Chennai, July 21: DMK chief M Karunanidhi, whose party had quit the Congress-led UPA early this year, has opposed Centre's hiking of FDI cap in certain sectors, including Telecom and Defence, saying it may not augur well for the government ahead of next year's Lok Sabha elections.
"Centre's prescription to address the grim economic situation would only lead to "side-effects" and result in manifold problems," he said.
In big-ticket reforms push, the UPA government on Tuesday decided to hike foreign direct investment (FDI) in a dozen sectors, including 100 per cent in telecom and higher caps in insurance and defence sectors, to boost the sagging economy.
"Centre allowing 100 per cent FDI in Telecom would allow foreign companies to take over complete control of joint venture initiatives with Indian firms, leaving the latter with some little foreign investment in the lurch," he said in a letter to partymen.
State-run BSNL was already incurring losses for the past few years, he said quoting statistics.
"But our Central government has opened up avenues for revenue generation for foreign companies," Karunanidhi said.
On the insurance front, the Centre had opted for a "short-cut" to increase FDI cap to 49 per cent from 26 per cent despite a Parliamentary Standing Committee's recommendation against it and if that be the case what was the need for a standing committee at all, he asked.
At a high level meeting chaired by Prime Minister Manmohan Singh, it was decided to raise the sectoral FDI cap from 26 per cent to 49 per cent under automatic route under which companies investing do not require prior government approval.
A Bill to raise FDI cap in the sector is pending in the Rajya Sabha. Karunanidhi said countries like US, France and Canada had capped their FDI limit at 35 per cent in Telecom sector and asked why it was being increased in India.
He said that one cannot ignore national security-related apprehensions if foreign firms dominated the Telecom sector.
With reports of US snooping on Indian through the internet, "one cannot think what this decision will result in," he said.
He asked if Centre was only concerned about foreign firms and not about domestic companies by taking the latest FDI decisions.
Admitting that certain steps were required for addressing the current account deficit and depreciating Indian rupee, he however said that the "medicine proposed by Centre will not help mitigate the decease (but rather) result in side-effects and make the problem manifold."
"Further, with parliamentary polls scheduled next year, one has to consider if Centre has to take such strong steps as they will make an impact. Especially, it will allow manufacturing of defence equipment landing in private control. DMK totally opposes Centre's decision on FDI," he said.
