New Delhi: A key component of Mukesh Ambani’s plan to make Reliance Industries free of net debt by early 2021 is hanging fire as officials raise questions over the structuring of an FDI proposal in Reliance Jio worth Rs 25,000 crore.

At stake: Reliance Jio’s divestment of its tower infrastructure business to Canada’s Brookfield, which sources say has been pending completion for nine months as the home ministry and department of telecommunications have not granted final approval.

Though India has a policy of welcoming more foreign direct investment, and the Reliance group is believed to have a good equation with the government, the manner in which Brookfield’s proposed FDI infusion of over Rs 25,000 crore in Reliance Jio is structured has triggered scrutiny with officials reluctant to sign off without greater transparency from the stakeholders.

Earlier this week, there was excitement over Facebook pumping nearly Rs 45,000 crore into Jio for an almost 10% stake. Besides building potential synergies with Facebook, the news of Reliance Industries being able to partially deleverage its large debt created huge interest in the RIL stock.

On the same day that the Facebook-Jio announcement was made though, the Economic Times reported how the Brookfield deal has yet to be cleared by the government even though nine months have passed since the announcement had been made by both companies.

However, the ET story did not give any reasons as to why the government had delayed this huge foreign capital inflow of Rs 25,000 crore.

Sources with direct knowledge of the matter told The Wire that there are two major reasons why the government has not yet granted final approval.

Also read: Four Reasons Why Facebook is Buying a Nearly 10% Stake in Mukesh Ambani’s Reliance Jio

The first reason is that the original proposal came from Brookfield Infrastructure, which specialises in global investment in real estate and infrastructure, and involved the infusion of Rs 25,000 crore routed via multiple entities in Singapore and apparently Bermuda. In Singapore too, the money was routed via three layers of entities to be eventually invested into India via a trust called Tower Investment Trust (TIT). And the administration of this trust was shifted to the jurisdiction of Singapore.

The layers of entities in Bermuda and Singapore, The Wire understands, made officials in both the home ministry and DoT uncomfortable as to the transparency of the deal. Though legally-speaking, foreign investments can be routed through tax havens, Prime Minister Narendra Modi had publicly stated, as part of his larger drive against black money, that tax havens must become more transparent in declaring the beneficial ownership of the layers of entities through whom funds are routed. Indeed, this was part of India’s commitment at G-20 which the PM himself had articulated on several occasions in India and abroad.

Given this backdrop, officials at both the home ministry and DoT are apparently uncomfortable with the structuring of the FDI proposal.

Another problem with the proposal is that one part of it appeared to be in the nature of debt dressed as FDI. So, initially the FDI of Rs 25,000 crore from Brookfield was structured as debt with a 15% interest outgo. The government felt the interest rate was rather high and would lead to big outgo every year from India. Besides, the DoT, the administrative ministry with a mandate to clear the FDI proposal, argued that any debt application must be examined by the external commercial borrowing (ECB) division of the finance ministry. This point was also raised by the home ministry.

Subsequently, sources say, RIL’s management responded to some of these issues and made changes. The structuring of the initial proposal was modified with the interest rate brought down from the 15% originally stated to 9% per annum.

The Wire has sent a questionnaire to Reliance Jio asking for its comments on the delay and this story will be updated when a response is received.

Still, officials say that the basic nature of the proposal remains a little complicated and may need the Prime Minister’s Office to weigh in and take a final call.

The Economic Times also reports that some of the non-sponsor investors/unit holders that Brookfield had commitments from – like the Public Investment Fund of Saudi Arabia and GIC of Singapore — may have also caused some delay in granting approvals as security clearance is needed with regard to foreign investors.