Revised guidelines clarify telecoms investment policy

The telecom sector in India has shown impressive growth over the past decade. Observers charting the country’s progress in the sector have found that India has the fastest growth in the number of telecom subscribers, coupled with a steady decline in call rates in the field of telecommunications. The telecom sector has recently become one of the most significant sources of investment in India.

Taking such information into consideration, the Department of Industrial Policy and Promotion, Ministry of Commerce and Industry, and the Government of India increased the limit of foreign direct investment (FDI) in the telecom industry from 49% to 74%, through Press Note 5 (2005 Series) dated 3 November 2005.

Flawed policy

Following a policy review, The Department of Telecommunications (DoT) established two committees to oversee the implementation of foreign direct investment in the telecom sector by various companies, especially with regard to guidelines concerning security. After resolving the issues, the government came up with Press Note 3, 2007 Series, which superceded Press Note 5 of 2005.

Gautam Khaitan is a partner at OP Khaitan & Co. He works mainly on corporate and commercial matters and has considerable experience over a wide range of corporate and commercial transactions.