India, too, worried, about foreign companies acquiring national infrastructure

Published 13 March 2006

Selling ownership in important critical infrastructure elements to foreigners is not only an issue in the United States, but in other countries as well. Example: A foreign partner sold 10 percent equity in an Indian telecom joint venture Hutchison-Essar to Egypt-based Orascom, which has a significant presence in Pakistan and Bangladesh. The deal has raised the hackles of the Indian government. National Security Advisor M. K. Narayanan has voiced security concerns about the deal. In a note sent to the Telecom Ministry earlier this month suggesting a total review of the foreign direct investment (FDI) policy in the telecom sector Narayanan said that, with the latest acquisition, the China-Pakistan-Bangladesh-Egypt connection was making such concerns “daunting.”

Telecom Ministry sources acknowledged the NSA concerns and said a FDI policy review would be taken up. “It would not be in terms of FDI ceiling of 74 percent [on foreign ownership of Indian businesses] but more about various clauses,” they said. Suggesting that the concerned ministries should meet on the issue to adopt a yardstick that would be acceptable and realistic, the NSA said that the time had come to take a formal position on this matter and for a comprehensive policy.

Sale of more than 10 percent equity to Orascom by Hutchison had promoted Essar to ask the government if clearance was required for the deal. Essar, the single largest equity holder in the mobile company, shot off letters to Prime Minister Manmohan Singh and Telecom Minister Dayanidhi Maran late last month, after it failed in attempts to get a satisfactory answer from Hutchison. The NSA communication coincides with a letter sent to Department of Telecom by the prime minister’s office seeking comments on the issues raised by Essar.

-read more in this report; read more about FDI in India at this Web site; and see the Hutchinson-Essar Web site