26% FDI in Radio leaves stake holders unhappy

The TRAI on Wednesday had suggested capping an overseas investment at 74 per cent as opposed to previously 49 per cent for television operators, DTH operators, IPTV, mobile TV and large cable distribution firm. Meanwhile, private FM radio and news channels, the limit has been capped at 26%, up from 20%.

TRAI has also made a specific recommendation for local cable operators ' wherein, the FDI cap could be reduced from 49 per cent to 26 per cent.

The TRAI recommendations comes on the back of a request from the Ministry of Information and Broadcasting to review its two-year old recommendations in the wake of modification in the methodology of assessment of foreign investments in Indian companies.

While the move would be beneficial for some, Radio probably gets a raw deal as it should the TRAI should have looked to involve more players in the private radio sector.

The above mentioned proposals differ from TRAI's earlier recommendations in 2008 to hike the FDI limits in FM radio and uplinking of channels to 49%.

According to the 2008 recommendations, there would be an FDI cap of 74 per cent in all the cable operations and 49 per cent, if the FDI was routed through an automated route.

But new proposed recommendations have been a bit harsh on the radio sector. Firstly, there is a huge gap between the DTH services and the radio. In other parts of the world, where the radio has been hugely popular, the government have ensured that they give equal weight age as compared to other broadcasting networks.

Though it brings great news for so called "upper-classed' broadcasting players, radio could have had a better deal. An increased FDI cap would have attracted better investments. Though radio industry is still in its early stages, but given proper freedom to breathe and support from the government, it can very well turn out to a powerful medium of communication.

As people from the industry and they would tell you that the FDI cap should have been increased and industry like radio should have been encouraged. "For a nascent industry like radio, to be able to unleash its true growth potential there is need for a further upward revision in FDI limit. It is important that media platforms be treated neutrally, with radio being given a fair chance with the FDI limit increased to at least 50 per cent,' says Tarun Katial, CEO, Reliance Broadcast Network Ltd.

According to Vineet Singh Hukmani, Managing Director, Radio One, the raise is virtually inconsequential and that the government has to do more. "It's fairly inconsequential and government should do something more rather than making small changes, this recommendations does not affect the radio industry in a big manner." Hukmani says. "The government's recommendation has to be much better for the radio industry to actually benefit from," he further adds.

However, Nisha Narayanan, Senior VP, Projects and Programming, Red FM, though welcomes the move, but feels government has to be consistent has to create a level playing field rather than having such huge differences.

"Definitely, any increase in the FDI limits is very welcome. Especially considering the fact that Phase 3 is coming up, this will definitely add an impetus to the growth of the industry," she says.

"But when compared to other broadcast media like DTH, etc, where the FDI limits have been increased to 74 per cent, radio is still far behind. A more consistent and common policy for all broadcast media is what we require for a level playing field, rather than such a huge difference," she adds.

The huge difference might have sparked a debate, but such huge difference is something, which needs to look at otherwise, no foreign or Indian investor would even look at radio as a viable option.