3/09/04 08:21:54

NEW DELHI: Sensing a move on the part of the government to push the budget promise of hiking FDI in telecom from 49% to 74%, the Left parties have reiterated that the proposal would be against the country's interests.

But in the process, it looked getting sucked into a corporate battle when it said the move will benefit only Bharti and Hutch.

"Why is the government in such a hurry to raise the cap to 74% which will mean some Indian companies become foreign ones. Why does it want two Indian companies to turn into foreign companies?" CPM politburo member Prakash Karat asked. The Left leaders also released copies of the memorandum they submitted to the UPA leadership and the Prime Minister recently.

Though government had assured the Left at the UPA-Left coordination committee meeting last week that it would "actively consider" its suggestions. Left leaders hinted that a move was afoot to allow more FDI in the telecom sector.

Asked what the Left would do if the government went ahead with raising the sectoral cap in the telecom sector, Mr Karat was evasive. "It has not reached the Cabinet yet. When it comes to that we will see."

However, when the query was repeated, he said "the government goes ahead with many things. We don't expect this government to run on the Left programme. There are areas of agreement and disagreement.... The CMP itself is a compromise." Government leaders read it as a distinct softening on the part of the Left.

In its 11-page note on telecom, the Left has cited the example of the US where foreign ownership limit is pegged at 25% after which there is a case-by-case clearance. "Most countries do not allow foreign enterprises to get hold of the telecom sector," Mr Karat said.

The Left is of the view that the sector has "grave" security implications and most East and South East Asian countries including China, which have experienced rapid growth of the telecom sector in the recent past, continue to have 49% or lower caps on FDI in telecom.

It points out that Indian security agencies have reservations about passing on the management control of the telecom service companies in favour of foreign promoters when the NDA tried to raise the cap. The note also claims that besides benefiting some companies like Bharti and Hutchison, the move is in nobody's interest.

"The only reason for asking for lifting of the caps on foreign ownership is for speculative gains: some of the existing owners would like to sell their stocks and therefore want to widen the net of buyers by including foreign ones."

The Left parties want "complete transparency" in ensuring that foreign ownership is restricted to 49% and are asking why the finance ministry did not object to "illegal manipulations" by Hutch and Singtel which according to the finance minister have acquired majority stake through backdoor manipulations using holding companies they own.

The Left has rejected government's arguments that FDI hike in telecom would lead to improved teledensity and competition saying balance sheets of telecom companies show that they are making profits and would have little trouble raising loans from domestic and international financial agencies.

On raising the FDI cap in the insurance sector from 26% to 49%, the Left said the government's hands are tied because it requires amending the Irda Act. The Left parties had made it clear that they would oppose any bill seeking to raise the cap in the sector. The BJP, too, has said that it will oppose the proposal in Parliament.

Source: The Economic Times