Middle path required over telecom dues

The fact is even without this judgment, telecom, one of the fastest growing sectors in the past and with the potential to add at least two lakh jobs a year, is today in a shambles.

The decision by the Centre not to place pressure on any of the telecom operators to pay up their dues to the government till the Supreme Court hears a bunch of pleas on the issue is a welcome measure. After last week’s SC verdict in which it refused to take a relook at its earlier judgment upholding the calculations of the tax department, telecom operators had till Thursday to shell out around `92,640 crore in back taxes. While this money would have been a boon to the Centre that is facing a huge shortfall in tax collections, it would have also sounded the death knell for large sections of the industry. The government has agreed not to take any coercive action for now.

Vodafone Idea alone would have had to cough up over `50,000 crore, which analysts say would have forced the firm to wind up its Indian presence, leaving thousands of employees and vendors in the lurch. Bharti Airtel, which has to pay `35,586 crore, and a number of non-telecom firms would have also slipped into the red, threatening jobs, operations and future businesses. Such a situation would not be exactly comforting for the banking sector that has a loan exposure of over `3 lakh crore to telecom firms. Nor could it be good news for the Indian consumer as pricing could then be decided in a near monopoly scenario.

The fact is even without this judgment, telecom, one of the fastest growing sectors in the past and with the potential to add at least two lakh jobs a year, is today in a shambles. This is due to a combination of regulatory pressures, high-cost structures and a vicious rate war that has left behind just three companies in the fray. There is talk now of the government agreeing to a staggered payout of dues by these firms with the interest being waived. This might be brokered under the aegis of the SC or in an out-of-court settlement by the Centre. If such a middle path is taken, as it should be, the government may be able to save the goose that lays the golden egg, while still extracting its pound of flesh.