Photo: Mint
Photo: Mint

Opinion | Govt has to ensure digital India does not miss the bus

If the government reviews the levies on the operators, it might soften the blow on the industry

The telecommunications sector in India has been one of the most progressive in the world, in terms of both development and outcomes. Riding on increasing mobile penetration, declining tariffs, increasing competition, and the evolution of wireless technologies, telecom has surged ahead of other infrastructure-heavy sectors. This success can be attributed to a large addressable market coupled with substantial private sector participation, technological innovations and an enabling institutional and regulatory environment.

This juggernaut was stopped in its track by a judicial pronouncement in 2012, when the Supreme Court ordered the cancellation of 122 telecom licences in the 2G scam case.

Barely had the sector recovered from the cancellation of licences that it had to weather a phase of hyper competition unleashed by a new entrant. The after effects are there for everyone to see—rapid consolidation led to a virtually 3+1-player market (from 14), bankrupt telcos, lakhs of lost jobs, red balance sheets and worried lenders/investors. And, just as there was some optimism around the industry settling down and repairing itself, the Supreme Court judgement on licence fee and spectrum charges has taken away all those hopes, pushing it into an unprecedented crisis.

It is anybody’s guess where the industry will drift from here, given the precarious financial position of the operators. Will we see more operators folding up and more job losses? In fact, the recent judgement also affects several companies that hold ISP, national long distance or international long distance licences, or are MSO/cable operators.

In the judgement, the apex court held that the definition of gross revenue mentioned in the licence agreement is sacrosanct and cannot be reviewed or decided by Telecom Disputes Settlement and Appellate Tribunal (TDSAT) or Telecom Regulatory Authority of India (Trai). It held that the “gross revenue of the licence" is equal to the “total revenue of the licensee company". It said all revenue arising out of non-telecom activities has to be classified as “miscellaneous revenue" and included in the total revenue of the company.

The definition of revenue is same for all telecom licences. Therefore, all companies—such as GAIL, Power Grid, RailTel, Delhi Metro, Oil India Ltd—that have taken the telecom licence for their own captive use, and not for commercial purpose—and whose revenue from telecom operation is actually nil— would also be liable to pay huge sums as licence fee on the revenue earned from its main, non-telecom, operations.

Back of the envelope calculations suggest that the impact could be upwards of 2 trillion on these non-telecom entities alone, in addition to the 93,000 crore for mobile operators.

DoT can waive these charges, fully or partly. But if it decides to go ahead and recover these charges from all operators, the industry will face an unprecedented crisis.

Can we afford the ripple effect of this Supreme Court verdict at a time when the economy seems to be in the slow lane with job creation a massive challenge?

Considering the importance of telecom services in the overall development of the country, Trai always held that revenue from operation of non-telecom services should not attract licence fees. It recommended it to the government in 2006 and in 2015. But to fulfil its objective to maximize revenue, the mandarins in the department of telecommunications have not acted on the recommendations of the regulator. Now, sensing this crisis, the government has created a committee of secretaries to look into the issue. Let us hope the government reviews the levies on the operators. This might soften the blow on a promising industry.

My considered view is that considering the importance of this sector, the government should take a holistic view, so as to ensure Digital India does not miss the bus.

Sudhir Gupta is former secretary, Trai.

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