Home Ministry Blocked Telenor’s Security Clearance Before FIPB

Foreign Investment Promotion Board (FIPB) is an integral part of foreign investments in India. Under the consolidated FDI policy of India 2012, the Minister of Finance who is in-charge of FIPB would consider the recommendations of FIPB on proposals with total foreign equity inflow of and below Rs.1200 crore.

The recommendations of FIPB on proposals with total foreign equity inflow of more than Rs. 1200 crore would be placed for consideration of CCEA. The CCEA would also consider the proposals which may be referred to it by the FIPB/ the Minister of Finance (in-charge of FIPB).

Amid of 2G spectrum scam and related controversies, Telenor is looking forward to new telecom partner in India. Telenor is also in the process of starting a new company in India and it has already filed a FIPB application. The strategy of Telenor in this regard is very simple. It would first find a solution with the current partner Unitech and would then find a suitable new partner.

However, the real problem is that Telenor is not disclosing the name of potential and possible partner for it new joint venture. World over telecom equipment providers like Huawei and ZTE are under attacks from regional governments over cyber security issues.

For instance, recently the cyber security concerns excluded Huawei from Australian Broadband Project (ABP). Even ZTE has been accused of facilitating e-surveillance in Iran. Now it has been reported that the US House Intelligence Committee is investigating Huawei role amid concerns that it is an arm of Beijing’s cyber-espionage effort.

In such circumstances, if Telenor has any potential plans to have Huawei, ZTE or their affiliates as a partner in its latest joint venture, this may raise red flag before the Home Ministry of India.

In fact, it has been reported that Home Ministry of India has declined to issue a security clearance to Telenor for its new joint venture. Telenor has made an application to the FIPB last month but it has not been listed for approval till now because Home Ministry has placed an objection in this regard.

Home Ministry has objected to the fact that Telenor has neither identified its investing entity nor the Indian partner as per the terms of Press Note No 3 of 2007. The application by Telenor requested for certain relaxations and exemptions from disclosures that seem to have been opposed by Home Ministry.

Another problem with Telenor’s application is that the application named all three board directors as Norwegians whereas security conditions in Press Note No 3 stipulate that majority of the board directors should be Indian citizens.

Further, the Home Ministry is also insisting upon identification of the Indian partner so that its antecedents as well as those of its owners or directors are verified by the Intelligence Bureau before giving a no-objection certificate.

The Home Ministry also needs to check the backgrounds of the designated chairman, managing director, chief executive officer or chief financial officer if they are foreign nationals.

These are genuine concerns and they are closely related with cyber security and national security aspects as well. Realising the gravity of the situation, recently an inter-ministerial meeting was held to resolve this problem. However, the officials from Home Ministry did not attend the meeting. This means Telenor has to change its strategy of non disclosure and come up with some better strategy.