FDI in key sectors under scanner

The government will conduct a review to formulate a comprehensive policy on the issue of foreign holdings in key sectors like telecom, seaports, and airports. The review will correlate foreign investment promotion efforts with security and diplomatic considerations.

The department of telecommunications, along with other ministries, will be at the fulcrum of the review. The objective is to adopt a "yardstick that will be acceptable and realistic".

On the face of it, the catalyst to review the existing case-by-case clearance policy (being followed for well over a year now and dealt primarily at the Foreign Investment Promotion Board) is the Orascom-Hutch deal.

However, experts feel the issues involved are much deeper and go beyond individual deals. It may be recalled that certain investment proposals of Chinese telecom companies as well as an investment in a Gujarat seaport is yet to be cleared at the FIPB, due to reluctance of security agencies to endorse the foreign company involved.

That the security establishment was concerned over the implications of enhanced FDI in telecom before the final decision to hike it to 74 per cent was taken last year, is a documented fact.

However, the latest event to draw considerable attention is last years' overseas equity deal that saw Egypt's Orascom Telecom invest in Hutchison Telecom, that runs a joint venture mobile phone operation across India with Essar Tele-Holdings.

Sources added that while from "time to time concerns have been voiced over how foreign shareholdings may affect the security of communications in India", the issue had never been considered in a holistic fashion.