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Defence ministry moots 26% FDI cap for news channels

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NEW DELHI: The ministry of defence, under minister George Fernandes, is understood to have suggested that foreign shareholding in a news channel should be capped at 26 per cent in a response to a Cabinet note on the news channels' uplinking circulated by the information and broadcasting ministry.

It is interesting to note that the defence ministry's observations on the uplinking issue comes close on the heels of Fernandes' staunch opposition to the government stand on disinvestment. Fernandes is on record as saying disinvestment "should be done carefully".

According to government sources that indiantelevision.com spoke to today, the feedback from various government departments and ministries on the uplinking issue is that 100 per cent FDI in news channel should not be allowed. The Star News issue has also not been listed yet for a Cabinet meet that is generally held on Tuesdays.

While the telecommunication ministry has observed that a 49 per cent FDI in news channels is okay (consistent with the FDI cap in telecom infrastructure segment), the ministries of home and external affairs have recommended "reasonable restrictions."

It is also learnt that the I&B ministry, under Sushma Swaraj whose brainchild it was to take the issue to the Cabinet after Star filed for uplinking permission for Star News last year, had prepared an internal note representing the ministry's viewpoint which had envisaged capping the FDI news channels at par with the norms set by the government in the print medium for the news category.

The big question is: what would be the stand of the new I&B minister Ravi Shankar Prasad? He hasn't yet spoken his mind on the issue, but he did give a hint to indiantelevision in an interview that the Star News/uplinking issue is "commanding" his attention and that all options are being looked into. That includes giving provisional permission to Star for the news channel subject to the condition that the company would abide by all future policy decisions on the matter. Prasad said this in response to a question whether giving provisional permission to Star is an option being considered by his ministry.

However, he had also reiterated his predecessor's stand that the guidance of the Cabinet would be sought on the matter.

Meanwhile, if the government caps FDI in news channels at 26 per cent, then other broadcasters too, would be put to inconvenience and would have to undertake corporate restructuring. A case in point is Zee Telefilms where if Zee News' shareholding control has to be 74 per cent Indian, then NRI promoter Subhash Chandra would have to do some restructuring.

If the 26 per cent cap is effected, then TV Today Network, that has said it may offload some more equity to outsiders, will not have much to offload as it has already offloaded about 16 per cent to various parties, including Bharti, an Indian company where foreign companies like Singapore Telecom hold stakes.

CNBC India, a joint venture between Television Eighteen Ltd and CNBC Asia, may also have to opt for some restructuring.

"In effect, if the government caps FDI in news channels at 26 per cent, then various companies would have to go in for corporate restructuring which may be time consuming," a media analyst said.

The Virgin Island-based Star News Broadcasting had sought the government's nod in October last year to uplink Star News channel that had been interpreted in the government circles as 100 per cent foreign ownership of a news channel from the country.

Star is getting ready to put in place a news team and other infrastructure. Industry sources also say that some Indian corporates have evinced interest in forming a joint venture with Star in case government restrictions come in.

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