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Foreign Direct Investment in India – The Recent Beginning of a Rising Phase
Introduction With a paradigm shift in economic management after the reforms began in the early 1990s, there was a metamorphic change in the perception of policy planners regarding the role of external trade and investment as well as the system of exchange rate and payments. It was believed, contrary to the past, that a liberalised foreign trade, payments and investment system opens up a window on the world through which vast types of benefits would flow: exposure to new products, new processes, advanced technology, modern marketing and finance, employees’ skill upgradation and application of modern management techniques. The experiences of many high-performing Asian economies were held out as examples of success stories of deriving such benefits of exposure to global trade and investment [which were achieved along with, of course, those countries’ intensive focus on social sector development as well as higher levels of domestic savings and investment; many of them also have had land reforms which helped to widen their domestic markets]. Drawing lessons from such experiences and also as part of the broader strategy of liberalisation and globalisation, this country too moved fast in opening up the external sector. It was also perceived that apart from supplementing domestic savings, non-debt capital flows could provide a measure of long-term sustainability to the country’s balance of payments. Therefore, the strategy adopted was one of shifting the weight of external sector financing from borrowing to direct equity investment inflow (and also changing the composition of commercial borrowing from sizeable short-term and government-guaranteed debt to long-term debt with minimum reliance on government guarantees). Subsequent to the initial initiation of reforms, liberalisation of regulations regarding foreign investment has passed through several stages. The basic approach adopted has been one of steady but gradual relaxation of regulations. To begin with, in August 1991, dispensing with the provisions of the Foreign Exchange Regulation Act (FERA) 1964, a system of permitting automatic approval for foreign investment up to 51% equity in 35 industries was introduced. For industries not covered by automatic approval, a Foreign Investment Promotion Board (FIPB) was set up in the government to process the applications. There were further relaxations from time to time, but the second major step taken was in January 1997 when, for the first time, detailed guidelines for the FIPB were issued and the list of industries eligible for automatic approval was expanded to cover 48 of general category allowing equity up to 51%, 3 industries relating to mining for automatic approval up to 50% of foreign equity and another set of 9 industries eligible for 74% foreign equity. Various procedural changes effected during 1997 were also of a substantive nature designed to give a push to foreign direct investment. Finally,
as a result of the comprehensive
review of the FDI policy,
wide-ranging policy changes were
notified in 2006; these included
extending the scope of automatic
route, increasing equity caps,
removing restrictions, simplifying
procedures and extending the
horizon of FDI to vistas like
single brand product retailing and
agriculture. Of late, several
steps have been initiated to
facilitate FDI inflows which,
among other things, include:
raising the equity cap in civil
aviation; organizing Destination
India events in association with
CII and FICCI with a view to
attracting investments; activating
the Foreign Investment
Implementation Authority (FIIA)
towards speedy resolution
of investment-related problems;
setting up of National
Manufacturing Competitiveness
Council (NMCC) to provide a
continuing forum for policy
dialogue to energise the growth of
manufacturing; regular
interactions with
foreign investors through
bilateral/regional/international
meets and meetings with individual
investors; and making the website
of the Department of Industrial
Policy & Promotion
(www.dipp.nic.in) more
user-friendly with online chat
facility. The government has
indicated that about 4,500
investment-related queries have
been replied during just one year
2007-08 (Economic
Survey 2007-08, pp.202-03). Thus,
with increased liberalisation,
equity caps on FDI now exist only
in a few limited sectors which are
regulated
on security or other
special considerations. These
are: FM radio broadcasting (up to
20 per cent); insurance, defence
production, petroleum refining in
the PSUs, print and electronic
media covering news and current
affairs (up to 26 per cent); air
transport services, asset
reconstruction companies, cable
network, direct to home (DTH),
hardware for uplinking, HUB, etc.
(up to 49 per cent); single brand
retailing (up to 51 per cent);
atomic minerals, private sector
banking, telecom services,
establishment and operation of
satellites (up to 74 per cent).
FDI is prohibited in retail
trading (except for single brand
product retailing), gambling and
betting, lottery and atomic
energy. Approval for proposals for
induction of equity of more than
24 per cent for manufacture of
items that are reserved for
small-scale sector and the
proposals where the foreign
investor has an existing joint
venture/technical
collaboration/trademark agreement
in the same field of activity and
where the provisions are not under
automatic route (Economic
Survey 2006-07, p.154). FDI
Flows Did Not Yield Results on
Expected Lines Initially When external sector liberalisation was thus conceived and implemented, there was a distinct expectation, as hinted at earlier, that there would be greater flow of FDI as compared with portfolio flows. There were concerted efforts towards that end, but they did not yield the desired results for quite some years. No doubt, an environment of substantial openness got created in the economy. A large number of foreign collaboration approvals was accorded in the initial years themselves. For instance, between August 1991 and 1994, the Government had approved 5,778 foreign collaboration proposals including 2,806 foreign equity proposals amounting to Rs 22,238 crore. Earlier, for 15 years there were very few such approvals under the FERA. As a consequent to the amendments to the FERA and the liberalisation of foreign investment policy, many multinational companies (MNCs) could increase their equity holdings beyond 51%. Many companies like Coca Cola and IBM, which had exited from the Indian market in the 1970s, returned to the country. Later on, by the end of September 2004, the number of fresh foreign collaborations approved since liberalization had increased by nearly 12,000.
Even
so, the FDI in terms of the
amounts of annual flows remained
meagre in the range of less than
$1 billion or thereabout per year
until 1994-95 and between $2 to $4
billion per year thereafter for 15
years until 2004-05 (Tables 1 and
2). This
happened because the amounts of
FDI involved in individual
collaboration and other approvals
were meagre, many of them giving
the impression of attempts being
made to formally enter the Indian
market and not for immediate
execution of investment projects.
The meagre nature of this
FDI flow stands out when we
compare them with two other
indicators.
First, the portfolio
inflows into
Quantum
Leap in FDI Since 2005-06
It
is this development of a sudden
surge in
A few global and domestic
factors have contributed to the
expansion in
In
In
addition, reports suggest that
some significant rationalisation
and simplification of government
procedures have taken place in
recent years.
Secondly, the interest
shown by some state governments in
attracting investments in their
respective states is indeed
noteworthy.
They have shown competitive
spirit including providing fiscal
concessions for investment
projects. In this respect, the
dynamic spirits shown by
Karnataka, Tami Nadu, Andhra
Pradesh and
Also,
as cited earlier, the recent
period has such renewed intensity
of cross-border capital flows and
While on the subject of
comparing
Coming
to the caveats referred to above,
the following observations made by
Bajpai and Dasgupta (2004) based
on an IFC study on “FDI - “As
a rough approximation, we make the
necessary adjustments in “On
the other hand, India's adoption
of a somewhat broader method of
FDI computation would raise its
net annual FDI inflow figures, as
reported in the Reserve Bank of
India's official balance of
payment statistics, from around
$3.2 billion to about $8.1 billion
in 2000”. India
has since already adopted the
international standards in
defining FDI including covering
reinvested earnings, though for a
critical study of FDI flows actual
cash flows are relevant, and this
is what has been done above. In
Conclusion
The
literature on Indian FDI has
raised a number of issues which
gave an explanation for the
relatively lower size of inflows.
Apart from the conventional
arguments of antiquated labour
laws and bureaucratic restraints,
foreign investors seem to have
focused essentially on domestic
market and not for treating
It
must also be recognised that apart
from creating a healthy and
conducive economic environment,
improved FDI flow also requires
congenial procedural arrangements
as well as institutional
structures devoid of bureaucratic
bottlenecks. Studies have shown
that in this respect Reference Bajpai,
Nirupam and Nandita Dasgupta
(2004): ‘FDI
to differences’, The Hindu Business Line, May 15
Highlights of Current Economic Scene
Agriculture According
to Food Corporation of India (FCI),
wheat procurement as on 7 June
2009 has increased to an all time
record of 24 million tonnes, as
against 21.51 million tonnes
achieved during the same period
last year. This improvement in
procurement is attributed to sharp
increase in minimum support price
and stable retail prices, which
have discouraged private buyers to
purchase wheat, form the mandis. Acreage under sugarcane in Uttar Pradesh is likely to fall by 6% to under 2.02 million hectares in 2009-10 crushing season. This decline in coverage under sugarcane since last couple of years is due to the delay in cane payment and confusion over the price. According
to International Cotton Advisory
Committee (IAC), production of
cotton is expected to decline for
the third consecutive season to
23.4 million tonnes, displaying a
downfall of 1% over the period of
one year. Production is predicted
to decline in The Cotton Corporation of India (CCI) stated that cotton arrivals in the market as on 30 May 2009 were around 27.8 million bales as against 30.7 million bales accumulated a year earlier. As per the official of Soybean Processors Association of India, exports of soyameal is likely to remain below 70,000 tonnes in the month of May, displaying a decline of 80% over the period of one year. Exports are reported to decline due to low arrivals of soyabean crop in the mandis, lower crushing and poor demand from importing countries. Traders believe that farmers are still holding soyabean crop in anticipation of better realisation. During the period October-April 2009 soyameal exports dropped by nearly 30% to 26, 65,095 tonnes from 37, 74,099 tonnes in the corresponding period of the previous season. Onion exports are expected to decline by 18% in May to about 1.50 lakh tonnes over the corresponding period last year. This reduction is reported to be due to high domestic prices. As per the reports by Nafed, country has so far exported 1.46 lakh tonnes of onion as against 1.77 lakh tonnes exported a year earlier. Exports of cashew have registered a drop in both volume and value for the first month of the current fiscal. Volume of exports has fallen by 12% during April 2009 as compared to the performance of April 2008. Value has dropped by 2.4% during the same period while dollar realisation is seen lower by 22% for the month. Unit value of realisation has seen an increase at Rs 265.68 per kg as against Rs 239.61 during April 2008. The small gain in unit realization is due to the shortage of the commodity in the global market and accompanying rally that took place during March-June 2008. Coffee
board reiterated that production
estimates of coffee have been
reduced for the second time in
April after witnessing an
excessive rainfall in the major
coffee producing state, Karnataka.
Coffee production is expected to
decline to 262,300 tonnes by the
end of September 30, compared with
276,600 tonnes as projected in
earlier estimates. Industry
The General Index (IIP) stands at 297.9, which is 2.3% lower as compared to the level in the month of March 2008. The cumulative growth for the period April-March 2008-09 stands at 2.4% over the corresponding period of the previous year. The annual growth of thee Indices of Industrial Production for the Mining, Manufacturing and Electricity sectors for the month of March 2009 at 0.4%, (-)3.3% and 6.3% as compared to March 2008. The cumulative growth during 2008-09 over the corresponding period of 2007-08 in the three sectors have been 2.3%, 2.3% and 2.8% respectively, which moved the overall growth in the General Index to 2.4%. In terms of industries, as many as five (5) out of the seventeen (17) industry groups (as per 2-digit NIC-1987) have shown positive growth during the month 2009 as compared to the corresponding month of the previous year. The industry group ‘Beverage etc’ have shown the highest growth of 15.1%, followed by 8.3% in ‘basic chemicals ’ and 6.6% in ‘Rubber and plastic products’. On the other hand, the industry group ‘Food Products’ have shown a negative growth of 35.8% followed by 25.1% in ‘Wood and Wood Products; Furniture and Fixtures‘ and 18.1% in ‘Leather and Leather Products’. As per Use-based classification, the Sectoral growth rates in March 2009 over 2008 are 1.4% in Basic goods, (-)8.2% in Capital goods and (-) 4.4% in Intermediate goods. The Consumer durables and Consumer non-durables have recorded growth of 8.3% and (-) 3.4% respectively, with the overall growth in Consumer goods being negative at 0.8%.. Infrastructure
The
Index of Six core industries
having a combined weight of 26.7
per cent in the Index of
Industrial Production (IIP) with
base 1993-94 stood at 243.0 in
April 2009 and registered a growth
of 4.3%
compared to a growth of
2.3% in April 2008. While crude
oil and petroleum products
registered declines during the
month , electricity, cement, coal
and steel registered production
increases. However production
increase in steel is meager.
Inflation
The
annual rate of inflation,
calculated on point to point
basis, stood at 0.48%
for the week ended 23 May
2009 asd compared to
8.90% during the comparable
period last year. The
increase over the week was
very marginal t 0.04%.
While the price index of fuel,
power,light and lubricants and
manufactured products remained
stationary at the previous week
level, the index for
major group Primary
articles witnessed a marginal
increase mainly due to increase in
the prices of tea, jowar, eggs,
condiments etc.. The final wholesale price index for ‘All Commodities’ (Base: 1993-94=100) revised upwards from 227.3 to 228.6 for the week 28 March 2009, and hence the annual rate of inflation based on final index, calculated on point to point basis, stood at0.84 % as compared to 0.26%. Financial
Market Developments Capital
Markets
Primary
Market New demat account registrations have seen an increase over April and May in likely anticipation of big ticket public sector undertakings IPOs (Initial Public Offerings) following the recent announcements coming from government. According to the data from National Securities Depository Ltd (NSDL) and Central Depository Services Ltd, around 1.13 lakh new demat accounts have been added in May and 71,000 in April. This is after having been on a continuous decline for several months up to March this year. To
infuse funds for its business
expansion and to independently
manage the operations, Big FM, the
country’s single-largest private
FM radio company in terms of
number of licences to operate
radio stations (45), will be
listed on both the BSE and the NSE
within the next two months. It
will be the second FM radio
operator to have listed on the BSE,
after Entertainment Networks India
Ltd that operates its radio
business under the Radio Mirchi
brand. After listing, Reliance
Unicom will be the holding company
of the Big FM brand. Secondary
Market The BSE Sensex surged past the 15,000 mark, extending the rally to the thirteenth consecutive week. Government’s plans to introduce a slew of market-oriented economic reforms and some signs of recovery in the domestic and global economies boosted the key indices. The BSE Sensex rose 478 points or 3.3% to 15,104. Mid caps and small caps performed much better than broader indices, rising 7% and 7.8%, respectively. NSE Nifty gained 138 points or 3.1% to 4,587. The Defty rose 3.35% as the rupee remained quite strong. Members of the Securities and Exchange Board of India (SEBI) have suggested a phased reduction of the securities transaction tax (STT), as part of a package of measures to develop the capital markets that was discussed with Finance Minister Pranab Mukherjee during the week. Removing STT is considered necessary to improve retail participation in the capital markets by reducing transaction costs, Assets under management (AUM) of several fund houses gained a significant amount in May compared to April, representative of smart inflows from retail investors in the mutual fund industry. The country’s biggest fund house, Reliance mutual fund, crossed the Rs 1 lakh crore mark in May. Fund managers attribute these gains to a surge in the Indian equity market in the last one-month. Data released of 27 fund houses by the Association of Mutual fund in India (Amfi) showed AUM of Rs 4,40,589.64 crore for May, gaining 16.84% or 63,502.22 compared to Rs 3,77,087.41 crore for April. AUM of Reliance MF stood at Rs 1,02,730.15 crore, up by 14,342.16 crore or 16.23% compared to Rs 88,387.98 crore in April. Riding
the wave of optimism over a stable
Indian government and positive
global cues, domestic companies
trading on American bourses saw
their total market value zoom by
more than USD 20 billion during
the month of May. The market
capitalisation of 16 Indian firms
listed as American Depository
Receipts (ADR), soared by $20.41
billion, with private sector
lender ICICI Bank and IT major
Wipro together accounting for
nearly half of the total gains.
Among the 16 companies trading on
the New York Stock Exchange and
the Nasdaq, ICICI Bank’s
valuation jumped as much as $5.78
billion. The market value of Wipro
climbed $3.72 billion in May.
Another major gainer was leading
copper producer Sterlite
Industries whose valuation went up
as much as $3.34 billion. After
the UPA’s success in the
election, investors are taking
more interest in the public sector
units in the expectation of
divestment. This is being
reflected in the share prices of
the PSUs. Wealth of the public
sector units' promoter (the
government of Derivatives
The
derivatives market continued to
generate high volumes and premiums
remained high during the week. The
focus on stock futures
significantly increased.
Throughout the bull-run of the
past three months, the hedge ratio
(volume of index instruments to
all instruments) has been
consistently higher than normal.
However, the week saw expanding
stock futures volumes.
Historically, Volatility index remained steady throughout the week. It closed the week flat at 40.55 against its previous week’s close of 40.3. The fall from the intra-week high levels suggests that traders may be expecting a steady period for the Nifty futures. Government
Securities Market Primary
Market The
RBI auctioned 91-day TBs and
364-day TBs for the notified
amount of Rs 4,500 crore and Rs
1,000 crore, respectively, on 3
June 2009. The cut-off yield for
the 91-day TB was set at 3.36% and
the 364-day TB was set at 4.0%. On 4
June 2009, RBI fixed the rate of
interest on the floating rate
bonds 2009 at 4.12% per annum
applicable for the half year (6
June 2009 to 5 December 2009). Through
open market operations (OMO) RBI
purchased 3 securities for the
aggregate notified amount of Rs
6,000 crore. The cut-off yield for
the 7.49% 2017, 8.35% 2022 and
7.95% 2032 was set at 6.92%, 7.35%
and 7.65%, respectively. Secondary
Market On
6 June the money market rates
remained soft tracking comfortable
liquidity in the system. The call
range was noted at 3-3.30%.
Considering the volume in
overnight money market and amount
parked by banks with RBI under the
reverse repo window, the extra
liquid resources in system are
estimated at over Rs 2,00,000
crore. The overnight CBLO rate was
seen in the range of 0.50 - 3.24%.
The comfortable liquidity was
evident from the high recourse to
the reverse repurchase window at
the liquidity adjustment facility
(LAF) auction. The amount absorbed
under LAF Reverse Repo operation
was noted at Rs 1, 31,290 crore.
In addition, the Reserve Bank of Bond yields softened on the back of high liquidity and non-bank institutions chasing government securities as safe haven investments. Traders said high liquidity was partly on account of the RBI’s intervention in the foreign exchange markets to stem the rupee’s buoyancy. The buoyancy was partly on capital inflows, largely driven by Participatory Note investments through FIIs. During the week, FIIs were net buyers of government debt. FII investments in debt papers during the period amounted to $453.7 million (about Rs 2,136 crore). The reduced FII interest followed the hardening of US Treasury yields. Five- year US Treasury hardened by 30 basis points to 2.85%. Bond
Market During
the week under review, 3 banks
tapped the bond market to mobilize
an amount of Rs 1,350 crore with
coupon rates ranging from
8.38-8.72% for 10-years.
Foreign
Exchange Market The rupee firmed to Rs 47.08 against the dollar during the weekend, up from the previous week’s level of Rs 47.29. Forward premia for one, three, six and 12 months dipped to 3.40% (3.58%), 3.39 (3.52%), 2.78% (3.03%) and 2.38% (2.51%) respectively. Cash to spot premia was 2.16%, down ten basis points over the previous week. However, spreads between spot and the non-deliverable forwards (NDF) widened, though NDF rates firmed to Rs 47.20 from the previous weekend’s level of Rs 47.30%. Foreign exchange reserves rose $1.66 bn during the week ended 29 May largely on account of dollar purchases by the central bank to stem the rise of the rupee against the dollar. Also, there has been some revaluation impact of non-dollar assets in reserves because the dollar is weakening against the rupee in the international markets. The total foreign exchange reserves including gold and SDR rose $1,667million to touch $262.3bn as on 29 May. According to Clearing Corporation of India Ltd (CCIL), the volume of rupee forward deals plunged 26% in May from the beginning of the year as companies expect a further reduction in their requirements for hedging against currency fluctuation in a slowing economy. The number of transactions in the rupee forward market—where two parties agree to buy or sell a currency on a future date at a predetermined price—declined to 17,342 in May from a peak of 23,580 at the close of December. In April, the decline was 30% to 16,318 deals. Currency
Derivatives MCX
Stock Exchange announced
divestment of 6.48% equity to
Union Bank of Commodities
Futures derivatives Multi Commodity Exchange of India (MCX) will shortly make a final representation to excise authorities requesting a partial modification of excise regulations, which is expected to enable delivery of industrial commodities on the exchange platform. The spices counter on agri bourse National Commodities and Derivatives Exchange (NCDEX) has been witnessing a session of profit-booking over the past fortnight. Analysts opine that, jeera, turmeric and pepper were overbought and due for correction. Jeera and turmeric are expected to see a further downside pressure. Prices of these commodities shot up on account of supply constraints and export demand. According to analysts, the imposition of special margin on turmeric by FMC on 25 April also dented sentiment. The new government will reintroduce the bill to amend the Forward Contract (Regulation) Act, 1952 (FCRA) in the Budget session of Parliament, expected to begin last week of June or early July. The bill provides more autonomy to the Forward Market Commission (FMC) and it also gives it necessary legal power to oversee the orderly functioning of the commodities markets. The bill proposes to increase the number of members from four to nine up to three whole-time members and a chairman. It confers power upon the FMC to recruit it officers and employees. Insurance The
country’s largest institutional
investors, Life Insurance
Corporation of India (LIC) is
expected to step up equity
investment by 25% to around Rs
50,000 crore in equities, as
against Rs 40,300 crore during
2008-09. Accordingly, LIC is
scanning around 200 companies on a
daily basis for possible
investments. SBI
Life Insurance has tied up with
Syndicate Bank to offer housing
loan insurance cover to the home
loan borrowers of Syndicate Bank
till June 30, 2009. ICICI
Prudential Life has launched a
wealth creation policy
‘SecureSave’ enabling
customers to get the benefits of
security and growth on the
savings.
Investors can avail a
guaranteed maturity benefit up to
150% of the sum of all premiums
paid by a policyholder. BankingAt
present State Bank of India (SBI)
is operating four branches and
seven ATMs in The
country’s second largest bank,
ICICI Bank has announced a 0.50 %
reduction in both retail and
corporate loans. The revised
floating reference rate (FRR)
stands at 12.75%, against 13.25%
at present. The bank also
announced a 0.50% reduction in its
benchmark advance rate to 15.75%.
All existing floating-rate retail
loan customers will benefit from
the new reduced rates. ICICI
Bank’s new floating reference
rate is applicable to all
floating-rate retail loans
(including home loans) and will
come into effect from June 5,
2009. Three
public sector banks, Bank of
Baroda (BOB), Indian Overseas Bank
(IOB) and Andhra Bank have signed
a joint venture (JV) agreement for
setting up India BIA Bank ( Union
Bank of Corporate In
the month of May 2009, JSW Steel
has reported a growth of 33% in
crude steel production to 4.59
lakh tonnes as compared to 3.46
lakh tonnes in the same period
last year.
Oil
and Natural Gas Corp (ONGC) has
approved the revised cost
estimates for developing the
nation’s most prolific on-land
oilfield in Rajasthan and
accordingly will be investing
around $350 million more in the
fields operated by Cairn Lucas
India Services, part of the $5
billion TVS Group has forayed into
the organized car accessories
retail market and will be
investing around Rs 180 crore to
set up 108 stores in 32 cities in NTPC
is looking to acquire coal assets
abroad to secure coal for its
planned generation of 55,895 MW by
the end of 2012. As per the 11th
Plan Period the company is
targeting to add another 22,000 MW
with a capital expenditure of Rs
55,000 crore. NTPC has tied up
with the State Bank of Hindustan
Petroleum Corporation Ltd (HPCL)
is investing Rs 614 crore in the
two sugar mills it had bought in State-run
BHEL has bagged an Rs 375 crore
order for executing two gas
turbine generating units for a
project in Global
soft drink player Pepsico is
investing Rs 1,000 crore in the
current calendar year to increase
the capacity of its beverages
business across the country. The
new investment will be spread
across manufacturing capacity,
market infrastructure, supply
chain and R&D. External
Sector
Exports during April 2009 at US$ 10743 million which was one-third lower than that in April 2008 Imports during April were valued at US $ 15741 million, a decrease of 36.6 per cent over that of US$ 24823 million in April 2008.Thus the trade balance during the month worked out to be $ 5004 as compared to $8747. While oil imports was valued at $3634 million, that of non-oil imports was lower by 24.6% at $ 12113 million. Information TechnologyThe
aggregate exports of software and
IT enabled services from Mohali, IBM
will be providing enterprise
information technology
infrastructure services to India
Glycols Ltd, a market leader in Essar
Group’s back office unit Aegis
Ltd is augmenting its workforce by
12,000 summing up the total
headcount to 43,000 by end of the
current fiscal year. The company
is planning to hire 1,000 people
every month in TelecomState-owned
Bharat Sanchar
Nigam Ltd (BSNL) is planning to
follow the private sector practice
of long-term tendering with a
selected bidder as against the
present practice of multiple
tendering. BSNL is seriously
thinking of changing the method of
issuing tender in an attempt to
prevent the repeat of tendering
delays which has held up its many
on-going projects. The present
system of frequent tendering
causes delays in awarding the
contract, as vendors often dispute
the selection process and move to
courts. For instance, the
45.5-million GSM line expansion
tender floated in mid-2006 was
awarded only a year later, by when
the company lost its second
position in the GSM segment to
Vodafone-Essar. As per the revised
method, each time the company
wants to expand its GSM mobile
capacity it wouldn’t have to
float a fresh tender as it does
now. Instead, the selected lowest
bidder would be awarded all
subsequent projects for several
years. BSNL will be disbursing the
incremental payments on the basis
of per line capacity expansion,
which would be negotiated
according to the prevalent market
price. BSNL’s new tendering
system, however, needs to be first
approved by its board, and later
by the government. Recently,
Bharti Airtel has announced that
it had reinitiated discussions
with MTN for a 49% stake in the
South African company in return
for a 36% stake in the Indian
company. The transaction would
involve $10 billion in cash and a
share swap worth $13 billion. The
deal would create a $20-billion
entity with a subscriber base of
over 200 million in 24 countries.
Meantime, Singapore-based SingTel
is in discussions with Bharti
Airtel to increase the cash
component of its contribution to
the partnership should the
Bharti-MTN deal materialise. At
present, SingTel has an effective
30.5% stake in Bharti Airtel and
the deal between Bharti and the
MTM would result in a significant
dilution of SingTel’s holding in
Bharti.
*These statistics and the accompanying review are a product arising from the work undertaken under the joint ICICI research centre.org-EPWRF Data Base Project. | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Second,
the FDI inflow into