Cancel the call

The 10-month flip-flop on policy details after taking the decision to increase foreign investment limits in telecom to 74 per cent was bad enough, but worse now seems round the corner as the government may reverse the decision and go back to the old 49 per cent limit. Since various departments of the government, including the Prime Minister's Office and the defence ministry, have come up with objections to the new policy, post facto, an incensed telecom minister has decided that it is best to forget the whole thing""his note saying as much goes to the Cabinet on Thursday. If the note is accepted, it will probably be the first instance of the government coming up with a new investment policy, dealing with applications under it (two companies have already crossed the 49 per cent limit, and one letter of intent has been issued under the new policy, for long-distance telephony!), and then scrapping it. Since the clock cannot be turned back as though nothing has happened in the interim, what we have is a right royal mess.

Under the policy, as enunciated by Press Note 5, which was issued in November last year, all top jobs in telecom firms""CEO, CTO, CFO, etc""are to be held by resident Indians, and even if a foreigner held 74 per cent of a company's shares, the appointments of the Indian CEO/CTO/CFO have to be made in consultation with (read approval of) any Indian shareholder who holds 10 per cent of the company's shares. While this was itself a bad idea, the PMO now suggests that these restrictions be lifted for those firms with foreign investment below 49 per cent""that is, it wants two classes of foreign investors. And, the defence minister has backed the proposal to create special rights for Indian shareholders vis-a-vis their foreign partners, making this perhaps the only industry where such discrimination will be the norm.

Other parts of Press Note 5 were equally curious""some cannot be implemented and other restrictions are unique to India. Prior to Press Note 5, as is the international practice, Indian telecom firms were allowed to access their networks from overseas locations (Remote Access)""so if Bharti's network was looked after by Ericsson, it could maintain/repair it from anywhere in the world. Press Note 5, however, stopped this on security grounds. When it was pointed out that no country, including the security-conscious US and Israel, had such restrictions, and that this would hurt even the business process outsourcing industry in the country, the department of telecommunications (DoT) came up with a Cabinet note that watered this down. While the PMO wants the watered-down conditions to apply to only those with 49 per cent foreign investment, the defence ministry favours retaining the restriction for everyone. Another restriction in Press Note 5 is that no calls within the country should be hauled to anywhere outside India""this is impossible to implement since, in internet protocol (IP) networks, the decision to haul traffic is taken by a computer that directs traffic to the less congested networks. A call from Delhi to Mumbai, on an IP network, may travel from Delhi to New York to Mumbai if that route is less congested. The defence ministry is opposed to this.

In short, the government can go neither forward nor back, and the telecom minister has thrown up his hands. Only one solution is possible: scrap the conditions that cannot be technically implemented, and those that are unfair to majority shareholders. If security checks of foreigners are required before top appointments, that can be made a licence requirement.