The Reader's Digest Association Inc's bid to return to the country on its own has hit another roadblock. The core group of the Foreign Investment Promotion Board (FIPB) has deferred a decision allowing 100 per cent foreign equity in this sector.
The information and broadcasting ministry, under Sushma Swaraj, some time ago decided not to support a proposal of Reader's Digest Association of the US _- pending with the FIPB _- to acquire the publishing assets of Tata group-promoted Readers Digest India Print & Publishing Pvt Ltd as it "does not conform to the existing media policy".
The FIPB core group, which met last Friday, dwelt at length on whether the information and broadcasting ministry's objection stands in the way of allowing 100 per cent foreign ownership in the magazine on the basis of the 1956 cabinet decision.
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A section of the core group, government sources said, felt that since the foreign company was forced to dilute its stake because of the then Fera rules, it should be allowed to restore its equity to the pre-Fera level.
Reader's Digest Association in the late 70s was forced to dilute its stake in the magazine on account of the Fera rules.
The core group, however, could not reach a consensus on the issue of whether the 1956 decision is still applicable since the foreign partner voluntarily diluted part of its stake in 1979.
"Reader's Digest was made an exception to the mid-50s cabinet note on not allowing foreign publications, especially news and current affairs ones, to be published from India.
"But Reader's Digest Association unilaterally cannot decide to return years later after washing its hands off the project in the 1970s when it could have retained some percentage of the equity," information and broadcasting ministry officials had contended.
Giving Reader's Digest Association's permission now would open up the pandora's box as other local media companies may also want to get permission for foreign participation, the information and broadcasting ministry had stated.
Readers Digest India is promoted by Titan Industries and some other Tata group companies which have a majority stake in the company. The remaining shares are held by other Indian promoters. Apart from publishing assets, the company also has other financial and investment assets.
Reader's Digest Association also proposes to invest about $ 5 million to acquire up to 100 per cent equity in Reader's Digest India's wholly owned subsidiary, Readers Digest Association Pvt Ltd.
In India, the magazine, post-1977, is published by Reader's Digest India under a licence granted by Reader's Digest Association Inc, which is the proprietor of the name and trademark Readers Digest.
Till 1979, Reader's Digest Association Private Ltd was the company which used to publish Readers Digest in India. Reader's Digest India was formed in the same year and it subsequently turned Reader's Digest Association Private Ltd into its wholly owned subsidiary.