US may ask India to further liberalise telecom sector

New Delhi, Jan 18 | Updated: Jan 19 2007, 05:30am hrs
In the proposed Indo-US FTA, Washington is likely to seek further liberalisation of Indias booming telecom sector, according to a study by the Indian Council for Research on International Economic Relations (ICRIER). US companies have raised concerns about the telecommunication policy in India and the transparency of domestic regulations.

The report said the US had been pushing for transparency in domestic regulation in the Doha round and was likely to raise this issue during the FTA negotiations. Currently, the US is asking for significant liberalisation in the telecommunication sector in its bilateral agreements, much beyond the scope of GATS and the Reference Paper on Basic Telecommunications. Although India has substantially liberalised the telecommunication sector, its multilateral commitments are far less than the unilateral liberalisation, the study said.

Specifically, the US would like India to have a technology-neutral transparent policy that allows private and public telecommunication companies to compete fairly.

The study states that the US companies are happy with the 74% FDI provided this is through the automatic route and is accompanied by the removal of two conditions, namely, that senior management should be resident Indian nationals and investors rights should be in proportion to shareholding levels.

These are likely to be raised during the FTA negotiations. Within India, there is an on-going debate on the security issues and strategic control resting with Indian management.

Due to various restrictions imposed by the government, very few companies have applied for increasing the FDI regime from 49 % to 74%. At present, the government is reviewing the FDI policy. The US is likely to push for full commitments in Mode 1 for basic telecommunication services.