The Government has initiated a process to review FDI norms in telecom sector in view of the concerns raised by Essar group regarding possible threat to national security over equity sale by its Hong Kong-based partner Hutchison to Egypt's Orascom.

Last week, Essar had sought clarification from DoT and PMO on whether sale of equity by Hutchison to another foreign firm Orascom, which is alleged to have links with firms in Pakistan, required government approval.

The Prime Minister's Office last week held a close-door meeting with senior officials from Intelligence agencies as well as ministries of Home, Defence, Commerce and DoT, senior government officials said.

The Department of Telecom has now sought views from all ministries concerned and other stakeholders, including telecom operators, on the issue.

Orascom is understood to have some links in Pakistan and this could be a serious issue for India from security point of view, officials said, indicating the issue required a close scrutiny and government would look into it on priority basis.

The government has already extended the deadline for meeting requirements of FDI policy in the telecom sector, which last year allowed foreign equity holding of 74 per cent from 49 per cent earlier.

Officials said telecom was a sensitive sector in most countries and security was a concern whenever a new player comes in. Moreover, now that any investor with 10 per cent stake has been designated as "serious investor" in the company, the government must know who was investing, they said.

"We must have strong guidelines to keep a check... we are looking into it but nothing has been decided as yet," the officials said.

Telecom companies themselves have raised these concerns regarding national security on account of foreign investments coming in the sector, they said, adding this becomes even more important in case of indirect stake in a domestic telecom company when holdings of parent foreign company changes as part of the global mergers or acquisitions.

The government move comes days after telecom providers were given a four-month extension to comply with FDI norms, which required them to disclose all foreign holdings and appoint only Indian nationals as Chief Executive Officers, Chief Financial Officers and Chief Technical Officer.

Essar, which was kept out of the loop about the Orascom deal, had last week shot off letters to Telecom Minister Dayanidhi Maran asking whether sale of equity in an Indian telecom JV by a foreign partner to another foreign company required government approval.

Besides the issue of national security, telecom players have also sought clarifications from the government on whether the norms, which require top executives to be Indian officials, were applicable to companies who did not have foreign holding.

Tatas had recently approached the DoT regarding Tata Teleservices, a closely held group company, in which one of the top executives is a foreign national.

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