Symbol of Abject Dependence-100% FDI in Telecom Services

One Full by BJP and another  full by Congress

The BJP lead NDA Government has allowed 100% FDI in telecom manufacture sector in automatic route, in the year 2000.  Now, on 16.7.2013, the Congress lead UPA-II Government has decided to hike FDI ceiling from 74% to 100% in telecom services companies. In this, it can come in automatic route up to 49% and beyond that, the approval of FIPB (Foreign Investment Promotion Board) is necessary.  This decision taken by a group of Ministers Chaired by the Prime Minister was subsequently approved by the Cabinet on 01.08.2013. (Earlier, on 3.11.2005, the UPA Government has hiked the FDI ceiling in telecom services from 49% to 74 %.)

Thus, courtesy the NDA and UPA, doors are kept wide open for allowing foreign companies to have their telecom equipment manufacturing companies and telecom services companies in India, without Indian partner.

Misleading Arguments

The Communications Minister Mr. Kapil Sibal has stated that in the next 5 years, Rs 5, 00,000 crores funds are required for the development of telecom sector and since that much money is not available, it has become necessary to encourage FDI by hiking the ceiling limit to 100%. He also stated that allowing 100% FDI in telecom services will not create any security risk and the security risk arises due to imported telecom equipment and Government is going to take care of it. Hiking FDI ceiling is also supported by arguing that it will bring in new technology and help us to develop our own technology. These justifications are all stories for misleading the people.

Less gain but heavy loss

The amount of FDI that entered our telecom sector including equipment manufacture and services during the last 12 years from April 2000 to December 2012 was Rs 57585 crores only (Source: DoT web site). This was in spite of 100% FDI limit in manufacture and raising the ceiling limit in services to 74% in November 2005 itself. When this is the hard fact, how in the coming 5 years FDI will come in such a large quantity for mobilizing the Rs 5, 00,000 crores?

  In spite of allowing 100% FDI in telecom equipment manufacture long ago, our country is mostly depending on imports. As per the report of the TRAI, in the value of the equipment utilized for the expansion of our telecom networks, 89% is being paid for imports and only 11% is created in our country. While our country has received Rs 57585 crores only as FDI in telecom sector during the period April 2000 to December 2012, an astronomical amount of Rs 3, 11,714 crores was paid for importing the telecom equipment during the period  April 2004  to December 2012 (Source: TRAI web site and replies given by the Government in Loksabha and Rajyasabha).  Thus it is proved that 100% FDI will not automatically result in any real development and on the other hand, it is resulting in the draining out of our resources to other countries.

Threat to Security

The Home Ministry has warned that expanding our telecom networks with imported equipment will result in danger to the security of the customers, services and the country. There is every chance that in the equipment imported from the foreign countries, codes may be embedded in the software/hardware /firmware and through the codes, when required, the information passing through the network can be known and also the functioning of the network itself can be disrupted at critical times. Hence the Home Ministry recommended that the percentage of the equipment manufactured domestically should be increased in a phased manner. Accordingly, on 5.12.2012, the DoT (Department of Telecom) issued an order directing the PSU operators BSNL, MTNL and Government Departments to increase the utilization of domestically manufactured equipment in their networks in a phased manner. It also issued draft guide lines (not a final order) for private telecom operators proposing the same policy for them, only for 14 types of security sensitive equipments. It is to be noted that the Home Ministry has highlighted the fact that the US and China rely “entirely on indigenous capacity to meet their requirement of sensitive gear and embedded systems” (The Economic Times, May 24, 2013). 

Surrendering the Security Interest

But  the USIBC(United States-India Business Council, representing 400 big companies   in America and India with its headquarters in Washington), ITIC(Information Technology Industry Council, a Washington based organization consisting of members like Microsoft, Motorola, Alcatel-Lucent, Qualcomm, Apple, Adobe, Cognizant, Google, Sony etc), the TIA(Telecom Industry Association of America), the COAI(Cellular Operators Association of India representing the private sector mobile services companies ) and several other organizations representing the big Corporates have brought pressure on the PMO(Prime Minister’s Office) against this PMA(Preferential Market Access) for domestically manufactured equipment. They argued that such imposition of PMA on private sector is against the WTO (World Trade Organization) agreement signed by India.  Coming under this pressure,  the Prime Minister’s Office has issued a statement ( this can be seen in the web page http://pmindia.nic.in/press-details.php?nodeid=1660)  on 8.7.2013  that these guidelines for preference to domestic equipment are applicable only for the PSUs BSNL, MTNL, BBNL  and Government procurement and not for the private telecom operators(Airtel, Vodafone, Idea etc). Moreover, the Prime Minister has directed the Secretariat of the National Security Council to redefine “Security” so that it will not trouble the private operators and foreign equipment manufacturers. He has further directed the DeiTy (Department of Information Technology) to submit revised proposal on PMA before 8.8.2013 for the approval of the Cabinet, without out insisting the private telecom services operators for procuring domestically manufactured equipment! This means the PMA will be applicable only for the Public Sector Operators BSNL ,  MTNL, BBNL etc.

Protesting against this holding back of the PMA for domestically manufactured telecom equipment in the case of the private telecom operators, the Telecom equipment Manufacturers Association of India (TEMA) has written a letter to the Prime Minister. It has categorically mentioned the following facts:

1. The applicability of PMA for the private operators was earlier cleared by the Cabinet under the Chairmanship of the Prime Minister himself and after great scrutiny at various levels in DoT, DeiTy, NMCC (National Manufacturing Competitiveness Council), Commerce Ministry, Planning Commission etc

2. Even according to  the WTO rules, Governments can implement PMA for domestic manufacture for its own procurement as well as for security related purposes. Hence directing the private telecom operators to procure security sensitive telecom equipment from domestic manufacturers is not a violation of WTO rules.

3. Even USA and advanced countries have policies favoring domestic manufacturers and WTO has nowhere said that the signatories should explicitly delink manufacture and security. Indeed, WTO leaves the signatories to address security concerns through appropriate buying decisions.

But it is clear that the Prime Minister is not caring for all these security related objections and preference for domestic manufacture. It is because the combination of the big capitalists in India and America and other advanced countries want unhindered access to exploit Indian market in all sectors including the strategically sensitive telecom market. Accordingly,  an inter ministerial meeting held on 25.7.2013 has decided to drop the applicability of PMA for the private operators and made it applicable only for the Public Sector companies  like BSNL, MTNL etc.  Not only this. As detailed in this article at another place, they want to exploit jointly even the security of India in telecom sector.

Present level of FDI

What can be the result of this 100% FDI? At present the FDI in various telecom services companies is as below:

1. Vodafone-FDI 74%  belonging to Vodafone, a British Company; remaining 26% Indian  capital in which 11% belongs to the Piramal Group and 13% to Analjit Sing and IDFC.
2. Aircel—FDI 74 %( belonging to Maxis, a Singapore Company); Remaining 26% Indian capital belonging to Apollo Hospitals Group.
3. Uninor (Telewings communications Ltd) —FDI 74 %( of Telenor, a Norway Company) and the remaining 24% Indian capital belonging to Sun Pharma.
4.  Sistema Shyam (MTS)—FDI 73.82%, in this 56.68% belongs to Sistema (Russia) and 17.14% of Russian Government; in the remaining 26.18% Indian capital, Shyam Group has 24%.
5. Bharti Airtel---FDI 37.25%; In this, SingTel of Singapore 32.25% and Qatar Endowment foundation of Qatar 5%; Most of the remaining 62.75% Indian capital belongs to Bharti Group.
6. Idea Cellular—FDI 20.98%(Axiata of Malaysia); In the remaining Indian capital, 45.88% belongs to Aditya Birla Group
7. Reliance Communications—There is almost no FDI; 68.90% belongs to Anil Ambani Group
8. Tata Teleservices—FDI-26% of Do Co Mo(Japan); Remaining Indian capital of Tata Group and others( As per the news paper reports, the Russian company Sistema is trying to acquire the 26% stake of Do Co Mo and also something from Tatas to become major share holder in it)
9. BSNL—100% owned by Government of India
10. MTNL-58.67% held by Government of India and the remaining Indian share holders

More Concessions

The foreign partners in the telecom services companies have demanded for hiking the ceiling limit of FDI to 100% so that they can have fully owned companies in India. The domestic promoters/partners of the telecom services companies want to sell their stake in part or in full to reduce their debt burden and hence they have demanded for increasing the FDI ceiling limit to 100%. But they are not simply for raising the FDI ceiling. They demanded more concessions. Accordingly, several other concessions are being showered on the private sector telecom companies. The Mergers and Acquisitions guidelines are going to be announced by 15^th September 2013 to convince the foreign and Indian partners that they can easily merge or acquire to become bigger.  It is reported in the newspapers that as per these new guidelines, the merged company can have 35% of the market (35% of the total customers) without any permission and up to 60% with the permission of the TRAI. Government is in favor of reducing the base price of the spectrum and the DoT has already asked the TRAI to consider this. TRAI Chairman Mr. Rahul Khullar already has given the statement that the price of the spectrum has to be reviewed.  It is negotiating with Vodafone to reduce the Rs 11200 crore tax  it has to pay. It is also negotiating with the private operators for reducing the Rs 20,000 crores penalties they have to pay for violating the license conditions. In fact, the Communications Minister Mr. Kapil Sibal himself has stated that the DoT is imposing huge penalties on the telecom operators and hence the Government is proposing to transfer the responsibility of imposing penalties, from DoT to TRAI (Telecom Regulatory Authority of India).  What will happen with all these concessions along with increasing FDI limit to 100%?

Leading to Foreign Domination

As per the TRAI statistics, the following is the market share (number of wire line and wireless customers a company has, compared with the total number of customers) of various telecom operators as on 30.4.2013:

1. Bharti Airtel=21.78%
2. Vodafone=17.74%
3. Reliance Communications=14.27%
4. Idea=14.17%
5. BSNL=11.42%
6. Tata Teleservices=7.57%
7. Aircel=6.93%
8. Unitech(Uninor)=3.67%
9. Sistema Shyam(MTS)=1.16%
10. MTNL=0.56%
11. Loop=0.34%
12. Videocon=0.25%
13. Quadrant=0.16%

Due to raising the FDI ceiling to 100% and liberalizing the Mergers and Acquisitions and giving other concessions, the big companies can acquire small companies or two big companies can merge or the foreign partner in a Company can acquire the shares of the Indian partner partly or fully. By purchasing the remaining 26% Indian stake, Companies like Vodafone, Systema, and Telenor can become 100% foreign owned companies. The foreign stake can be increased in Airtel, Idea,  Tata Teleservices etc so that they become foreign dominated companies. Due to these mergers and acquisitions, out of the above 13 companies, only 5 or 6 may remain in the field. As a result, the market share of some companies will increase largely and it will be difficult for the PSUs BSNL and MTNL to compete with them and their market share may further get reduced. Added to this, the condition of procuring domestic equipment for expanding their networks is imposed on these PSUs while imposing no such condition on private sector operators, thus putting the PSUs in a disadvantage. This will make the condition of BSNL and MTNL which are in losses since 2009-10, much worse.

Allowing 100% FDI in telecom equipment manufacturer has resulted in the destruction of our domestic manufacture and our domestic R&D(Research and Development). The ITI, the premier PSU manufacturing telecom equipment has been in losses since 2003. The cable manufacturing PSU, the HCL has been in losses since 1993. In the weak telecom equipment manufacture sector in our country, the major manufacturers are foreign companies who established their plants here like Nokia, Ericsson, Siemens, ZTE, Huwaei, Motorola etc. Both the foreign as well as domestic manufacturers making equipment in India are mostly assembling the imported parts without developing their own technology. Thus we lost our self reliance due to 100% FDI in telecom equipment manufacture.

In the same way, due to this raising of FDI ceiling to 100% in the telecom services, the BSNL and MTNL which are the telecom services PSUs will face more difficulties and losses and their market share will be further reduced from the present 11.98%. Thus, in the telecom services sector also, more than 90% of the market will be controlled by entirely foreign owned or foreign dominated companies.

The preaching and practice of America

Telecom networks built with foreign made equipment, foreign telecom companies operating these networks, emaciated domestic telecom equipment manufacture-this is the result of these policies. Will this not be a threat to our security? Manmohan Singh Government says it is not a threat. But what the America, which is pressuring India to implement these policies, is doing in its own country? It has not allowed 100% FDI in telecom. As per the section 310 of thee Communications Act of America, in case the Government considers that the FDI beyond 25%in any telecom Company is against the interests of the country, permission can be denied for it. Recently, the House Committee of America (Committee of its Parliament) has warned that in the security interest of the country, it is better not to have business with the Chinese equipment manufacturing companies ZTE and Huwaei. But the Chinese Companies are stating that the House Committee is doing this with an intention to damage their business. When the America having a far higher technology than us in telecom sector is imposing such conditions on foreign equipment and foreign companies, why our Government is allowing the expansion of our telecom network with imported equipment and why it is allowing 100% FDI in telecom services? Even after the opinion of the Home Ministry that allowing 100% FDI in telecom services is not desirable from security angle, why it is being allowed?

Big Brother spying on all

In America all the telecom and IT companies like AT&T, Verizon, Sprint, Microsoft, Yahoo, Google, Spike, Pal talk etc are secretly supplying the information to the American Government’s security agencies  regarding the details of the telephonic conversations and information seen in/sent through internet, by the people in all countries and also by the American people. They are providing information of the people and organizations of other countries to the NSA (National Security Agency) of America. Not only this. Even in India also, the private telecom operators Reliance Communications and Tata (VSNL) have signed agreements as per which the US Government agencies can monitor any communication that is flowing through their optic cables, as the one end of their networks is in US and the information they thus supply to the US agencies cannot be disclosed to the Indian Government and even to the management/Directors of these companies!

Threat to Cyber Security From America and its allies

 It is also to be noted that the investigation carried out by the Russian anti-virus Company KASPARSKY Lab as per the request of the ITU (International Telecom Union, an organization of United Nations) has revealed that the Iranian Oil installations which were kept on line were infected by a virus which was created, possibly by America and Israel! Similarly, investigations revealed that the Iran’s nuclear fuel facility at Natanz was targeted by two viruses Stuxnet and Duqu  and these were created by US! Thus the US is the real threat to the world regarding security in internet and telecom. The famous newspapers O Globo (Brazil) and Der Spiegel (Germany) have revealed how the telecom networks of Brazil and Germany were hacked with the help of American Companies. Just like Reliance and Tata, the US has agreements with more than 80 foreign telecom companies to provide access to their optic fiber networks. Under these agreements, the US can monitor any communication flowing through all these networks.  To cover up this, like a thief shouting at others as thief, the US is campaigning that China is spying the telecom and internet networks of all countries! While the threat from China may be possible, the threat from the USA security agency NSA etc is well documented and proved. Edward Snowden has revealed that US agencies are regularly spying the networks of all countries including China. The NSA routinely vacuums up all the data that passes through the global fibre optic cable network and stores it on its servers. In this it is aided by the telecom companies of USA, the GCHQ of UK—UK’s equivalent of NSA—and to our shame, Indian private telecom operators like Reliance Communications and Tata Teleservices. If 100% foreign owned telecom services are allowed, it will further increase the threat to our security in telecom sector.

Dependence even in the Security

But our Government is not bothered about the fact that the privacy of our citizens is compromised by the NSA of America. Instead, it also wants similar powers! Under its licensing powers it is asking all Indian telecom companies to provide access to their networks, for siphoning off as much data as it wants and also to know in real time regarding who is talking to whom, from where and for how long. The Indian Government wants that its security agencies should have equal opportunity like NSA of America to spy on our citizens and hence the data supplied by the telecom companies as well as internet companies like Google, Face book, Yahoo etc should be supplied to it also. Thus in effect, Indian Government wants to allow foreign companies as strategic partners in security matters! Our National Security Advisor Sri Shiv Shankar Menon has been saying about the need to have partnerships with other countries, means the US-to address our intelligence needs. This means we need US and other foreign companies to snoop on our citizens.  (The contents in this Para and the previous two Paras   are based on the article “The New Strategic Mantra: Indian Cyber Security Needs Foreign Help”, by Prabir Purkayastha, published in Peoples’ Democracy, July 28, 2013).

Congress, BJP and Regional Parties

Hence it is not surprising that the UPA Government has decided to allow 100% FDI in telecom services, since it wants to have US and foreign Companies as the strategic partners in the security of telecom and internet (cyber security) and also in Defense! But it is to be noted that the principal opposition party in the parliament, the BJP, is also sailing in the same boat. They also want America as strategic partner in the security of the nation. In fact, the strategic alliance in security matters with America was started by the Vajpayee Government. The “Swadeshi” of BJP is confined to create hatred against Muslims while crawling before the US imperialism. The regional parties also are working with a pro-capitalist view and hence not opposing these policies. These parties (Congress, BJP and regional parties) are the parties representing the indigenous capitalist classes who are increasingly collaborating with the foreign capitalists in their hunt for profits in our country as well as in other countries. Hence they are not opposing these policies, even though they are against the interest of the people and the security of the country.

Liberalization leading to destruction and dependence

 It is clear that allowing foreign domination in our telecom network installation and in our telecom services will be dangerous to our security. Besides the security, these policies are destroying our self reliance and compelling us to pay lakhs of crores of rupees for importing equipment. Due to these policies, our indigenous telecom equipment manufacture and indigenous Research and Development in telecom technology is being destroyed. Our telecom services sector is coming under foreign domination. The telecom equipment manufacturing PSUs ITI and HCL have become sick. The telecom services PSUs BSNL and MTNL are in losses since 2009-10. The number of regular employees in telecom sector is decreasing and the number of temporary/casual/contract workers is increasing. The foreign and Indian private telecom companies have been pressurizing the Government to cut the rights of the workers and employees. Proposals are being made and considered by the Government for reducing the staff in BSNL and MTNL in large number in the name of VRS and also, efforts are being made to fragment BSNL and MTNL in order to prepare them for privatization.

The Experience of China and the Necessity for the Alternative

Therefore it is necessary to propose alternative policies countering these bankrupt liberalization policies and to organize a big movement to pressurize the Government for implementing such alternative policies.

The experience of China is noteworthy in this regard. The Prime Minister of India has appointed a Group headed by Sri V.Krishna Murthy, Chairman of the NMCC (National Manufacture Competitive Council) to study and make recommendations for ensuring sustained growth of manufacture in India. This Group has submitted its report on 20.9.2008. In this report it observed that China has achieved spectacular growth in manufacture by adopting “an industrial policy including FDI policy which promoted domestic manufacturing growth….China also has put in place policies in respect of the FDI which helped in the growth of domestic companies including technology transfer. For example, absorption of technology by local company, minimum capital requirement, local participation in the companies etc., are prescribed to ensure that the manufacturing along with technology is transferred to China.”

In China, all the telecom services companies are PSUs. By keeping the telecom services market in its hands, the China Government was able to compel the foreign telecom equipment manufacturing companies to invest in China with a Chinese partner and transfer their technology to the Chinese partner. The technology thus acquired was further developed. On this basis, it was able to develop its own telecom equipment manufacture industry. Today, the Chinese telecom equipment manufacturing Companies ZTE and Huwaei have become world famous, supplying their equipment to all countries in competition with Nokia, Motorola, Siemens, Ericsson, Samsung etc. In India, while the BJP lead NDA Government allowed 100% FDI in telecom equipment manufacture in automatic route without insisting for transferring their technology to our companies for further development, thereafter, the Congress lead UPA Government has continued the same policy and further decided to allow 100% FDI in services sector also, making our country depending on imports for equipment to expand our telecom networks and handing over our telecom services to foreign domination. 

FDI is required to some extent for acquiring and developing higher technology, for providing more jobs and for developing our indigenous industries. Only to this extent it has to be utilized. But it should not be allowed to damage our security, self reliance and our industries, our technological development and our employment. It is necessary to encourage our domestic R&D(Research and Development) in telecom technology, our indigenous equipment manufacturing companies and our indigenous telecom services companies. For this, it is necessary to encourage the Public Sector R&D, manufacture and services organizations C-DoT, ITI, HCL, BSNL, MTNL and BBNL (Bharat Broadband Network Limited). It is also necessary to see that our country comes out of the poisonous strategic alliance with US in the security and defense related issues. The trade unions, the mass organizations of the people, the Left and Democratic forces have to organize this struggle for the alternative.

---P.Asokababu