The Indian government has begun preliminary work on crisis plan for the troubled telecom industry, taking into consideration interest of millions of mobile subscribers and business enterprises and to make sure that telecos sail through the difficult period. The department of telecom (DoT) is hopeful of working out a formula to pull the beleaguered players out of the crisis. The collapse of any major telecom company would result in chaos. Mass-scale shift of subscribers, millions of porting requests, and even closure of telecom and internet lines of businesses (leased lines) that range from top corporate houses and MNCs to ride-hailing companies and online retailers are feared in the worst scenario.
India’s biggest service provider Vodafone Idea, with 300 million mobile subscribers and a long list of business enterprises as customers, appears to be in a very tight spot now with the Supreme Court making it clear that companies have to pay the AGR dues. Vodafone Idea has so far paid about £ 680 million. With its current outstanding is around £5.15 billion, amid it already crippled operations. The company has made an SoS for the bailout package.
The deadline set by the SC is a challenge for other operators. Within over two weeks, by when the SC hears the matter, Airtel is required to cough up around £2.50 billion, over the £1.8 billion that it has paid. The plausibility for raising fresh finances in a short span of time remains questionable and doubtful.
Sources in DoT have maintained that it fully understands incapability of handling sudden and large influx. A contingency plan is needed to avoid chaos. The DoT official say none of the existing private companies, including Tata Services, Reliance Geo have got additional infrastructure to handle a large influx.
Expert group to look into the row
The huge differences between the outstanding payment sought by the DoT and those claimed by telcos has compelled the Indian government to form an expert group to decide over £8.23 billion disputed AGR (adjusted gross revenue) dues. It has been learnt that the group will look into the matter in order to create an opinion acceptable to all the parties involved. The need to form the group has arisen as the differences in the amounts are mammoth.
The DoT has sought £5.82 billion in AGR dues from Vodafone Idea but the company’s self-assessed puts the dues at £2.15 billion. From Airtel, the department has demanded £4.39 billion while the company claims a self-assessed amount of £1.3 billion. From Tata group, the DoT has sought £ 1.67 billion but the company pegs the self-assessed dues at £2,20 million.
Even as the deadlock over the dues payment and difference in calculations continue, telcos have received a breather from the government. The Union Cabinet has recommended to extended the payment tenure to 20 years. But its implementation is unlikely without the Supreme Court’s go-ahead.
Telcos officials claim many gaps have been ignored in the DoT’s assessment. They said that the department’s claims in certain cases are based on the numbers from the balance sheet instead of the profit and loss account. They also cited computational errors and a faulty mechanism of recognising discounts as reasons for the huge dues claims of DoT.
SC lashes out at telcos, govt
The Supreme Court, meanwhile, has come down heavily on the government and telecom companies for not complying with its order on AGR dues. Refusing any reassessment of the AGR dues fixed by it, the apex court warned them of contempt of court proceedings if the dues were reassessed. The court questioned the government’s formula for a staggered dues repayment option for the telcos spanning 20 years and said the duration was unreasonable. The matter is expected to heard later this month.
The court said it will become a party to fraud if it allowed self-assessment of AGR dues by telecom companies, adding that reopening of the entire judgment cannot be allowed. It warned of actions against managing directors of telecos and government officials if the AGR dues fixed by it were changed.
Arguing for a staggered repayment of dues by telcos over the next 20 years, the government said the economy will be adversely impacted if service providers do not have enough time to pay dues. It asserted that if the companies were not bailed out, the quality of telecom services would take a hit and many jobs would be lost along with a cascading impact on other sectors. Also, the government said, foreign direct investment would also be adversely affected. In October last year, the court had allowed the government to recover the amount as licence fee and penalty along with interest based on the revenue-sharing model from 2004 till 2015.