15/09/04 09:15:07

Cabinet meet on foreign investment in telecom put off

NEW DELHI: The squabble in the ruling alliance over FDI in the telecom sector forced the government to defer a discussion by the Cabinet on increasing the quantum of foreign investment to 74% to September 17.

Government managers said the UPA leadership will conduct another round of consultation with Leftists, particularly Jyoti Basu, before the next meeting of the Cabinet.

The government, which appeared determined not to allow the Left to hold policy-making hostage to its dogma, had circulated the Cabinet note on telecom to its ministers on Monday.

But the ministers were informed on Tuesday evening about the cancellation, raising speculation that government managers have not been able to reconcile differences on the issue.

The government, which views the DoT's proposal for allowing a minority Indian partner with 26% stake in a telecom venture to have 50% representation in the company's board, as legally untenable, has suggested that security concerns could be addressed by insisting that only Indian citizens find place on telecom companies' boards. "The new proposal is aimed at softening the Left, which claims that foreigners will dominate the telecom sector after raising the FDI cap," said a senior minister.

Barring telecom minister Dayanidhi Maran, the Left's staunchest ally in the telecom war, not many are impressed by the demand for a 50% voting right to the 26% stake holder. "It will not stand the test of law as courts will insist that the board's composition should be commensurate with the holding pattern," government leaders said.

With this vicious corporate battle now spilling into the political arena, the government may find an amicable settlement quite difficult. Some corporate players, who are trying to scuttle the telecom proposal, had managed to get the Left's bug bear, the RSS, raise the same reservations against hike in FDI during the NDA tenure.

The NDA government had come close to inking the decision, but an RSS ideologue secured the backing of a powerful section within the government to defer a decision.

The Left parties' memorandum to the prime minister has only strengthened the suspicions of an intense corporate rivalry.

For, the Left's petition to the prime minister singled out two telecom companies. "Besides benefiting some companies like Bharati and Hutchison, this move is in nobody's interest," the note had said.

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 the foreign one," the Left had said in its memorandum.

Source: The Economic Times