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On Friday, the DoT amended the unified license agreement, which will allow 100% direct FDI in the sector. Incidentally, the government had outlined the same in the telecom relief package announced in September. What's more, the government also had recently allowed 100% FDI for all telecom services and infrastructure providers that fall under Category 1. Therefore, this comes as a continuation of that move.
DoT amends Unified License Agreement
The amendment in the Unified License Agreement has come almost after a month of DoT allowing 100% FDI in Category 1. Before this move, the department had allowed up to 49% under the automatic route. If a licensee sought more than the said threshold, the FDI had to come via the government route.
Per the notification issued by the DoT, FDI up to 100% under the automatic route, which is subject to observance of both security and licensing conditions by the licensee and investors, has been notified by DoT on a timely basis.
However, the department has placed some restrictions on the same; no entity that originates in a country with which India shares a land border can invest via the direct route. Per the statement, the DoT will take into account both the direct and indirect FDI to calculate the total FDI. What's more, the licensee also has to comply with the government's norms regarding FDI, along with its investors and promoters.
One of the key reasons for telecom sector reforms has been to attract investment in the sector.
Ashwini Vaishnaw, the telecom minister, had called upon stakeholders in the sector to join the private telco triumvirate in delivering connectivity. In short, the government will now seek new players in the telecom market, to make it a more competitive segment. That has been the key motivator for the government to announce a slew of telecom sector reforms.