Cabinet approves 100% FDI in telecom

In a major reform push, government on Thursday approved 100 per cent foreign direct investment (FDI) in the telecom sector, meeting a key demand of the fund-starved industry.

It has been decided to increase FDI cap in telecom to 100 per cent from 74, up to 49 through automatic route and beyond that FIPB, Commerce and Industry Minister Anand Sharma said after a meeting of the Union Cabinet.

A presentation was made by Department of Industrial Policy and Promotion (DIPP) following consultations with the the nodal ministries involved, he said. The idea behind increasing the FDI limit in the telecom sector is to help the industry get fresh funds to lower financial burden.

The moves brings relief for foreign partners in telecom companies as they can have complete ownership of the business. "Foreign investors will no longer need to partner with Indian investors in order to comply with regulatory requirements," PwC India's for Executive Director, Tax and Regulatory Services, Goldie Dhama said.

In 2012, there have been disputes among foreign investors with their India partners in firms like Uninor and Etisalat DB. While Telenor resolved issues with its Indian partner Unitech in Uninor, Etisalat decided to quit the country.

Telecom majors Reliance Communications, Russian conglomerate controlled Sistema controlled SSTL, Malaysian firm Maxis controlled Aircel, Norwegian firm Telenor welcomed the decision.

Industry analysts believe 100 per cent FDI in the telecom sector can attract investment of $10 billion in near to long term.