Financial Daily from THE HINDU group of publications
Friday, Jul 01, 2005
Industry & Economy - Foreign Direct Investment
Government - Policy
FM radio policy allows switch to revenue share FDI permitted but cap remains at 20 pc
New Delhi , June 30
THE Indian airwaves are set to witness action with the Government opening up 330 new FM frequencies to the private sector.
Giving the much needed booster shot to the bleeding industry, the Cabinet today approved a new FM radio policy that does away with the existing license fee regime and paves the way for a revenue share arrangement.
Briefing newspersons after the Cabinet meeting, the Information and Broadcasting (I&B) Minister, Mr Jaipal Reddy, said bidding for the second phase will start in about a month's time. The Government had, in 2003, appointed a Radio Broadcast Policy Committee under Dr Amit Mitra, Secretary-General of FICCI, to work out a new policy.
While the foreign investment cap of 20 per cent has been left unchanged, the new policy allows foreign direct investment (FDI) into the sector. However, the Government has also decided not to allow private FM radio channels to air news and current affairs shows.
"Even as we have decided to allow FDI at the existing 20 per cent cap for FIIs, OCBs and NRIs, there will be no news permitted on private FM channels under the present regime," the Minister said.
On the revenue share arrangement, the Government has stipulated that operators would have to pay four per cent of their annual revenues as fee. All the existing operators who cough up licence fee will also be allowed to migrate to the new regime.
"The new players will have to pay a one-time entry fee through a closed-bidding process and each successful bidder will pay as per his bid amount," said Mr Reddy. However, existing operators will have to pay the average bid amount of new players.
"The Government will not black-list any player on the basis of ongoing litigation in various courts... we will allow everyone to participate in the new bidding process," he added. During the first phase, 108 frequencies were offered for bids, but only 21 were operational. Only recently, two operators have given notices to close down the operations.
Mr Reddy further added that cities would be divided into four broad categories - A, B, C and D - starting from the metros and to the smaller ones. About 10-11 operators would be allowed in the metros, while in B cities it will be six, four in C and two in D towns.
In order to discourage monopoly and facilitate generation of local content, the Government has decided not to permit networking between radio stations in A and B categories. "However, in C and D, networking would be allowed whereby stations would be able to share content," he added.
As safeguards, the new policy has also specified that a company cannot have more than 15 per cent of the radio stations on offer and cannot operate in more than one station in each city.
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