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Top India court tightens screw on telcos

The Supreme Court's action follows similar notices sent to the firms by the telecoms ministry.

January 10, 2011 12:29 by

India’s top court on Monday asked several telecoms firms, including the local units of Telenor  and Etisalat, why their licences should not be revoked, adding to regulatory uncertainty in the sector.

A bench comprising justices G.S. Singhvi and A.K. Ganguly ordered notices be sent to the firms to respond to a petition seeking cancellations of the licences after the state auditor said they were not eligible for the licences they got in 2008.

The Supreme Court’s action follows similar notices sent to the firms by the telecoms ministry.

The scandal has deadlocked politics in Asia’s third largest economy after the auditor estimated India may have lost $39 billion in revenue due to improprieties during the grant of licences. The telecoms ministry has said the process was likely flawed but rejected the loss estimate.

Investors are closely following the row, which is seen as a test case of how stable business contracts and government regulation is in India and any cancellation of licences would be a negative for foreign investments.

Earlier in January, Telenor Chief Executive Jon Fredrik Baksaas said he was concerned over his firm’s India operations, adding the country’s attractiveness for foreign investment could be be damaged by the protracted row.

The scandal is only one of the several woes the Congress-led coalition government is facing, including high food prices and internal rebellion. The firefighting has left it little time for policymaking and for pushing much needed economic reforms.

The state auditor’s report forced a telecoms minister to resign and the main opposition Bharatiya Janata Party has vowed to block the February budget session of parliament if the government does not set up a joint parliamentary committee to probe the case.

(Reporting by R. Venkatraman; writing by C.J. Kuncheria)

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