India's private telecom operators appear punch-drunk having reported collective losses of over Rs 1 lakh crore as of September 2019.
Telcos are already frail and furious due to excessive taxes and an insane tariff war, and the recent Supreme Court order on Adjusted Gross Revenue (AGR) mandating them to cough up over Rs 1.3 lakh crore caused them a near brain death.
So the government is left with a brutal binary choice: give relief or let the only two surviving incumbents (Airtel and Vodafone Idea) go belly up further denting business confidence and deepening the credibility crisis.
If critics argue that recovering dues is a desperate act by the government to fund its resource-constrained coffers, it can be equally said that telcos' playing victim is like putting a gun to the government's head, deviously capitalizing on an inopportune moment when the country is coursing through one of its worst slowdown phases.
As such the litigation itself was 14 years old and the sum to be submitted didn't emerge out of thin air. If anything, telcos should be slammed for non-compliance to standard accounting practices and for not making adequate provisions and keeping shareholders in the dark.
Until the June quarter, Airtel and Vodafone Idea provisioned as little as Rs 9,779 crore and Rs 17,124 crore respectively, which was way too short of the Rs 92,000 crore they together owe towards AGR. The set-aside sum also included dues of spectrum usage fee and not solely for AGR.
Interestingly, the principal amount telcos need to pay to comply with the SC order comprises just about a quarter of the total sum outstanding, while interest costs, penalty and interest on penalty (due to non-payment) are much higher.
Companies, which first delayed paying the exchequer its due, are now seeking waivers and the government considering the industry's interest may write off penalties, but any relaxation such as allowing another 10 years time to pay the principal that's already behind schedule for well over a decade may set a bad precedent.
"Telcos deliberately delayed payment of dues but given the ongoing litigation, they should have made necessary provisions," an independent telecom analyst, told Express.
Curiously, the telcos' financial stress narrative has been going on for long. On its part, the government (UPA included) did take the 'boots off the industry's neck' in the past and it's this relief that helped the industry's gross revenue grow from Rs 4,885 crore in FY04 to Rs 2.3 lakh crore in FY15.
Private players' steady rise during this decade also decimated BSNL's near-monopoly and more recently, several smaller players folded up under intense competition, but that didn't prompt a government rescue act. Now, bailing out the two surviving telcos seems simplistic to avoid a deeper crisis, but such a move could be shortsighted and may seem partial and unjust to those who succumbed due to market forces.
Probably, a lesson can be learnt from Iceland, which took an unpopular and unconventional route allowing three of its large banks to collapse during the 2008 financial crisis causing adverse impact. Yet, Iceland stuck to its guns and now a decade later, the move appears right with the country doing better than Europe and other developed nations like the US who bailed out large lenders to avoid systemic collapse but continue to teeter on the edge, let alone stage a good recovery.
It's not that the Indian government is totally abandoning telcos waiting in the departure lounge. Recently, it gave a much-needed relaxation regarding inter-connect usage charges. Besides, a committee of secretaries is considering more sops for licence fee and spectrum usage charges. The share on AGR itself saw two revisions and is now down to 8 per cent from 15.
The government also took a lenient view in 2017, when the CAG reported that six telcos including Airtel, Vodafone and Idea were under-reporting revenue causing Rs 7,697 crore loss to our coffers.
Telcos do have non-core assets to dispose of and raise monies to honour payments. Those who cannot should suffer the consequences of their own actions.