Govt notifies 100% FDI in telecom sector

The government on Tuesday notified its decision to permit 100% foreign direct investment (FDI) under automatic route in the telecom services sector. 

The Centre had earlier announced 100% FDI in the telecom sector through the automatic route as part of its comprehensive package for the telecom sector. 

Till now, only 49% of FDI was allowed through the automatic route and anything beyond it had to mandatorily go through the government route.

This comes over a year after union government notified changes in the FDI rules in April 2020, which made prior approval of the government mandates for foreign investments from countries that share a border with India, including Pakistan, China, Bangladesh and Nepal among others.

The Centre has already allowed FDI through automatic routes in many sectors. However, in sectors such as defence, media, pharmaceuticals and insurance, government approval is needed for foreign investors.

All telecom services including infrastructure providers will be covered under the new regime of FDI investments.

The government has infused life into the debt-ridden telecom, with a series of reliefs including on computing dues relating to AGR, a four-year moratorium on dues, and the option for the government to convert dues into equity after the moratorium period expires.

In a press note, the Department for Promotion of Industry and Internal Trade (DPIIT) said foreign investment in telecom services will be subject to the condition of Press Note 3 of 2020. 

Accordingly, cases requiring prior government approval under the provisions of Press Note 3 will continue to be in place.

As per the Press Note 3, an entity of a country, which shares a land border with India or where the beneficial owner of an investment into India is situated in or is a citizen of any such country, can invest only under the government route.

Shares of telcos Vodafone Idea and Airtel were in focus since the relief announcements for the stressed sector. Airtel's scrip today closed 1.33% lower at ₹689, while VI's stock dropped 1.73% to settle at ₹11.35.