NEW DELHI / MUMBAI: There is just no let-up for the team handling the Indian operations of Rupert Murdoch's Star TV. After Star News, the latest to be hit by the government with a list of questions regarding equity structure is Music Broadcast Pvt Ltd (MBPL), the company that runs Radio City.
The information & broadcasting ministry has asked MBPL to explain its relationship with the Star India subsidiary Digiwave and how and why the relationship should not be deemed to be flouting the foreign equity restrictions in the FM radio sector.
As per current records, content, ad sales and marketing support for Radio City is Star India's responsibility. The PK Mittal-promoted MBPL is the licence holder while the operational part is with Digiwave, a 50:50 JV between Star and the Ispat group.
According to Reserve Bank of India (RBI) guidelines only portfolio investments by foreign institutional innvestors (FIIs) are allowed in the FM radio sector.
Pointing out that the debt equity ratio of MBPL is 5800:1, government sources said today that MBPL may be asked to provide details of the nature of its relationship with Digiwave.
The government has further stated that as per Clause 13 of the FM radio licence agreement, a licencee (MBPL) cannot transfer the licence and is responsible for generating the content. If it comes to light that this is not happening the licensor (the government) has the right to cancel the licence.
When contacted, Star India's radio division COO Sumantra Dutta said he was not aware of any such move on the part of the government.
The government missive to Star also points out that the paid up capital of MBPL being very low, it is rather curious how the operational costs of running an FM channel the size of Radio City is being managed.
The government has also said that since Digiwave has given a loan of Rs 580 million to MBPL, it appears that Digiwave is the company that is solely responsible for running Radio City.
In the light of all this MBPL has been asked to furnish details on which an opinion would be sought from the law ministry and the Department of Company Affairs (DCA) to examine whether the guidelines are being contravened or not.