News aggregators will have one year to make sure that their foreign direct investment doesn’t exceed 26%, the government said in a “clarification” issued on Friday. The Department for Promotion of Industry and Internal Trade had last August announced a 26% FDI limit for digital media (which is the limit of foreign ownership that print media companies are subject to). But it did not clarify what digital media constituted. Now, this is what it has to offer:

“The decision of permitting 26% FDI through Government route would apply to the following categories of Indian entities, registered or located in India:

  1. digital media entity streaming/uploading news and current affairs on websites, apps, or other platforms;
  2. news agency which gathers, writes and distributes/transmits news, directly or indirectly, to digital media entities and/or news aggregators; and
  3. news aggregator, being an entity which, using software or web application, aggregates news content from various sources, such as news websites, blogs, podcasts, video blogs, user submitted links, etc in one location.”

This clarification shows the 2019 policy change in its clearest light: a restriction on foreign funding for Indian news outlets. We have argued in the past that this is a restrictive policy that would inhibit Indian media from competing internationally. While the benefits to the government from a funding-starved news media is clear, there is also no clarity on who exactly asked for it in the first place.

Uncertainty remains

Even with this clarification, there remains uncertainty on who will be affected: for instance, are Indian bureaus of international news organisations going to be subjected to these restrictions as well? What about social media companies and YouTube, where users post news links, which is explicitly covered in the clarification?

Restriction on foreigners: The majority of directors on the board of digital media companies have to be Indian citizens, and the CEO should be Indian too. What’s more, any foreign national who is expected to be working at the company for more than sixty days is required to get security clearance from the government, failing which the company will be forced to terminate their employment. These nationality requirements may be targeting news outlets like The Wire, one of whose founding editors, Siddharth Varadarajan, is a US national.

Who benefits from this restriction?

The only stakeholder group that this move might benefit is traditional print publishers who are expanding their online presence but don’t want to compete with digital-only media that has foreign funding they don’t have access to. The members of the Digital News Publishers’ Association, who reportedly met Information and Broadcasting Minister Prakash Javadekar a few days after the digital media FDI policy was announced, fit this bill.

Including news aggregators is significant — I&B Secretary Amit Khare had said recently that he believed that they should also come under the ambit of these restrictions. Whether the inclusion of aggregators was thanks to him is not clear though as this entire process has been carried out without public consultation. This may affect apps like Dailyhunt and Inshorts, which have already raised significant funding from foreign investors. These companies may now effectively have to reduce their foreign investors’ aggregate stake to 26%.

Before this 26% rule was announced, FDI in digital media was not capped, as evidenced by News Corp’s acquisition in 2015 of VCCircle. In July this year, News Corp sold the entity to HT Media, which publishes the Hindustan Times and is a member of the DNPA. The Hindustan Times in August had welcomed the 26% FDI rule as it “levels the playing field between digital and print media companies”. It is unclear if DNPA members have sought an overall relaxation in FDI in media, as opposed to advocating for restrictions for their digital-only counterparts.

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