Digital news outlets have until October 15, 2021 to reduce their foreign investments to 26%, the Ministry of Information & Broadcasting announced on Monday. Additionally, these companies have one month to share details of their foreign investors to ministry. This is a part of the government’s enforcement of the 26% cap on foreign investments, which was notified in September 2019.
The development comes just days after digital news media and streaming services were brought under the administrative control of the I&B ministry. It essentially marks the first real assertion of this control by the ministry.
‘Submit all details within a month’
Companies have been directed to submit the following details within a month from November 16, 2020.
- Details of company/entity and its shareholding pattern; names and addresses of directors and shareholders.
- Names and addresses of promoters, significant beneficial owners
- Whether they comply with the current FDI rules
- PAN, latest profit and loss statements, and balance sheet
Companies that currently have more than 26% foreign investment have one month before which they have to the I&B ministry what steps they will take to bring this figure to below 26% before October 15, 2021. They will essentially have to seek approval from the ministry to continue functioning.
Foreign employees in digital media need I&B approval
In another major move, the ministry has given itself the power to scrutinise and approve foreign employees at these companies. Companies have to obtain security clearance for all foreign personnel likely to be deployed for more than 60 days in a year in any capacity, prior to their deployment. An earlier “clarification” of the FDI rules by the DPIIT had left it vague as to who the approvals will come from. This clarification, dated October 16, 2020, had also made it clear that in case approval for a person is revoked, the company will have to ensure the person resigns or is terminated from their job.
For this purpose, the entities will apply to Ministry of Information & Broadcasting at least 60 days in advance and the proposed foreign personnel shall be deployed by the entity only after prior approval of this Ministry — I&B Ministry
The ministry said that all companies have “to comply with the requirements of citizenship of Board of Directors and of the Chief Executive Officers (by whatever name called)”. In itself, the public notice doesn’t specify these requirements. However, the DPIIT had made it clear last month that a majority of directors on a company’s board will have to be Indian citizens. Additionally, only an Indian citizen can serve as CEO.
FDI needs government approval
The FDI policy, changed in September 2019, had capped the total FDI in “digital media” to 26%. Before this policy, FDI in digital media was not capped. Essentially, digital media companies went from being able to raise funding without any restrictions, to having to take government approval for the same. The I&B ministry reiterated this same policy, directing companies wishing to bring in fresh foreign investment to seek government approval through the Department of Promotion of Industry and Internal Trade (DPIIT).
Last month, the government issued a “clarification” on what “digital media” meant exactly. It was declared that news and current affairs websites, apps, other platforms; news agencies that transmit/distribute news to digital media entities; news aggregators and so on were brought under the purview of the FDI policy.
The 2019 policy change was a patent attempt at restricting foreign funding for Indian news outlets. MediaNama has argued in the past this is a restrictive policy that will affect the international competitiveness of Indian media. There are other issues as well. For instance, the rules on foreign citizens may be targeting outlets such as The Wire, one of whose founding editors, Siddharth Varadarajan, is a US national.
- I&B Ministry gets administrative authority over streaming services and digital news platforms
- Govt publishes ‘clarification’ on 26% FDI in digital news media
- Why new FDI rules for digital media companies are regressive for the internet space in India
***Correction (at 18:20 IST, November 16): Original headline did not have the word “ministry” in it. This has been corrected. The error is regretted.