Government revises uplink norms for news channels, Indian entity to have 51% stake

NEW DELHI: The Indian government today decided to tighten the screws for uplinking norms for news channels with foreign investment by bringing in safeguards against proxy control that include a single Indian shareholder or entity holding 51 per cent in the news channel company uplinking from India.

The ceiling of 26 per cent on foreign equity continues. The government has also decided to bring the norms for foreign direct investment (FDI) in the electronic medium at par with those of the print medium, with additional safety, which will mean that some more changes would need to be effected in the FDI guidelines for the print medium too.

The changes in the foreign investment guidelines for uplinking of news channels, to be effected from next week in all probability, will also mean that Media Content & Communication Services India Pvt Ltd (MCCS)/Star News or any other such cases would officially get one month's time to restructure to adhere to the revised uplinking norms.

The new norms also state that the applicant company must have a paid up capital of Rs 400 million, which is ten times more than the amount that Star India had committed to place in MCCS once it was granted uplink permission. MCCS currently has a paid up capital of Rs 100,000.

Pointing out that the revised uplinking norms are "additional safeguards" compared to the print medium norms, information and broadcasting minister Ravi Shankar Prasad today said, "We have decided to change the guidelines for uplinking where the whole thrust is going to be on dominant shareholding of 51 per cent to be held by an Indian entity."

The Indian shareholder(s) can be an individual or a company or a group of companies. The Indian government has further made it clear that the share of the shareholders (be of resident Indian/Hindu Undivided Family or a relative as defined under Sec 6 of Company's Act) either singly or in combination be at least 51 per cent. Indian financial institutions would also be allowed to hold stake in a news channel company as per Reserve Bank of India guidelines.

The decision to go in for a revision of uplink norms was taken at a meeting today attended amongst others, by Prime Minister AB Vajpayee, deputy prime minister LK Advani, law and justice and commerce minister Arun Jaitley, Prasad, finance minister Jaswant Singh and officials from the PM's Office and the I&B ministry.

Contacted by, Star India CEO Peter Mukerjea said, "We are very happy to hear that the government would come out with revised guidelines. We'd study them and move forward."

MCCS, which has applied for permission to uplink news content for the Star News channel, had been accused by the government and Indian media houses of not following the existing guidelines in letter and spirit by forming so-called shell companies with Indian shareholders who did not have much control over the company. An Indian government official had said, "The group of ministers studying the Star case had found that it contravenes guidelines through interesting financial arrangements with backend companies."

The safeguards that would be given a formal shape by the government over the next few days for the revised uplink norms include the following: 

* If the Indian entity is a group of companies, the applicant company seeking uplinking should also be under the same management control.

* All appointments of key personnel --- executives and editorial --- shall be made by the applicant company without any reference to the foreign investor (In Star News' case it was found that Star with 26 per cent stake wielded more power than Indian shareholders).

* The applicant company must have complete operational control and also control over assets and content.

* The applicant company must have adequate financial strength for running a news channel (this means that a company with low paid up capital cannot possibly be allowed to uplink a news channel from India, though Prasad did not say whether the rules would define "adequate financial strength" too).

* The applicant company should have total financial, managerial and other control.

Asked about the time frame to be given to the likes of Star News, Prasad said, "Our guidelines are any channel exclusive. Once they are given a final shape, then Star would be given a month's time to comply with the new guidelines."

The minister did not comment whether the government would re-examine CNBC TV 18's case too, where through a complex restructuring the Raghav Bahl-promoted Television Eighteen Ltd holds 90 per cent stake in a joint venture with CNBC Asia Pacific. The restructuring was cash neutral.

As per indications available, two options may have been discussed at today's meeting -- either ask Star News to shut down or amend the guidelines to force compliance in letter and spirit.

The latter seems to be the likely option that would be taken by the government. Star News would also be given time to comply with the new guidelines if the present ones are changed.

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