Supreme Court, Tel Cos and Capitalism - watsupptoday.com
Supreme Court, Tel Cos and Capitalism
Posted 15 Feb 2020 05:56 PM

Watsupptoday

The Supreme Court on Friday (February 14) came down heavily on the Department of Telecommunications (DoT) for issuing a notification last month that asked for no coercive action against telecom companies even though they had not paid the adjusted gross revenue (AGR) dues by the stipulated deadline of January 23.

A three-judge Bench headed by Justice Arun Mishra also initiated contempt proceedings against the telecom companies for not paying the AGR dues.

The court also asked DoT to immediately withdraw the notification which said that there would be no coercive action against telcos.

What does SC order on AGR mean?

The order by the top court means that the telecom companies will have to immediately clear the pending AGR dues, which amount to nearly Rs 1.47 lakh crore.

Vodafone Idea, which has to pay up nearly Rs 53,000 crore, faces the prospect of shutting down the business. This has been said both by its global head, as well as the India head Kumar Mangalam Birla.

Bharti Airtel, which faces a payout of more than Rs 21,000 crore, could also be in trouble for not paying the AGR dues on time.

Other than the telcos, non-telecom companies could also be facing huge payouts individually, which amount to a total of Rs 3 lakh crore.

Case History

The telecom Cos of India ...Airtel, Vodafone, Idea, Reliance were not paying the Licence Fee ever since the grant of Licence since 1994 onwards (by Congress regime). In 1999, the Govt of the day provided them a face-saving and an alibi, by signing a fresh agreement to move to ‘gross revenue sharing’ method, instead of the fixed Licence Fee. This probably was a clever ploy to dodge the system. So, expectedly, disputes raised as to what constitutes revenue, and not a penny paid; despite the fact that the Agreement (these are drafted by Law Min) was crystal clear.

So, successfully consuming decades, they could manage to get an order passed by the TDSAT (the appellate tribunal), to remove several incomes from the revenue; to pay by a percentage of revised ‘adjusted gross revenue’ each year. But instead of paying up, challenged this order also; and to their bad luck, it finally landed up before the SC bench of Justice Arun Mishra, MR Shah. Expectedly, the bogus petitions were dismissed, on 24th Oct 2019. The guys went for a review, which too was rejected on 16th January 2020; ordering them to pay these ‘statutory’ dues by 23rd January. Having exhausted all options, did they pay up? Nothing.

Meanwhile, they managed to get an order passed by a Desk Officer in DOT, putting a freeze on SC’s order? Do you know the sums involved? It’s a whopping ₹1.47 lakh crore. In addition, the Mobile Telephone Operators (not all telcos) were also bound to pay spectrum usage charges (SUC), which also they didn’t pay. Bharti (Airtel) alone owes ₹36000 crores.

Crony Capitalism Explained

Often we see posts saying why is Govt into business, why not sell everything and let pvt sector manage, ... etc. Perhaps some of these articles are based on superficial knowledge about ‘capitalism’; Personally, I’m against any ‘ism’ be it ‘capitalism’ or ‘communism’; it depends upon who’s in control. In this case, Govt issued Licenses only; for spectrum usage. Based on these licenses, the value of their private Cos (not the listed ones) sky-rocketed, fetching billions overnight. The same thing happened in Coal-mine licenses. Who gained, at whose cost? This’s crony capitalism. Be it socialism or capitalism. It’s the corrupt Govts at the root; and the stupid people behind, who don’t realize the dangers of electing the corrupt.

Today Sunil Bharti Mittal says he will pay up ₹10,000 crores within 6 days; the balance before March 17, the day he’s been summoned to court if fails to pay.

In another case, Mukesh Ambani is also not paying up the Govt share of Royalties, on extracting oil from the seabed, for decades (the famous gold plating allegation, by his brother, to the tune of $5 billion) .... dragging to courts, in arbitration, whatnot. This’s plain cheating. Today, Govt has decided to refer a dispute with him, to an expert panel, for recovery of $380 million. At least Reliance has not been awarded exploration contracts in ONGC’s in new round of bidding recently, and he’s being denied permission to sell refining assets to Saudi Armco.

What does this situation mean for customers and lenders?

If Vodafone Idea does exit, an Airtel-Jio duopoly will be created, which could lead to bigger bills, considering it was the cutthroat competition in the sector that made mobile telephony and Internet almost universally affordable.

The AGR issue has triggered panic in the banking industry, given that the telecom sector is highly leveraged. Vodafone Idea alone has a debt of Rs 2.2 lakh crore that it has used to expand infrastructure and fund spectrum payments over the years. The mutual fund industry has an exposure of around Rs 4,000 crore to Vodafone Idea.

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