26% FDI cap in news channels

NEW DELHI: The Indian Cabinet on Tuesday took the bull by the horn and exercising a country's sovereign power to have laws to suit local environs, a la any other country, put a 26 per cent foreign direct investment (FDI) cap on television news companies desirous of uplinking from India. This is at par with the FDI cap prevalent in the print medium relating to news and current affairs.

The policy decision, as had been alluded to in the past in reports, will compel existing news channels like CNBC India and Zee Telefilms (operating Zee News) to restructure themselves as per the new policy within a year's time. More importantly, it means that the Virgin Island-registered Star News Broadcasting would have to apply afresh or amend its existing application for uplinking from India after locating an Indian partner(s) for the venture.

The 26 per cent FDI cap, unlike that in other sectors like DTH and the print medium, is inclusive of investments in a television news company by foreign financial institutions, overseas corporate bodies, non-resident Indians and external commercial borrowings.

"There was no separate policy regarding news channels as the government made no difference between entertainment and news channels. Hence, there was no restriction on foreign investment in such ventures. But it was felt that since there was a policy regarding FDI in the print medium, it should be brought to its logical conclusion by having a policy for news channels too," parliamentary affair and health minister Sushma Swaraj told journalists on Tuesday evening after a Cabinet meeting that discussed the uplinking issue, amongst other things.

Swaraj, an immediate past information and broadcasting minister, asked by, also said that the guidelines regarding the new policy would be "finalised by the I&B ministry as soon as possible", though a time frame could not be given at this moment.

"For that (the time frame), you will have to ask the present I&B minister (Ravi Shankar Prasad)," Swaraj quipped, adding that the communications ministry would also come up with guidelines for those news channels (like CNBC India) that use V-SATs (very small aperture terminals) to go in for point-to-point uplink like from Delhi to Singapore.

The Indian Cabinet, however, has made some concessions for existing news channels that have foreign shareholding over the now-prescribed permissible limit and has given them a year's time to go in for corporate restructuring to continue availing the uplinking permission given to them earlier.

The government has also made it clear that though 100 per cent FDI is allowed in entertainment channels, any percentage --- small or big --- of news and current affairs programming on such channels would compel the government to treat them as news channels.

This means that programmes like Rajat Sharma's `Aaj Ki Baat' cannot continue to air on Star Plus, an entertainment channel. Ditto for Sri Adhikari Brothers' owned Sabe TV that has a fairly good crop of on-air current affairs show, hosted by the likes of Karan Thapar and Hindustan Times editor Vir Sanghvi. The FDI cap would be applicable to regional entertainment channels airing news or current affairs capsules too.

Tuesday's Cabinet decision, to be ratified by the Indian Parliament when it reconvenes next month, comes after months of speculations on a policy on news channels, sparked off by an application for uplinking filed by the Rupert Murdoch-controlled Star that seeks to take full control, including editorial, of Star News after its present content agreement with NDTV for the news channel comes to an end on 31 March.

"We'll have to wait and see the implications properly," Star India's chief executive Peter Mukerjea told from somewhere in South East Asia where he has gone on an official work. Still, he pointed out that any decision on the matter by the government is welcome as it makes things clearer.

Quizzed on the issue, Television Eighteen Ltd. managing director Raghav Bahl said, "We'll have to start negotiations with CNBC Asia now in this regard, but we have 12 months to dwell on the issue." TV-18 Ltd. is the 49 per cent Indian joint venture partner in the Mauritius-registered CNBC India that runs the business news channel of the same name. Singapore-based CNBC Asia holds the remaining part of the equity.

Though the Subhash Chandra-promoted Zee Telefilms could not be immediately contacted for comments, media analysts said that even Zee would have to restructure itself to continue uplinking Zee News from Noida, on the outskirts of Delhi. The foreign shareholding in Zee Tele, including that of the NRI promoter Chandra, is said to be over the permissible limit of 26 per cent.

Tuesday's decision would facilitate clearance of the pending uplink applications from several media companies that have foreign equity in their companies, including TV Today Network (for the proposed English channel), NDTV World (for the up and coming Hindi channel) and BBC (to augment its global newsgathering activities). Both NDTV and TV Today, at present, have less than 26 per cent foreign holding.

Media analysts, however, point out that the present FDI restriction on news channels may hamper their efforts to raise additional funds from FIIs, etc for expansion purpose in the future. 

Still, the government contends that no country allows unfettered FDI in any sector, especially the media. Government officials were at pains to point out today that the Cabinet decision was taken after studying various laws in other countries, including the US where non-Americans are not allowed to invest in the media freely. "The biggest example is that of media baron and Star's boss Rupert Murdoch who had to give up his Australian citizenship to start businesses in the US, " a government official said. 

Good or bad, Tuesday's decision brings to an end tortuous speculation in the government and media on the uplinking issue. Now comes the time to hunt for Indian partner(s) and some corporate jugglery.

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