June 10, 2023

Telcos In Trouble: The Government Must Provide Relief

By Sunil Garodia
First publised on 2020-01-21 13:11:18

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Editor-in-Chief of indiacommentary.com. Current Affairs analyst and political commentator.

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The Supreme Court has refused to provide any relief to telcos by dismissing a review petition against its earlier order on the issue of what constitutes adjusted gross revenue (AGR). Hence, the government argument (backed by the terms of the contract) that AGR includes all non-core incomes such as rent, interest and dividend stands. Although Bharti Airtel is reported to be thinking of filing a curative petition, no relief can be expected from it. Hence, the telcos will have to make substantial payments to the government, unless there is a rethink on the part of the government. Bharti Airtel is expected to pay Rs 35,586 crore and Vodafone Idea Rs 53,038 crore. If the telcos have to make such huge payments, at least Vodafone Idea will have to shut shop.

The government needs to reconsider its stand. More than fifty percent of the amount being bandied about consists of interest and penalties. Since the matter was in dispute, the least the government can do is to waive off the interest and penalties. That would bring down the figure substantially. Then, it should allow the firms to pay the revised figure in installments. That would be a fair short-term solution to this matter. Although the terms of the contract mandated income from non-core business to be included in the AGR (and the telcos foolishly signed it despite having highly paid lawyers to advise them), since the licensing was done for the telecom business, ideally only the income earned through the core business should form the revenue to be shared with the government. Even Trai and TDSAT have advised the government to consider the same.

But since firms in India are adept at fudging heads of income and can siphon off substantial revenue to avoid sharing, any long term solution lies in clearly demarcating what will henceforth consist of shareable revenue. The government must also revisit the terms of the contract it signs with telcos, including spectrum usage charge, license fees and pricing. It should be realized that bullying telcos into paying the full amount will change the fundamental structure of the telecom sector in India. A duopoly that might emerge will not be in consumer interest. The government is bent on milking the sector and this has to change.

There are other problems before the government. Several PSUs like GAIL and Powergrid Corporation also hold telecom licenses. If the same rule is applied to them, they would have to shell out more than Rs 2 lakh crore. But if the government exempts them from the payment, telcos may cry discrimination and another round of court cases will follow. Hence, it would be best if the government acts in an even-handed manner by waiving off interest and penalty on the AGR share under demand in the short term and revisits the terms of the contract for a long term solution. Telecom is too vital a sector (especially as Digital India gathers momentum and with 5G and more advanced technologies slated to come in the future)  to be left to arbitrary decisions.