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The 2006 approval of the Aircel-Maxis deal by the Foreign Investment Promotion Board (FIPB), which is under the scanner of the Central Bureau of Investigation (CBI), was based on a policy that later changed in January 2010, said an official who was in the finance ministry at that point.
Till 2010, the FIPB could clear investments up to Rs 600 crore, which was later raised to Rs 1,200 crore, beyond which proposals are vetted by the CCEA. But the earlier policy allowed the FIPB to consider investments pegged on the face value of a company share proposed to be acquired, rather than on the actual foreign investment inflow, said the official. Finance ministry officials of the time also argued that there were more than 20 cases involving foreign investment of over Rs 600 crore , apart from the Aircel-Maxis deal, during the pre-2010 period that were approved through the FIPB route without going to the Cabinet. The controversy around the Aircel-Maxis deal is whether FIPB could approve the $800 million (Rs 4,800 crore as per current dollar value) proposal on its own, or should it have gone to the Cabinet Committee On Economic Affairs (CCEA).
But, FIPB archives show that CCEA approvals were procured in some cases involving lower foreign investment than Aircel-Maxis even for the pre-2010 proposals. Fiat’s additional flow of foreign direct investment (FDI) of Rs 2,000 crore at the end of 2006 was one such example. In what could seem like a surprise, the eight-year-old Aircel-Maxis proposal does not show $800 million FDI, but rather it shows “no FDI inflow”. A 2006 FIPB statement says the total FDI inflow was nil against a proposal of Global Communication Services Holdings Mauritius (representing Malaysian conglomerate Maxis) to invest in Indian telecom service provider Aircel. This came up at an FIPB meeting on October 3, 2006.
Ashok Jha, the Department of Economic Affairs (DEA) secretary who chaired the FIPB meeting during the Aircel-Maxis deal, told Business Standard, “There is no impropriety whatsoever in granting FIPB clearance. Everything was done strictly in accordance with existing rules.”
Former finance minister P Chidambaram had already clarified that investment of such nature did not require any approval of the Cabinet Committee on Economic Affairs (CCEA), Jha said. “This was not a single case, there were many such proposals which were cleared by (just) the FIPB,” he added.
The CBI is investigating how the FIPB under Chidambaram cleared the proposal of Global Communication Services Holding Mauritius to invest $800 million in India through a 74 per cent stake purchase in Indian telecom service provider Aircel. The CBI recently filed a chargesheet naming former telecom minister Dayanidhi Maran and his industrialist brother Kalanithi Maran in a 2G spectrum allocation case linked to Aircel-Maxis. The CBI told a special court that Maxis had paid a bribe for telecom licences in the garb of investment in a company run by Kalanithi Maran.
The licences were granted during Dayanidhi Maran’s term as telecom minister (2004-2007).
A press statement issued by the FIPB, after the October 3, 2006 meeting, said the Global Communication (Maxis) proposal was meant to “issue specific approval in the name of Aircel Cellular to accord conformity approval to the indirect foreign investment of 73.99 per cent in ACL (Aircel).” No foreign investment inflow was shown against the Maxis-Aircel proposal.
When asked about any violation in the Aircel-Maxis case, an official said, “Assuming the proposal had to go to the CCEA and it did not go, there is no criminality involved.”
However, questions are being raised over procedural irregularity, in case there was any. There is no evidence of any quid pro quo yet in the case dealing with the FIPB approval without going to the Cabinet. “It took eight years to come out in the open,” said an analyst.
Reacting to a portion of the CBI chargesheet in the Aircel-Maxis case, Chidambaram in a statement had said on Friday, “The FIPB is chaired by the Secretary, department of economic affairs. It recommends proposals for the approval of the finance minister and, where required under the rules, the approval of the CCEA.’’
He added that in the Aircel-Maxis case, the FIPB sought the approval of the finance minister in accordance with the rules. “The case was submitted through the additional secretary and secretary, department of economic affairs (DEA). Both of them recommended the case for approval. Approval was granted by me, as finance minister, in the normal course.’’
According to Chidambaram, the files will bear out “the correctness of this position’’. Jha was the DEA secretary and Ashok Chawla, now chairman of the Competition Commission of India (CCI), was the additional secretary at that point.
While Jha said he had not been contacted by the CBI in the last one year on the matter, the agency said it was probing the Aircel-Maxis FIPB case but had not registered a separate preliminary enquiry into it. The aspect of the irregularity in grant of FIPB approval to the Mauritius based company Global Communications and the role of the Indian partner company of Chennai (Aircel) was being further investigated, the CBI had said in a statement soon after filing the chargesheet in the court of Special CBI judge OP Saini. The agency is yet to take a call on whether to question Chidambaram.
As for other proposals with investment of over Rs 600 crore being approved by FIPB, in 2006 itself, there were quite a few. These included proposals for investments in Idea Cellular, ICICI Venture Funds, Essar Infrastructure Holdings, Teletech Investments, and Hilton Hotels. Some of them had an additional layer of “government approval”, based on FIPB recommendation.
In a case related to Rs 2,000 crore FDI by Fiat (Italy) in November 2006, the proposal got the nod of the CCEA, according to an FIPB statement at that time.
FOREIGN INVESTMENT ROUTE
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A pre-2010 policy allowed FIPB to consider investments pegged on the face value of a company share proposed to be acquired, rather than on the actual foreign investment inflow
