The Committee is in favour of a simplified foreign investment regime for radio.
We recommend that the following safeguards be introduced in the license agreement:
a. FDI up to 26 per cent should be permitted in FM broadcasting (news as well as entertainment).
b. While calculating the 26 per cent limit on FDI, the foreign holding component, if any, in the equity of the Indian shareholder companies of the licensee should be duly factored in on a pro rata basis to determine the total foreign holding in the licensee. The equity held by the largest Indian shareholder group should be at least 51 per cent of the equity excluding equity held by public sector banks and public financial institutions.
c. 75 per cent of the directors of the licensee, the Chief Executive Officer of the licensee and/or head of the channel and all key executives and editorial staff of the channel must be resident Indians appointed by the licensee without any reference on or from any other company for all news channels. For all entertainment channels exception to the above could be made for 'People of Indian Origin' cardholders / NRIs for the position of key executives and editorial staff. This facility will not be available to channels providing any kind of news. It should be obligatory on the part of the licensee to inform the Ministry in writing before effecting any alteration in the foreign share holding pattern or in the shareholding of the largest Indian shareholder and / or in the CEO / Board of Directors. Further, the licensee should be liable to intimate the Ministry the details of any foreigners/ NRIs employed/engaged by it for a period exceeding 60 (sixty) days. Further, there should be a bar on direct/ indirect outsourcing of content to foreign parties.
d. The licensee should be required to make disclosures of any shareholders agreements, loan agreements and such other agreements that are finalized or proposed to be entered into. Subsequent changes to the said agreements should be permitted only with the prior approval of the Ministry. Further, the licensee should not be permitted to raise loans from foreign entities for all news channels beyond the proportion of foreign equity allowed. (In other words, for Licensees putting out news, upto 26 per cent of their total equity can be taken as loans from foreign sources and no more).
e. In the light of the aforementioned changes to the FDI policy, in respect of FM broadcasting, the existing licensees should be required to effect the necessary amendments to their Memorandum of Association and Articles of Association and relevant agreements no later than two months from the date of migration of their licenses from Phase I to Phase II.
