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Home / Industry / Telecom /  Raise FDI limit in telecom: Parekh panel

The high-level committee on infrastructure financing has recommended an increase in the foreign investment limit in telecom to 100% from 74% and setting up a public sector unit (PSU) to award coal mining concessions to non-state entities.

In its interim report presented to the prime minister on Wednesday, the committee recommended that the foreign direct investment (FDI) limit in telecom be raised as it would have no impact on operational control. Other infrastructure sectors are allowed FDI to the tune of 100%.

“There has been some concern about allowing 100% ownership by foreign players," said Mahesh Uppal, regulatory expert and director at Com first (India) Pvt. Ltd. “However, I think the 74% cap serves little purpose in the Internet age where national boundaries are increasingly becoming irrelevant. It would be a good idea to raise the limit."

The report recommended setting up a state-owned unit to involve the private sector in coal mining and “eliminate the resistance of Coal India Ltd (CIL)" in the award and management of public private participation (PPP) concessions in the coal sector.

This company would be allocated mines that have all required clearances or are at an advanced stage of getting them, besides CIL’s unexplored mines. It would award concessions against mining charges to private parties and sell the coal mined from the arrangement.

The target of infrastructure investment at 9% of GDP for the 12th plan period (2012-17) was a healthy improvement on the 7.22% targeted in the 11th plan, said Deepak Parekh, chairman of the committee. However, it could not be achieved without removing constraints and increasing the private sector’s share.

Among immediate actions the report recommended are rationalizing railway passenger fares, gas allocations and gas pricing.

The latter should be done “within the next two months so that further delays in importing gas to run gas-based power stations are avoided".

The report supported mutual negotiations between bulk-buying power consumers and generating companies so that the latter don’t have to operate below capacity when costs of fuel, including gas, are high.

The private sector’s share in total investment is sought to be raised from the 37.5% it was in 11th Plan to 47% during the 12th Plan period.

This should be done through private participation in sectors such as transport, power distribution, irrigation, water supply and sanitation, the report said.

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