sell its entire stake to Vodafone Plc). The Hong-Kong company held 67 per cent stake in Hutch-Essar. Combined with the 22 per cent foreign shareholding of Essar, the effective foreign stake stands at 89 per cent, breaching the 74 per cent limit.