For all the liberalization of the Indian economy, bewildering efforts like this are still the rage amongst some regulatory agencies in India. Of course, taxation is the central focus:
According to official sources, foreign players such as Skype, in addition to disturbing the level-playing field for bonafide licensees, were also causing great revenue loss to the government as they did not pay the 12% service tax and 6% revenue share on internet telephony. Sources said DoT was keen to implement this move on security grounds too. Foreign service providers could be a “serious security threat as they did not come under any Indian regulator and policy framework,” they added.