On telecom, don’t look Left

The steering committee of the Planning Commission headed by N.K. Singh recommended FDI upto 74 per cent in basic and cellular services and 100 per cent in all other services subject to security clearances. It also contended that US$ 2.5 billion was needed annually during the 10th Five Year Plan period to sustain telecom growth and achieve the targeted tele-density. Based on this assessment, there was a need for more FDI in the sector due to two related reasons — firstly, the available domestic capital was simply not adequate and secondly, the available capital could not be expected to be spent on the telecom sector only.

According to the finance ministry, the expected investments required were US $ 28.06 billion for the five year period of 2002-07 for achieving tele-density of 19.2 per cent while according to a Morgan Stanley study, it would be US $ 20 billion for the same period to achieve a tele-density of 13.7 per cent. These estimates have considered both the private and public sector investment possibilities.

Left parties do not subscribe to the view that opening the limits of FDI will bring in more investment. They contend that most major countries like the US, Canada, France and China have restricted their telecom sectors on the issue of FDI. They are trying to plead for the Chinese model whereby FDI is restricted to 49 per cent and at the same time efforts are made for more investments in domestic manufacturing by having alliances with state owned companies.

The problem is that the Chinese domestic market did not spring up overnight. It grew up on the sidelines of the immense investments made by MNCs in the sector in that country. That made the hardware industry competitive. Unfortunately in India, we do not have the time to restart the growth of a hardware industry although we could do well to have vast production to cater to the domestic hardware market. A case in point could be the mass production of the low-cost yet high-technology simputer which could work wonders in all our e-governance programmes and efforts to increase PC penetration.

Coming to the second point of security, the Left had raised the issue of national security implications and the possibility of control of networks going into foreign hands. In this case, we need to look at the hardware and networking aspects and the management aspects that could allow such possibilities. Presently the import of hardware is already free under the OGL scheme and their installation in critical telecom infrastructure will naturally be subject to due diligence before they are commissioned. This is generally provisioned by all the customers in their purchase formalities. Moreover, for a long time we have been relying on foreign hardware for all our networks’ functioning and till date no unwanted activity or remote management has been noticed.

As far as management issues are concerned, there have been suggestions about Indian management keeping the actual control. But this could come in the way of the Companies Act which clearly envisages management control based on shareholding patterns. Similarly, the software for the day-to-day management of the networks could also be regularly audited by government agencies as also occasional surprise checks undertaken. This is not to say that surveillance should be the order of the day nor that the government has the best surveillance tools available with it.

For now, everybody will watch the Left’s reaction. Meanwhile the government and its agencies alongwith the private sector players in the arena need to ensure that the Cabinet decision paves the way for all round growth of the industry and the quality of service improves. Else, the purpose of the move will be lost.