Even by the standards of vacillation of the government, the policy on increasing foreign investment levels in telecom has got to take the cake.
Foreign investment levels were first raised, from 49 per cent to 74 (the 74 per cent was to include all types of foreign investment including portfolio investments), in November last year, and a press note to this effect was issued on November 3, 2005.
Since then, however, due to sharp disagreements within it, the government has been forced to extend the effective date of implementing the policy on four occasions! In between, there have been suggestions to come out with two policies, one for companies where FDI levels are below 49 per cent and one for those above this; and when the Cabinet met in September, Communications Minister Dayanidhi Maran was so upset he said the government might as well scrap the entire policy of increased FDI.
What's really interesting, however, is not just the fact that the policies being advocated on security grounds are unique to India (even security-paranoid countries like the US, China, and Israel don't follow the kind of policies being advocated), but that the majority of the differences between various arms of the government have been ironed out, and the policy still hasn't been cleared!
Equally curious, of course, is the kind of objections being raised and the fact that the ministries raising them don't have any locus standi on the matter.
One set of proposals in the original policy of November 2005, for instance, related to Indian nationals being in control. So, the policy said the CEO, CFO, CTO, essentially the top brass, had to be Indian nationals - this seemed a bit paranoid considering Indians are seeking to head more and more foreign firms, but it wasn't a sticking point for most investors.
Related to this was the concept of a "serious" Indian investor, defined as someone who held at least 10 per cent of the company. This "serious" investor was to be consulted on any important appointments - since this gave a stranglehold to a minority shareholder, most people objected to it and so, at the November 2006 inter-ministerial meeting, it got dropped.
The only ministry that still wanted the "serious" Indian investor clause was the defence ministry - now what interest the defence ministry can have in this matter is unclear.
The other substantive part of the 2005 policy related to what's called Remote Access, or the ability of a firm to oversee its network from a remote location. So, for instance, if VSNL has a client to whom it provides a service in the US (through a leased line it has from Sprint, for instance), Remote Access is what would allow VSNL to monitor this, to see if the client's network is functioning well or if it is getting clogged, to fix it if need be, and so on.
While Remote Access was allowed till November 2005, the new policy sought to restrict it. It was then pointed out, by international telecom majors as well as Indian software and other firms, that Remote Access is allowed by even the US and Israel, which are among the most security-conscious countries in the world - indeed, as you read this piece, there are 38 Indian firms that have operations in the US which can be remotely accessed from India, and companies like Nokia are moving their Network Operations Centre to India to remotely access their global networks sitting here. What's sauce for the goose ought to be sauce for the gander.
But this piece is not about whether Remote Access should be allowed or not. It is about the fact that on November 29, there was an inter-ministerial meeting which included all those ministries that could possibly have something to say about Remote Access, from the home ministry, which houses the Intelligence Bureau, to the defence ministry, the ministry of external affairs, the finance ministry, even the National Security Council Secretariat and, of course, the telecom ministry. Prior to the meeting, each ministry had given its comments on each section of the proposed policy.
At the meeting, changes got made in the policy to accommodate the objections from the Intelligence Bureau and the defence ministry, primarily. So, for instance, while the telecom ministry was in favour of continuing with the unlimited Remote Access facility, this was narrowed down.
So, while Sprint, for instance, can remotely access its Indian network and see if Microsoft's communications are running smoothly, it cannot allow Microsoft's US operations to monitor this unless the Department of Telecommunications in India specifically authorises this.
Similarly, Sprint is prohibited from monitoring any content (read tapping of phones) and it has to provide in India a "mirror image" of the information that is available for Remote Access, apart from keeping, at any point in time, a complete audit trail of Remote Access activities for the past six months.
That is, with the exception of the special powers for the "serious" Indian investor, the new Cabinet note on foreign investment took into account every possible objection by various ministries. An annexure to the note details all this. And yet, at the Cabinet meeting on the issue, the matter gets deferred once again, for the fourth time.
Marx told us, while correcting Hegel, that history repeated itself, first as tragedy and the second time as farce. Wonder how he'd have described a fourth repetition?
