Telecom sector attracts FDI despite bureaucratic hurdles

NEW DELHI: In a span of four-months between January and April 2001, the

foreign direct investment (FDI) in the telecom sector has reportedly been more

than the combined inflow recorded in 1999 and 2000.

The increase in inflow of funds comes despite the new regulatory policy and

various other issues that have been dogging the sector in the recent years.

This apart the domestic investments have remained steady and are now poised

for a major upswing with the fresh issuance of licenses for basic, cellular

services and entry of private players in the national long distance (NLD)

operations.

According to the figures from the Department of Telecom's (DoT), submitted to

the PMO, the inflow during January-April 2001 was Rs 534.6 crore. In 1999, FDI

inflows stood at Rs 212.7 crore, while it was Rs 288.6 crore in the subsequent

year.

This trend has belied predictions that foreign investors would shy away from

the Indian telecom sector due to bureaucratic red tape. The sector instead seems

to be witnessing a vibrant future and will remain a preferred destination for

both foreign and domestic capital, said analyst.

In fact, over the past decade, the total FDI inflow into the Indian telecom

sector has reached Rs 5,044.3 crore. This is nearly one-third of the total

private sector investment of Rs 16,564.38 crore in telecom up to March 31, 2000.

Of the entire FDI inflow of Rs 5,044.3 crore, the basic telecom sector

cornered just Rs 393.70 crore, a reflection on the viability and capital

intensive structure of this sector.

On the other hand, cellular mobile services took the lion's share with Rs

2,215 crore or nearly 44 per cent. DoT has also said that foreign investment in

holding companies, which invest in telecom outfits, stood at Rs 1,361.80 crore

or 27 per cent.