74% FDI in Media - Broadcasting, a welcome step!

In a slew of economic reforms announced by the Government, on Friday, media and broadcasting sector also stands to benefit as the Foreign Direct Investment (FDI) limit has been raised from 49 per cent to 74 per cent. This will benefit the broadcast sector in particular, except television news channels and FM radio where the existing 26% limit will continue.

 

Encompassed within this are the broadcast carriage services providers, including direct-to-home (DTH), head-end in the sky (HITS), multi-service operators (MSOs) and cable TV to bring about uniformity.

 

The 49 per cent FDI will continue to be approved through the automatic route, anything beyond this upto 74 per cent will have to be routed through the government route, and will need clearance from the Foreign Investment Promotion Board (FIPB). Among other segments, 74% FDI was allowed in mobile TV, which is an area of future growth.

 

Says Smita Jha, Leader, Entertainment and Media, PwC India, “FDI increase in the TV sector is a welcome step in the right direction and was much anticipated. This will help step up the process of digitisation where investments are required to be made by the cable industry. This timely announcement will enable the TV distribution industry meet the deadline of mandatory digitisation as pronounced by the Government. A commendable step is also the uniformity in the increase across sub-sectors of DTH, Cable and HITS in the era of convergence.” 

 

It may be recalled that the four metros need to be digitised before November and the entire country needs to go digital by 2014. Industry estimates suggest investments to the tune of Rs 20,000-25,000 crore are required. DTH sector for instance has been suffering from losses and it takes long time for companies to break even and require investors with deep pockets. This move will help MSOs as well as DTH industry raise funds. As the Government has not given any fiscal incentives for digitisation in the form of relief on taxes, so the increase in FDI limit was a much needed policy nod.