The Department of Telecom (DoT), understood to be against raising FDI cap in the sector to 100 percent due to security concerns, has suggested that views of home and defence ministries be taken before raising the limit.
According to sources, DoT is of the view that when the current limit of foreign direct investment (FDI) in telecom sector was raised from 49 percent to 74 percent, security agencies and the Home Ministry had raised various security related issues.
DoT therefore is of the opinion that views of the two ministries be sought on the issue before taking a decision on the recommendations of a high-level committee on financing infrastructure (HLCFI) which has proposed raising the FDI cap to 100 percent from 74 percent in the telecom sector.
"Views of Ministry of Home Affairs, National Security Council and Ministry of Defence may be sought on the recommendations of HLCFI on raising FDI limit to 100 percent," said a DoT source.
In order to get more competitive offers in the proposed auctions, the committee had recommended raising the FDI cap to 100 percent.
The committee had said that auction-based allocation of spectrum would need large infusion of equity by companies and this would require participation of foreign companies.
Stating that present FDI limit of 74 percent already allows foreign investors to exercise complete control over their telecom companies, the committee has said finding Indian investors for the remaining 26 percent to take a minority stake constitutes a constraint in getting competitive foreign investment at the right valuation.
The committee cited the examples of sectors such as power, roads, ports among other where 100 percent FDI is permitted.
Commerce and Industry Minister Anand Sharma has also favoured hiking the FDI cap.
"I am strongly in favour of raising the cap in telecom sector. I have discussed this with the Telecom and Finance ministers and once we have the proposal, we will move the Cabinet for raising the cap to 100 percent, and also for FDI in defence," Sharma had said.