Unease of doing business

Govt’s intentions are fine, but actual decisions are making it more difficult to do business in broadcasting sector

| October 25, 2017

#Broadcasting   #TRAI   #WEF   #MIB  

Is the government serious about improving the ease of doing business? The recent report of the World Economic Forum (WEF) indicates that India remains the most competitive economy in South Asia, appearing at No. 40 in the global competitiveness ranking of 137 countries. The ranking, however, is one lower than last year’s.

This might be because of the contradictory play in the corridors of power which seriously undermines the prime minister’s push to improve investment climate and increase employment opportunities.

Let’s take, for example, developments in the broadcasting sector.

The telecom regulatory authority of India (TRAI) issued a consultation paper on July 31 on ‘Ease of Doing Business in Broadcasting Sector’ to remove the barriers by laying down transparent procedures, facilitate innovation and technology adoption and introduce investor-friendly policies. It said, “A business-friendly environment is a prerequisite for the growth of the sector. The government of India has launched an ambitious programme of reforms, aimed at making it easier to do business in India. The programme aims to pinpoint the bottlenecks and ease them to create a more business-friendly environment.”

As a natural corollary, the ministry of information and broadcasting (MIB) ought to have waited for the regulator to come out with its recommendations for implementation. However, MIB, without waiting for the regulator’s final word on the issue, has reversed some of its own decisions on ‘Ease of Doing Business’.

Flip-flop on security clearance

The issue of security clearance for a broadcast entity came up during the reign of UPA II. After holding up the issue of fresh licences for several months and after several meetings with stakeholders, MIB stated in an office memorandum of June 25, 2014 that “It has now been decided to restore the earlier practice wherein no fresh security clearance was sought in case security cleared company (with security cleared directors) seeks permission for additional TV channel(s) within the validity period of security clearance. Accordingly, it has been decided to grant permission to the eligible companies where security clearance is available in favour of the company and its directors on the board within the validity period.”

In 2015, when Arun Jaitley was at the helm of affairs at MIB, in response to the home ministry (MHA) communication denying security clearance to 33 TV channels of the Sun TV group citing ‘economic security’ as the prime reason, MIB sought clarification on what constitutes ‘economic security’. The then attorney general of India, Mukul Rohatgi, even opined that MHA’s action of denying security clearance to Sun TV violated fundamental rights granted by the constitution under Article 19. In December 2016, MIB and MHA decided to bury their differences over granting security clearance for the renewal of licences of radios and TV channels of the Sun TV group.

In February 2017, when MHA filed its affidavit before the supreme court on Sun TV’s security clearance case, it took the stand that even though persons related to a company could be facing prosecution in economic-related charges, security clearance may still be given. It also said that in such cases the final decision would be subject to the judgment in this case. The MHA also informed the court that the inter-ministerial committee headed by the cabinet secretary is the final authority in issuing security clearances in consultation with the concerned ministry and finance ministry.

It was a sigh of relief for those existing broadcasters who wanted to expand their business by launching new channels as there was no need for them to wait for MHA’s security clearance which usually takes a couple of years. 

However, it seems, it was a short-lived relief. Of late, MIB and MHA are on a different wavelength over the issue. A source in MIB revealed that MHA while granting security clearance to certain broadcast entities also gave adverse inputs about promoters of some entities, without any opinion. According to the source, MIB wrote back to MHA asking it to state clearly whether it can grant licences to those entities or not. MIB reminded MHA that as the sole authority for internal security it should not merely give inputs and that MIB is not equipped to dig deep into the information provided by the MHA.

As per its earlier stand, MHA refused to accede to MIB’s request and instead asked it to take responsibility and decide on granting security clearances to economic offenders who apply for licences. With the two ministries slugging it out, over 40 licences got stuck. In its communication, MHA maintained that a revision of the “extant system of national security clearance was not necessary”.

This means the existing broadcasters who are planning to apply for additional TV channel licences or expand their operations will also be subjected to fresh security clearances, which will definitely slow down investment coming into the sector.

Changing orbital positions on satellite clearance

Another recent decision pertains to satellite clearance issued to the existing on-air TV channels which want to migrate to another already approved satellite.

MIB issued an order in February, amending clause 9.2 of Policy Guidelines of Uplinking of Television Channels from India dated December 5, 2011, thereby those applicants seeking permission to set up teleports and operating DSNG and TV channels would not require the department of space’s satellite clearance which are already cleared by DoS. 

Quite simply, this was in response to the stakeholders’ demand under ‘Ease of Doing Business’ to do away with sending physical files to the DoS headquarters for satellite clearance in case they migrate from one approved satellite to another approved satellite as they cause enormous of time and wastage of precious foreign exchange.

The moot question is: why should a mere change of satellite and/or transponder need clearance from ISRO, under DoS? As per the government’s satellite policy, when a foreign satellite operator approaches an Indian broadcaster or a teleport operator, they get clearance from ISRO once they coordinate the technical parameters with ISRO and WPC for usage by Indian satellite users. 

For the ‘Ease of Doing Business’, the stakeholders suggested that instead of sending physical files through India Post which takes months to reach the ISRO headquarters, ISRO should publish its own list of INSAT-coordinated foreign satellites on its own website so that MIB does not have to send each fresh applications and change of satellite applications to DoS for verification. In the age of ‘Digital India’ this would have been the natural corollary for both DoS and MIB to agree on, but unfortunately to ensure control they decided to cancel the order on September 20.

In other words, the existing TV channels and teleport operators which want to migrate to another satellite/transponder have to wait endlessly for approval. Is that ease of doing business?

Investment bottlenecks

The government’s focus is to increase investment and employment opportunities but MIB, it seems, has an altogether different world view. In 2016, the government amended the FDI policy on broadcasting carriage services to enable 100 percent FDI in teleports, direct-to-home (DTH), cable networks, mobile TVs and Headend-In-The-Sky (HITS) broadcasting services.

With the implementation of digitisation and the government’s new thrust to make India a robust digital economy, there is a crying need for heavy doses of capital inflow over the next few years. Estimates peg the funding requirement to be anywhere between Rs 15,000 crore and Rs 20,000 crore.

However, the reason behind foreign media companies not showing any interest in investment in the broadcast distribution landscape is the existing artificial restrictions on crossholding.

TRAI in its recommendations on “issues related to media ownership” issued in 2014 called upon MIB to remove the anomaly of 20 percent investment restrictions for broadcasters willing to invest in distribution platforms. The distribution vertical not only needs heavy investment but it also needs the latest technologies to enable the Indian M&E sector to become a global player.
In addition, TRAI in its “Recommendations on Issues related to New DTH Licences” has clearly stated that a broadcaster or a distribution platform can choose to fully vertically integrate one DPO from amongst MSO/HITS/DTH.

The interesting thing is that these recommendations were made in response to consultation processes initiated by TRAI at the behest of MIB itself. However, these recommendations have been gathering dust for past several years as MIB is yet to accept and implement them.

It should be stated that the issue of allowing investments by broadcasters in distribution platforms is not an issue affecting “cross media ownership” at all, as some of major Indian broadcast networks and distribution platforms form part of the same value chain. Hence, this, by no stretch of imagination, would constitute a case of monopolisation of media outlets which is the core subject matter of “cross-media ownership” restrictions.

The highlight of such an artificial restriction is a mystery because while Indian broadcasters, most of which being family run businesses, have been able to overcome these restrictions through innovative corporate structuring, foreign companies are subjected to such artificial restrictions which prevent some of the big foreign players who already are in the business of broadcasting and distribution business to integrate themselves and invest heavily in India. DIPP data shows not a single dollar has come into this sector despite the government’s move to allow 100 percent FDI in it!

Globally, all developed nations allow vertical integration as the same has proven to be a boon for the growth of the M&E sector but they discourage horizontal integration of media houses. India is the only economy where horizontal integration is allowed and not the vertical integration (but that too is only selectively applied to foreign investors!)

Ailing electronic news media

With the exponential growth of the internet and social media, MIB still believes that foreign ownership of news media is a problem whereas, in reality, anyone can access any news from any part of the world at any time and any place!

One of the core components of the Indian broadcasting sector is electronic/broadcast news. There’s no dearth of electronic news outlets in India, however, it’s apparent that the quality of news content has been badly impacted by the financial health of stakeholders. This is why, despite the extraordinary growth of the number of TV channels in India, there isn’t a single global news brand from India!

It’s no secret that news broadcast in India is fighting for survival and credibility. The only possible cure seems to be fresh investment from credible global media outlets. However, despite the fact that FDI in electronic news in India is allowed to the extent of 49 percent, electronic news broadcast has failed to attract any foreign investment due to a peculiar clause which is not in sync when the government increased the FDI ceiling from 26 percent to 49 percent.

When the government increased the ceiling, it was welcomed by all. However, the move has not resulted in any increase in investment inflow as the ‘Uplink guidelines for news and current affairs channels’ notified by MIB require the single largest Indian shareholder to own at least 51 percent of total share capital of any news broadcast concern. This problem gets quantified due to the SEBI guidelines governing public float of listed companies, which require minimum of 25 percent of the shareholding of a listed public company to be offered publicly.

As most Indian news broadcasters happen to be listed companies, it is virtually impossible to find a broadcast news company that has 51 percent ownership of share capital held by a “single Indian shareholder”.

When the investment ceiling was 24 percent, it was easy to put a condition that a single Indian shareholder should hold at least 51 percent of the total investment. This means a listed news broadcast entity will have among its shareholders a foreign investment of 24 percent, a single Indian shareholder of 51 percent and a public float of 25 percent. However, a foreign investor wanting to invest in an Indian news channel is unable to do so because in the new FDI rule, the public float of 25 percent still exists. In other words, the government got their math wrong! 

Hence, interested investors have been deterred due to the difficulties involved in complying with the tough requirement as described above. Thus, there is a serious need to amend the uplinking guidelines and remove the requirement of having single Indian shareholder owning 51 percent of the total share capital of the news broadcast organisation.

The author, a veteran in a broadcasting firm, prefers to remain anonymous.

(The article appears in the October 31, 2017 issue)



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