The Supreme Court’s decision to reject the petitions of telecom companies seeking an extended duration to pay their hefty dues linked to the adjusted gross revenue (AGR) is yet another example of judicial fixation on form over substance. Indeed, this is the second instance of the telecom industry becoming a victim of this fixation. Eight years ago, in February 2012, the top court had cancelled 122 unified access service licences. The move to cancel the licences was based on the assumption that the 2G spectrum allocation to the licensees was flawed. About six years later, a special court pronounced there was no evidence to suggest that the 2G spectrum allocation in 2008 was a scam.
If in 2012, the vibrant telecom sector
was reduced to a fraction of what it was at its peak, the latest court decision is likely to result in a duopoly scenario — a development that’s worrisome for the industry as well as consumers. If eight years ago, foreign telecom firms such as Telenor, Sistema, and Etisalat had to exit due to an adverse court ruling, Vodafone is facing a similar situation currently. While the UK-headquartered telecom major, in a joint venture with the Aditya Birla group’s Idea, is assessing its dues, it has made it clear that it would be tough to remain a going concern if there is no relief from the Supreme Court on its AGR dues, estimated at more than Rs 50,000 crore. Another telco, Bharti Airtel, faced with an AGR bill of more than Rs 35,000 crore, should manage to pay but its future investments, especially in the upcoming 5G auctions, may suffer.
The AGR issue, which dates back to 1999, when telecom service providers were shifting from the fixed licence regime to a revenue-share model, has now reached a crisis point. The AGR legal disputes across various courts and tribunals since 2003 need a final resolution that is positive for the telecom sector
and consumers. For that, the Department of Telecommunications (DoT) must act decisively and should not distance itself from the crisis, fearing an adverse report from the Comptroller and Auditor General of India or a probe by investigation agencies.
The top political leadership must support the DoT to get the financially stressed telecom sector
back on track. The support should be upfront and on record so that the government doesn’t have to face another humiliation from the judiciary like it did on Friday. A desk officer in the DoT should not be left to fend for himself while the minister argues he or the topmost bureaucrats were not aware of a circular issued by the department saying no coercive action would be taken against the telcos for missing the Supreme Court deadline to pay the dues, as has been the case in the AGR matter. The government has lost precious time, but it can still play its part by stepping in and working out a modality that would save the telecom industry, facing AGR dues of Rs 1.47 trillion, and India’s reputation globally. In addition, it has to stand up for the public sector undertakings which have telecom licences but don’t offer services to third parties, so that no court can ask for an irrational payout that would drag them to bankruptcy.