This is one more step in the process to make the shift to a digital accessible system easier for the broadcast services business. In a bid to usher in digitisation, the Congress-led UPA government has raised the ceiling on foreign direct investment (FDI) from 49% to 74% in various distribution related sectors of the broadcast industry. The new FDI cap will apply to broadcast carriage service providers, including direct to home (DTH), headend in the sky (HITS), multi system operators (MSOs) and cable operators in order to bring in uniformity, said an official statement. In television news channels and FM radio, the existing 26% will continue. Commerce minister Anand Sharma has said that 49% FDI will continue to be approved via the automatic route. But any FDI beyond 49% and up to 74% will require a clearance from the Foreign Investment Promotion Board (FIPB). The move spells good news to cash-starved television distribution businesses, which are trying to switch from an analog regime to a digital one.
Smita Jha, leader – entertainment and media practice, PricewaterhouseCoopers said that the raise in the FDI limits meant uniformity in slabs — parity not just within media, but also parity of media with telecom in the era of convergence. ?This government has not arbitrarily raised FDI limits in media, these are especially done in distribution related areas, keeping in mind the technological advancements and also to fuel digitisation. Earlier, there was no clarity on the thought behind the various FDI caps across media businesses. However, the new FDI caps bring this clarity. Whether it is direct-to-home or cable, all these industries have their own set of complex issues. With a structure that now allows more foreign investment, these industries can focus on resolving issues pertinent to their business in order to make them more viable.?
One of the leading MSOs, Digicable Network India, is pleased with the hike in FDI limits, and says it will go a long way in aiding MSOs to shift to digitisation. ?We are very happy with the FDI reforms announced by the government for MSOs and cable companies. It will give the industry access to the much needed funds required for digitisation.? said Jagjit Singh Kohli, managing director and chief executive officer of Digicable.
Many of the DTH companies, however, take the recent set of reforms with a pinch of salt. Salil Kapoor, chief operating officer (COO) of Dish India said that the 74% slab was a positive step and besides the influx of funds, it will also bring in international technology and best practices. But the industry is languishing because of multiple taxation and has to bear a hefty licence fee (which is not borne by cable operators), he says. ?We have to bear the licence fee, the service tax and then the entertainment tax levied by the various state governments. In states like Maharashtra and UP, the entertainment tax is extremely high. Unless the direct-to-home industry gets a breather from this kind of taxation, no one will voluntarily want to enter this sector. The reforms will only be on paper,? he said.
Vocal in her criticism of the new FDI limits, is Roop Sharma, president of the Cable Operators Federation of India. ?The government has decided to open the floodgates to foreign conglomerates and this will no doubt aid in the rapid ?Rupert Murdochization? of the Indian television business. But it will also put hundreds of local cable operators out of business. Most will be forced to sell or will be banished out of the business,? she said.
A leading broadcast executive, when told about Sharma?s concerns, said that it was obvious that India had to move on to a new set of reforms in order to keep pace with the rest of the world. ?We cannot possibly be a closed economy. If you ask me, it is the natural order of things. If you are not good enough to compete, then maybe it is time for you to exit the game.?