CII, FICCI Bat For Telecom Bailout Package Amid Reliance Jio Opposition
A man stands in front of posters and banners advertising the services of various mobile networks displayed in the window of a store at the Nehru Place IT Market in New Delhi, India. (Photographer: Sanjit Das/Bloomberg)

CII, FICCI Bat For Telecom Bailout Package Amid Reliance Jio Opposition

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Rival industry associations Confederation of Indian Industry and FICCI have written to Finance Minister Nirmala Sitharaman seeking relief for telecom companies, which have been ordered by the Supreme Court to pay up as much as a trillion rupees in past statutory dues.

While Reliance Jio Infocomm Ltd. has been strongly opposing a telecom bailout package at taxpayers' expense, saying the operators have "sufficient" financial capacity to pay dues, CII and FICCI presidents have in separate letters asked the finance minister to address the "precarious" financial position of telcos saddled with a debt of Rs 7 lakh crore and ensure robust competition for vibrancy in the sector.

In a Nov. 19 letter, CII President Vikram Kirloskar sought a revisit the current revenue-sharing business model—where the government is paid a pre-decided share out of the income generated from using the scarce natural resource—and replace it with "competitive and transparent" model that also "address the possible adverse impacts on banks" having exposure to sectors with such business model.

FICCI President Sandip Somany wrote to Sitharaman on the issue on Nov. 27.

"The recent developments on the Adjusted Gross Revenue (AGR) dues of Telecom Service Providers (TSPs) , have triggered a great deal of concern not only to seriously-affected TSPs, but also amongst others who are part of the overall telecom eco-system.

"The precarious financial health of key players in this sector and their massive debt burden (estimated to be Rs 7 lakh crore), threaten not only their individual existence but also the much-needed vibrancy in this sector of national importance," Kirloskar wrote.

The Supreme Court had on October 24 upheld the government position that non-telecom revenue should be included in calculating AGR, a percentage of which is paid to the exchequer as statutory dues. Telcos such as Bharti Airtel Ltd. and Vodafone Idea Ltd. were asked to pay Rs 1.47 lakh crore in past dues within three months.

"In this context, CII urges the Government to consider addressing the situation in a manner which continues the robust competition in the industry and ensures further investments in infrastructure for new technologies," the Nov. 19 letter said.

It went on to say that telecom services are a "raw material" for the rest of the economy serving as a productivity-enhancer for many other sectors.

"A robust vibrant ecosystem of TSPs is critical for some of the key nation business initiatives of the government of India, including the drive towards a less cash-based economy and the larger Digital India programme. In essence, a vibrant telecom sector is in the national interest.

“CII urges government to continue with its policy of encouraging healthy competition in the telecom sector with at least 3-4 strong players, and work towards addressing the issues facing the sector with that prespective. This is essential in the national interest and the interest of the consuming masses," it said.

FICCI in the letter had stated that the apex court ruling not just lead to the collapse of the telecom sector but will also have a cascading effect on several other sectors including power, steel and railways.

It urged Sitharaman's urgent intervention to resolve woes in the telecom sector saying the debt-ridden industry has no appetite left to invest in networks and future technologies.

"...As you are aware, currently the sector is saddled with a massive debt and has almost no appetite to invest in networks and future technologies. Adding further woes to the sector, the recent ruling on the AGR, dues of the telecom service providers will lead to an unfortunate and disastrous collapse of the already battered sector," the letter said.

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