The defence being presented by key officials who handled the file relating to Maxis subsidiary’s investment in Aircel Ltd in 2006 is that the rules at the time considered the face value of equity and not the total investment inflow in deciding the ‘competent authority’ for approving the proposal.
According to a former member in the Foreign Investment Promotion Board (FIPB), the face value of investment by Global Communication Services Holdings Ltd in Aircel was less than Rs 300 crore. The total foreign investment, however, stood at Rs 3,560 crore.
“The finance minister was the competent authority for approving investments with face value of up to Rs 600 crore,” Ashok Jha, former secretary of the Department of Economic Affairs in the Finance Ministry, told The Indian Express. Jha had cleared the proposal and put it before Chidambaram then.
Face value is the nominal or original value of a company’s security when it is first issued. The market value of the security increases with time as the company grows and expands its operations. A company can then issue the same shares at a premium to the face value. The inflow then into the company is much higher than the face value.
The CBI is probing the circumstances of the FIPB approval to the Aircel-Maxis deal by Chidambaram, the then finance minister. As reported in The Indian Express, the CBI said the Cabinet Committee on Economic Affairs (CCEA) was the ‘competent authority’ to approve the $800 million or Rs 3,560 crore total investment.
Officials who cleared the proposal before it reached Chidambaram said that the policy prevalent then specified that the board would look only at the face value and not the total foreign inflow while considering the competent authority. The rules stated that proposals entailing foreign investment with face value up to Rs 600 crore be sent to the finance minister for approval; over Rs 600 crore to the CCEA.
Another official, who had signed the file, said, “The CBI has already been informed of the rules then.” The official added that there were more than two dozen more proposals — with face value less than Rs 600 crore, but with a higher investment inflow — that were placed before the finance minister, and approved by him.
In fact, a list of such proposals has also been submitted to the CBI, a former government functionary who did not wish to be identified said. The rules were changed subsequently in 2010. Former commerce and industry minister Anand Sharma, who was the commerce and industry minister then, confirmed to The Indian Express that in January 2010, the rules were changed so that total foreign investment inflow replaced face value as the criterion to decide the competent authority.