India Thursday opened its doors to foreign radio companies as the cabinet gave its nod to 20 percent foreign direct investment (FDI) in FM radio.

Information and Broadcasting Minister S. Jaipal Reddy said foreign radio companies could come in with Indian partners, subject to their equity cap remaining 20 percent.

Stating that the government would go in for the second phase of expansion of the FM radio network across 90 cities, Reddy asserted that private FM radio would be allowed to broadcast only entertainment, not news.

"We have allowed structural flexibility in foreign investment and are now going to allow 20 percent FDI subject to the existing ceiling," Reddy told reporters after the cabinet meeting.

"The bidding process will start within a month for 330 radio stations and all current players in the FM radio segment will be allowed to bid irrespective of any pending court case."

New players would have to put in a bid and old bidders would have to pay an average of the successful bid as a one-time payment.

Till now, only non-resident Indians, foreign institutional investors and overseas corporate bodies were allowed to invest up to 20 percent in FM radio.

However, private FM players will have to confine themselves to entertainment.

Reddy said: "The government will not allow news to be relayed by private FM radios, only entertainment. We have not applied our mind to permitting news on FM radio -- we will look into it later."

The decision was taken on the recommendation of the Amit Mitra committee and the Telecom Regulatory Authority of India (TRAI).

The government has also proposed to set up a quasi-judicial regulatory authority. Till the time it was brought into operation, the information and broadcasting ministry would act as regulator.

"FM radio will be an employment generator and give opportunity to local talent," said the minister.