On October 16, the Department for Promotion of Industry & Internal Trade, Ministry of Commerce & Industry, issued a clarification to the note it had issued on September 18, 2019 “liberalising” the foreign direct investment (FDI) regime for digital news media entities by specifying that those “engaged in uploading/streaming of news and current affairs…have been permitted FDI up to 26% through the Government approval route.”
The following categories of entities, registered or located in India, come within the purview of the FDI cap, according to the clarification issued by Nikhil Kumar Kanodia, Director (FDI), which is being reproduced verbatim below:
- digital media entity streaming/uploading news and current affairs on websites, apps (applications) or other platforms;
- news agency which gathers, writes and distributes/transmits news, directly or indirectly, to digital media entities and/or news aggregators; and
- 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.
All above-mentioned entities “would be required to align their FDI to the 26% level with the approval of the Central Government within one year,” that is, by October 16, 2021.
The decision to impose a cap on the FDI in digital news media entities was first announced by Finance Minister Nirmala Sitharaman in her speech presenting the Union budget in July 2019. Cabinet approval for the move came in August that was announced by Commerce & Industry Minister Piyush Goyal at a media conference.
Compliance with the new FDI policy and the applicable notification under the Foreign Exchange Management Act issued in December that year entailed various conditions: the majority of the board of directors of the entity and the chief executive officer (CEO) would have to be Indian citizens and security clearance would have to be obtained for foreign personnel deployed for more than 60 days in a year.
Who Are The Stakeholders?
The government “had received representations from several stakeholders” to clarify what kind of entities would fall within the purview of the new FDI policy, Friday’s clarificatory note stated. Who are these stakeholders?
At present, 26% FDI is allowed in the print media with government approval and the corresponding proportion for the broadcast media is 49%. The last time the government relaxed FDI norms in media was in November 2015. The FDI limit in television news channels and private FM radio stations was raised from 26% to 49% per cent while 100% FDI was allowed in entertainment television channels.
In September 2018, the Digital News Publishers’ Association (DNPA) was formed by some of the country’s biggest traditional media groups, many of them from the print medium––Jagran New Media, Malayala Manorama, the Times of India group, HT Digital Streams Limited in the Hindustan Times group, New Delhi Television, India Today, Indian Express, Dainik Bhaskar, Eenadu and Amar Ujala.
The members of the DNPA welcomed the government’s decision on the FDI cap on digital news media companies. They claimed a year later in September 2019 that the “move gives predictability and certainty to the policy regime and ensures equal treatment among news companies, whether producer or aggregator.”
The Times of India wrote at that time: “News aggregators operating in India, such as Dailyhunt, InShorts, Helo, UCNews, and Newsdog, have larger reach than Indian news publishers, and have received significant foreign investment, particularly from China, due to legal ambiguity. News aggregators ‘source’ or ‘link’ news articles from multiple sources into a single feed for users, often using thousands of content providers, and then choosing which articles to promote to consumers. In many cases, aggregators don’t rely on an editor, and use algorithms to determine which articles to show, creating risks of misinformation and unverified news promotion.”
It was further stated: “News aggregators carry content across text, image, and video formats, and cover wide ranges of topics, from hard news areas like politics, national security, business economy, to softer areas like lifestyle and entertainment. They are increasingly focused on hyperlocal content coverage, aiming to create or source content for small towns in India, and in regional languages. In this way, aggregators directly compete with local and national publishers, driving the need for parity in FDI limits.”
The ToI story that was published before the Indian government banned 59 Chinese applications used in mobile phones and computers on July 29, 2020, in the wake of the stand-off between soldiers of the two countries in Ladakh, pointed towards the “growing ownership of Chinese investors and companies in the digital media and digital news,” adding that Bytedance is the largest strategic investor in Dailyhunt, while owning and controlling its own news platform, Helo, and the fast-growing video platform TikTok. UCNews is owned by Alibaba, Opera News is owned by Beijing Kunlun Tech and Newsdog’s lead investor is Tencent.
The report commented: “Ironically, the same Chinese companies are heavily regulated in their home turf, due to China's tight controls on media. Together, these apps claim to reach over 200 million Indian users each month, surpassing nearly all Indian news publishers, and are focused on expanding (their) reach into Tier 2 and Tier 3 audiences (in smaller Indian cities) with significant marketing spends.”
Why the Digital News Publishers Association?
Particular observers like Nikhil Pahwa, founder of the Medianama portal, had wondered why the DNPA was formed in the first place since not a single “digital only” news publisher was part of the original group of founders. He presciently argued that this was “probably an outcome of the now-scrapped plan from (the) Ministry of Information and Broadcasting (I&B) looking at regulating online content, which included news publishers and aggregators.”
Pahwa added that that “consultation has now been parked with MEITY (or the Ministry of Electronics and Information Technology)” and that the publishers in the association have said that their first task is to collaborate to address fake news. He wrote: “There are already discussions between various publishers for fact checking, and the sharing of those fact-checked reports across media and social media. It didn’t need to form an association to achieve this. In any case, collaboration around fact-checking is useful, but not sufficient. We need strengthening of law enforcement capabilities, especially in small towns, and capacity building for the judiciary, bureaucracy and law enforcement. We need the police to be more active once misinformation is spreading, using counter speech to address it.”
Furthermore, he wondered: “Perhaps it’s about preventing formal regulation of online news. What appears to be happening in parallel in online entertainment, is a move to try and transpose traditional media norms to online norms, and create their own self-regulatory code and disclosure norms, in a means to distinguish themselves from content aggregators. Perhaps these traditional-digital publishers might attempt to do the same in the news domain, and create some self-regulatory norms, in order to distinguish themselves from blogs and news aggregators.”
The founder of Medianama wrote about the “confusion about what can be classified as news on the Internet, and whether aggregators and blogs are included, and about whether video will be regulated separately from text, given that the medium allows the mixing of audio, video, text and interactivity.” He argued against the need for “uniformity and a common code” and felt that such a step would pave the way for greater government control over free speech enshrined in Article 19(1)(a) of the Constitution of India as a fundamental right of every Indian citizen and perhaps expand the scope of Article 19(2) that specifies “reasonable restrictions” on Article 19(1)(a).
Pahwa concluded his October 2018 article stating: “The internet does not distinguish between journalists and non-journalists, publications and blogs. We are all users: both consumers and creators. Any move by any traditional industry to transpose and impose its norms and restrictions, to all of us on the Internet, should be opposed. Such moves may end up restricting freedoms for users and are thus potentially regressive.”
On September 30, 2019, representatives of the DNPA met the I&B Minister Prakash Javadekar to discuss the “challenges posed by fake news.” Speaking at the meeting, Pawan Agarwal, chairman DNPA, who represents the Dainik Bhaskar group, reportedly stated that “digital arms of the traditional media companies have maintained high editorial standards in providing the most credible and authentic news––across languages––to the ever-growing population of digital news readers in India and abroad” and wanted to explore the possibility of a collaboration with the government in “maximising future potential of the digital news industry to propagate and disseminate knowledge among (the) general public”.
Unlike representatives of “legacy” print media organisations, the government’s decision to place a 26% cap on FDI in digital media companies was not supported by such corporate entities that perceived the move as “restrictive,” since some of these organisations are reliant on funds from abroad. Some saw the restrictions on FDI as aimed at the Indian entities that are associated with international news media organisations like the BBC (British Broadcasting Corporation), Al Jazeera and Huffington Post. Yet others perceived the FDI cap as an attempt to “control” digital streaming platforms such as Netflix and Amazon Prime. Their apprehensions were not unfounded.
The huge success of the “Sacred Games” series released in June 2018––that broke new ground in depicting violence, sex and the use of expletives on Indian screens––also aroused the ire of conservative and right-wing persons and groups, some of who are aligned to the ruling party and who called for the “censorship” of such content by the Central Board of Film Certification. Calls for censoring online content on OTT (over the top) digital platforms (including Netflix) have continued subsequently even as in the aftermath of the COVID-19 pandemic, many cinema halls had to shut down and more and more feature films are being released online bypassing traditional distribution systems.
A question would arise as to whether OTT platforms should come under the purview of the new FDI policy as they stream content that is both fiction and non-fiction (that could broadly be categorised as ‘news and current affairs’). In the latter category could come a series called “Bad Boy Billionaires” now on air on Netflix that feature documentary films on Vijay Mallya, Nirav Modi and Subrata Roy (of the Sahara group) and which faced legal hurdles.
Implications of the Clarification on FDI
The lack of confusion may not go away even after Friday’s clarification, Pahwa pointed out in a series of Tweets. He said the government’s positioning of the new FDI policy as a “benefit” was “incorrect.” Earlier, there was no FDI cap on digital news media entities as became evident when Rupert Murdoch’s NewsCorp group bought VC Circle in 1995, thereafter selling it at a loss to the HT Media group’s Mint. He felt the “move strengthens the traditional media lobby against digital companies…This is probably their doing.”
Pahwa was also of the view that the new policy “might impact local bureaus of international publications” as many of them “contribute directly to websites, and not to television or radio” and that part of the government’s clarification “is worrying for them”. He then wondered: “What about Facebook and YouTube, where news content is posted by users? They, by definition, will be news aggregators. Note how it (the government) specifically mentions ‘user submitted links’ in the clarification. They do have India entities.”
By controlling access to foreign funds, instead of “of liberalising news media, easing restrictions on print, they’ve taken digital to the level of control they have on print,” he stated, adding that digital news companies may restructure by setting up companies in Singapore to raise funds from that jurisdiction.
The Medianama founder pointed out that the “policy change has been finalised without public consultation,” that representations made are not in the public domain and that digital media companies “need to brace for another policy: Registration of Periodicals and Publications Bill, 2019.”
Pahwa speculated that the government was “probably” targetting The Wire portal (that has been stridently critical of the current ruling regime). He pointed out that the FDI policy specified that the CEO of a digital news entity had to be an Indian citizen. He Tweeted: “Foreign citizens employed need government security clearance, and if not cleared, will have to resign.”
Incidentally, one of the founding editors of the portal Siddharth Varadarajan is not an Indian citizen.
Pratik Sinha of the fact-checking website AltNews, however, disagreed with Pahwa stating that since The Wire is run by a not-for-profit body, FDI rules would not apply.
When contacted by NewsClick, Varadarajan said: “The FDI policy does not apply to the non-profit entity that owns The Wire as we have no FDI. Nevertheless, the policy appears ad hoc to me.”
He pointed out what he perceived as a “carrot and stick” strategy of the government. A separate press release had been put out by the I&B Ministry on Friday stating that digital media companies––presumably those that do apply for and receive FDI approval––will also be able to avail of certain benefits, including PIB (Press Information Bureau) accreditation for its journalists and also eligibility for digital advertisements through the Bureau of Outreach and Communication of the ministry.
“Similar to self-regulating bodies in print and electronic media, entities in digital media can form self-regulating bodies for furthering their interests and interaction with the Government,” the press release added.
A report in Wire said that so far, “the government has not been giving PIB accreditation to digital media companies which are wholly Indian owned and do not have FDI.” It added: “As for the formation of self-regulating bodies, the government does not have the power to prevent any group of companies in India from forming an association so it is not clear what ‘benefits’ the (I&B) ministry is offering by saying digital media companies with FDI can also do so.”
Controlling Digital News Media?
Co-founder of Newslaundry Abhinandan Sekhri told NewsClick: “It’s laughable that the notification has used the word ‘liberalise.’ Calling a retrograde and prohibitive policy prescription liberalisation, is akin to the ‘let’s-change-the-name’ mantra of the government and pretend a problem has been solved. It doesn’t hide the attempt to restrict news media or change the damaging implications. This disincentivizes anyone from registering digital news entities in India.”
He added that the new FDI policy was a “huge blow to the digital news ecosystem” in the country and considered it “ironic” in view of the Narendra Modi government’s much-touted “Digital India” slogan. Sekhri said the slogan is “hollow… with policy going the other way.” He asked: “How are Indian companies on a level playing field with foreign news publications which have access to the Indian market (and foreign funds) unless our government plans to go even further and block foreign news portals––China style?”
Given that there are no entry barriers for the digital news media unlike for broadcast companies, Sekhri said that this was not how the Prime Minister’s dream of the Indian news media going global would be realised. “I find it bizarre that this unfortunate ‘clarification’ has not been called out by news media bodies who claim to represent the digital news ecosystem,” he stated.
Prabir Purkayastha, editor, NewsClick said that the new FDI policy is obviously to target digital media, sections of which have carried news that the government does not like. He argued: “The instrument chosen, of a 26% cap on foreign investments in digital media, looks strange as the current policy allows up to 49% foreign holdings in television companies. If restricting ownership of news channels––print, TV, digital news––to largely Indians was the aim, why the difference? And making any foreign investment up to 26% dependent on the government’s permission gives (it) a commercial lever against a digital news media company.”
Purkayastha added: “As others have pointed out, these measures may provide a perverse incentive to register Indian news platforms abroad, just to avoid the kind of control that the Indian government wants to assert. That would be indeed unfortunate.”
What is clear is that the new FDI norms appear to be aimed at constraining the working of sections of the digital media even as the government has liberalised foreign investment norms in just about every sector of the Indian economy, including the manufacture of defence equipment and spacecraft. Why this has been done is apparent.