MUMBAI: First came the articles questioning the Star News equity structure in India Today and later in The Times Of India. It was followed up by a petition made by virtually all Indian broadcast companies (excepting the Zee Group whose promoter Subhash Chandra is technically a non-resident Indian) demanding a "level playing field".
And finally on Saturday, the government announced it was planning to revise the guidelines for uplinking by foreign news channels from India, to ensure that the foreign 26 per cent equity cap is not circumvented. The information & broadcasting (I&B) ministry has also shot off a letter seeking clarifications on the company's equity and corporate structure.
In a related development, the Economic Times has reported to pre-empt such queries, Star a week ago revived a shell company it had formed in February - Touch Telecontent (India) - to hive off its infrastructure assets like studio, cameras, video and editing equipment. This company will provide all infrastructure support to Star’s uplinking company, Media Content & Communications Services (MCCS) Pvt Ltd. The new entity will be headed by Vynsley Fernandez who until now was a senior vice-president in MCCS.
That the issue had snowballed into one with serious political ramifications can be gauged from the fact that the announcement was made after a meeting that included virtually the "who's, who" in the government. Present at the meeting were Prime Minister Atal Behari Vajpayee, deputy prime minister LK Advani, finance minister Jaswant Singh, external affairs minister Yashwant Sinha, law minister Arun Jaitley, information and broadcasting minister Ravi Shankar Prasad and PM's principal advisor Brajesh Mishra.
Prasad was quoted in media reports as saying, "We will hold consultations between various ministries with a view to revising guidelines to ensure strict compliance of foreign equity clause both in letter and spirit by foreign channels in news segment."
Prasad also added that the government would work out a structure that offers a level-playing field to all channels (both Indian and foreign) in tax structure.
Rather late in the day it would seem, but te I&B ministry has now questioned how MCCS, with a paid-up capital of Rs 100,000, is meeting its expenses of hiring satellite and transponders for over Rs 25 million, besides incurring staff and other newsgathering expenditure.
Questions have been raised now about why Star, with just 26 per cent equity holding, remains the controlling shareholder. An explanation has also been sought on the constitution of its board of directors. "Two directors K Dalal and Ajay Kishor Sharma are employees of Star TV," the letter to Star says, according to the Hindu Businessline. Kumarmangalam Birla's Applause Entertainment (which has reportedly pulled out from the venture) has only one director, the minority shareholders having 25 per cent have one representation while Hemendra Kothari of DSP Merrill Lynch has no representation.
Among the specific questions Star has reportedly been asked to provide are: 
*Total projected turnover for the next five years and source of funding for this turnover. 
*Funds flow statement of last year and next five years.
*Loans proposed to be taken to fund the operations for any other purpose and also details on whether it will be from Indian or foreign equity. 
*Operational costs regarding staff employed and equipment costs. 
*Share holding of Star News Broadcast Limited (SNBL).
*Who is the present owner of Star News, and who will own it once proposed investments are made and the company's structure firmed up. 
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