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US broadcasters, including Star TV, have sought the intervention of the Department of Industrial Policy & Promotion (DIPP) for relaxing foreign direct investment (FDI) rules in the sector as well as regulations guiding their operations and distribution activities.
“A delegation from the US India Business Council (USIBC) recently met the DIPP Secretary and demanded withdrawal of the condition requiring a single Indian entity to have 51 per cent equity in a broadcast company. It also sought independence from the TRAI (the regulator) and dismissal of a proposal for cross-media restriction on distribution,” a government official told BusinessLine .
The DIPP has asked USIBC to come back with a written proposal, which it could then take up with the Telecom Regulatory Authority of India (TRAI) and the Ministry of Information and Broadcasting, the official added.
While the BJP government increased FDI limits in news channels from 26 per cent to 49 per cent last year, it retained the condition that 51 per cent of the total equity should be with the largest Indian shareholder.
This means that while foreign investors can own 49 per cent of a news channel in India, they can never have editorial or managerial control which will be with the Indian entity owning 51 per cent of the equity.
Big disincentive“Broadcast companies say the requirement that an Indian entity hold 51 per cent equity is a big disincentive for foreign companies to invest in India and should be done away with like in the case of defence,” the official said.
According to analysts, the government should have a re-look at this clause as it will give more headroom to foreign investors to invest in news broadcasting. “The clause is limiting the way strategic investors can form joint ventures in the Indian news broadcasting space,” said Akash Gupt, Partner and Leader -Regulatory Services at PwC India.
“Irrespective of the shareholding pattern, foreign broadcasters want to have a say in the joint ventures. The government can look at putting in other norms for proper disclosures to ensure accountability even if there are multiple Indian share holders,” said Ajay Shah, Partner, EY India.
USIBC also made a strong case for dismissal of a proposal made by TRAI which suggests that any entity permitted/licensed for television broadcasting or with more than 20 per cent equity in a broadcasting company, shall not have more than 20 per cent equity in any distributor, including cable operator and DTH operator.
USIBC also questioned TRAI’s role in regulating broadcasters. In 2013, when the regulator mandated the 12 minutes per hour advertisement cap, broadcasters challenged it in court and contended that it does not have jurisdiction to regulate commercial airtime on television channels.
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