India markets closed

Telecom crisis not limited to AGR; former finance secy Subhash Chandra Garg lists troubles in sector

Kshitij Bhargava

With all but three private telecom companies, having abandoned their operations in India and government players like BSNL and MTNL being just pale shadows of what they were in their heydays, India's telecom business is in a bigger crisis than it was in 1998, said former finance secretary at the department of economic affairs, Subhash Chandra Garg in a blog post. "While the telecom service has become almost universal in the country and the prevailing tariffs in India are possibly the lowest globally, the businesses which deliver these services are quite broke," Garg said. 

The former top government official at the North block, who worked closely with former finance minister Arun Jaitley said that the telecom crisis in India is not limited to adjusted gross revenue (AGR) dues issue of the telecom companies but instead is much deeper. According to Garg there are four major dimensions of the present telecom crisis in India. 

The issues with telecom sector

The first of these, according to Garg, is that telecom business is heading towards a duopoly – with only Airtel and Jio on the scene while the remaining two, Vodafone-Idea and BSNL-MTNL hurtling towards an eventual shutdown. "This has enormous consequences for over 400 million of the customers of Vodafone-Idea and BSNL-MTNL in terms of continuous availability of telecom services and also for competitiveness in the industry itself," Garg said in the blog.

The second problem faced by the telecom sector, Garg said is the closure of telecom licensee companies like Reliance and Aircel, whose networks and spectrum licenses are getting wasted. With most of these companies now undergoing insolvency proceedings, their share of AGR dues also will not reach the government.

Garg further adds that the third problem is the government's proposal to put in over Rs 70,000 crore to revive BSNL-MTNL. "With the country facing massive economic slowdown and fiscal situation being very tough, is it at all advisable to spend so much money for a revival which is unlikely to happen and would leave the country only with a massive bill?" he asks.

The fourth problem that Garg lists in his blog is the advancement of technology with 5G services. "It would leave country behind by decades if India were not to get on to the 5G bandwagon on account of illusory reserve price fixation," Garg said.

A word of advice

Garg, who was India's finance secretary till July 2019, opined that a one-time settlement scheme to pay the principal due amount as per the AGR definition as contained in the licensing agreement and waive the penal interest and penalties should be offered to telecom companies. "Abort the revival plan of BSNL and MTNL. There is no advantage in sinking so much of the tax-payers money in creating a new 4G network for BSNL and MTNL," he adds.

Vodafone-Idea paid, Rs 2,500 crore a part of their AGR dues on Monday while Bharti Airtel has paid Rs 10,000 crore. Airtel has said that it will pay the remaining amount before March 17. The telecos initiated payments after the Supreme Court refused to grant them any relief on AGR dues. Interestingly Garg, in his blog points out that, the saviour of 1998– the revenue sharing regime- is ironically proving to be a trouble for the telecom companies.