FDI in cable sector to be raised

The Ministry of Finance is working towards raising the limit of foreign direct investment (FDI) in the cable sector from 49% to 74%. This will help boost the media and entertainment (M&E) industry, which aims to raise foreign capital to fund its growth. Finance Minister Pranab Mukherjee, while presenting his budget proposals for 2011-12, insisted on making FDI policy more user-friendly. He said that prior regulations and guidelines had been consolidated into one comprehensive document, which was being reviewed every six months. "The last review was released in September 2010. This has been done with the specific intent of enhancing clarity and predictability of our FDI policy to foreign investors," Mukherjee told Parliament.

"Most companies have reported massive losses in this space. Companies will get a chance to expand distribution networks if foreign investment is encouraged," said Angel Broking analyst Chitrangada Kapur.

Currently, there are different FDI limits for different segments in M&E. The Telecom Regulatory Authority of India (TRAI) in July 2010 had suggested bringing uniformity and raising FDI limits since it was as low as 20% in some cases.

Cable TV companies are talking to foreign investors to ensure that the digitisation policy framework remains intact. Direct-to-home companies are also looking at funding support as they see a huge growth in subscribers. Private FM radio firms will be able to get more foreign exchange through partnerships if the government proposal increases the FDI from the present limit of 20-26%.

However, market players believe that prevailing issues like negative return on capital, high music royalty payout and e-auctions in Phase III have to be resolved to ensure that investors would want to invest. "The critical question is 'investment attractiveness' of the medium itself, be it Indian or foreign. Any foreign investor would want to invest if important issues are sorted out before Phase III is announced. Talking of FDI in isolation for any segment is meaningless," said Vineet Singh Hukmani, managing director of Radio One.

13 March 2011 — The Sunday Guardian.