NEW DELHI, Aug 4: Koshika Telecom, a Usha group company, has failed to get the union government's clearance for bringing in Alcatel CIT of France and a clutch of foreign investors as equity partners for cellular telephone services.

This is the second proposal of the company to be rejected by the government in less than two months. This is a setback for the Usha group which has been trying to raise money from foreign sources.

Koshika holds the cellular service licence for Bihar, Orissa and Uttar Pradesh (east) and had received foreign collaboration approval for a joint venture with Philipino Telephone Corporation. The government approved a 34 per cent foreign equity in the paid up capital of Rs 100 crore with the non-resident Indians' equity of 5 per cent.

The company approached the Foreign Investment Promotion Board (FIPB) for the allotment of zero interest, fully convertible debentures worth Rs 310 crore to Alcatel (Rs 3 crore), NRI Consortium (Rs 16.50 crore), US Investment Investor (Rs 31 crore) and other foreign investment companies (Rs 70.40 crore).

Besides, the company had also proposed to reduce the equity capital from the approved Rs 100 crore to merely Rs 2000 with foreign equity participation of Rs 300. The equity capital would increase subsequently since the FCDs were proposed to be converted into equity by December 31, 1998.

The first proposal was rejected by FIPB at its meeting on May 31 on the ground that the original holders are getting replaced which is not permissible under the Telecom Policy.

The company, however, approached FIPB again towards the end of June with an argument that by issuing fully convertible debentures that would be converted into equity at a later stage neither the terms of the Telecom Policy were being abrogated nor were any of the original approval holders replaced.

Copyright © 1997 Indian Express Newspapers (Bombay) Ltd.