NEW DELHI: The decks have been cleared for the second phase of FM broadcasting in the private sector with the Union Cabinet approving on Thursday a revenue sharing model, in which the emphasis is more on the growth of services than on generating revenue for the Government.

The Cabinet also decided to allow foreign radio stations to pick up stakes in private FM stations within the existing ceiling of 20 per cent of foreign capital. But the ban on private stations to broadcast news continues.

The new policy envisages the starting of 336 FM radio stations in 90 cities, including the 10 `A' class cities. Information and Broadcasting Minister S. Jaipal Reddy said operators would be required to pay only four per cent of their earnings as licence fee, besides a one-time entry fee.

The existing players will be allowed to migrate to the new system, paying the average of the bid amounts for new entrants. The new entrants will have to pay an entry fee according to the bid amount they quote.

Unlike in the first phase, which had an open bidding process — resulting in prohibitive bid amounts queering the pitch for the sector and thereby restricting its growth — the Government has now opted for a closed bidding process.

"We will not blacklist any player on the basis of on-going litigation. There are a number of disputes on account of the problems that occurred during Phase I. Without prejudice to the interests of both the Ministry and the operators, we are going to allow everyone to participate in the bidding process. Much of the cause for litigation will now disappear," Mr. Reddy said.

As for foreign investment, the Government would allow foreign radio stations pick up the stakes.

Earlier, investments by non-resident Indians, overseas corporate bodies and portfolio investments by recognised FIIs were permitted.

Asked whether FM stations would be allowed to broadcast news, the Minister said they would be permitted to air only entertainment programmes.

Sources in the I&B Ministry said the Home Ministry was not in favour of lifting the ban as yet.

Though the policy for Phase-II of FM broadcasting has been framed on the recommendations of the Telecom Regulatory Authority of India and the Amit Mitra Committee, no company can have more than 15 per cent of radio stations on offer and cannot operate more than one station in each city. The TRAI recommended a ceiling of 25 per cent.

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