The Foreign Investment Promotion Board (FIPB) is yet to be convinced that Vodafone’s deal with Hutchison Telecom International Ltd. (HTIL) does not violate the complex Indian laws governing foreign direct investment. The deal, which was made earlier this year, is expected to be discussed in the upcoming meeting of FIPB on April 23. With the Delhi High Court deadline for probe into alleged breach of norms by Hutch- Essar nearing, this meeting is expected to be decisive.
The Deal
Earlier this year, Hutchison Telecom International International Ltd., sold majority of its stake in Hutchison-Essar, India’s 4th largest telecom operator, to telecom giant, Vodafone. The equity holding thereafter has undergone major changes.
A complex shareholding pattern has emerged which has been the subject of much debate.
Vodafone bought 67 per cent of Hutchison’s stake. Companies owned by Asim Ghosh (MD-Hutchison Essar) and Anjaleet Singh (Chairman-Max India), hold 15 per cent of this block, over which Vodafone has call options. 33 per cent is held by Essar, of which 22 percent is held offshore.
The Objections
Those against Vodafone’s proposal argue that the shares held by Ghosh and Singh must be treated as a part of foreign holdings since they are funded by HTIL. This brings the total foreign holdings to 89 per cent- counting Essar’s offshore holdings- well above the limit capping FDI at 74 per cent.
The PIL
A PIL was filed by an NGO, Telecom Watchdog, in the Delhi High Court based on the above-mentioned argument. The High Court, on March 9, gave two months to regulators FIPB to complete investigations into the allegations.
The Department of Telecommunications has passed on the buck to FIPB and has reiterated that it has no jurisdiction over the matter.
Mr D.S. Mathur, Secretary of the Department of Telecommunications, was quoted
As far as licensing conditions are concerned, we have found nothing out of the ordinary.
However, the Law Ministry is yet to give its opinion on the matter. RBI, too, hasn’t come with any fresh communication. Hong Kong-based Hutchison Telecom International Ltd, has already made its final submission before the investment regulator.
FIPB having deferred the matter twice already is expected to reach a conclusion on the legality of the deal come April 23. If it okays the proposal, Finance Ministry would have to clear it within 15 days.
So wait till April 23 to see whether Indian government can follow up on its ‘in principle welcome’ to Vodafone. With the largest foreign direct investment made in India on stake, FIPB might set some interesting precedents.
Source: Hindu
