$30 Billion and Counting: Telecom Levy Rises for India Firms
(Bloomberg) -- Indian Prime Minister Narendra Modi’s government is seeking at least $30 billion in overdue telecom fees from mobile-phone service providers to energy companies and fertilizer makers as it struggles to meet its budget deficit target with economic growth foundering.
Gujarat Narmada Valley Fertilizers & Chemicals Ltd. on Wednesday said the telecom ministry has ordered it to pay 150.2 billion rupees ($2.1 billion) by Jan. 23, more than 20 times the company’s annual profit. This follows a $3 billion demand from Vodafone Group Plc’s Indian unit, another $3 billion from Bharti Airtel Ltd., and reports that GAIL India Ltd. has been asked for $24 billion.
Modi must arrest a deterioration in public finances if he’s to
boost spending and stimulate an economy that’s slumped to a
six-year-low. India’s budget deficit hit 115% of the full-year
target with four more months to go. A Supreme Court verdict is helping the government in its hunt for funds –- at least from companies that bought any form of telecom licenses.
“The emphasis on non-tax revenue is not surprising given weak tax collections,” said Priyanka Kishore, head of India and south-east Asia economics at Oxford Economics in Singapore. “If current trends persist it is likely that the Modi government’s fiscal deficit target will slip to 3.7% of GDP” in the year ended March 2020 compared with the 3.3% target.
Gujarat Narmada said it will seek legal advice in the matter, which pertains to licenses for satellite phones and internet services held between 2005 to 2019.
GAIL India is also facing a 1.7 trillion rupees demand, Press Trust of India reported Dec. 22 without saying from where it got the information. GAIL hasn’t done business under its internet service provider license and there is no amount payable, a representative said by email on Thursday. Vodafone’s local unit in December said it will cease operations if it doesn’t get government support.
“It’s too soon to say how large” the ultimate payout could be and over what time period it could be transferred to the government, said Anubhuti Sahay, head of South Asia economic research at Standard Chartered Plc in Mumbai.
Modi’s administration has been asking companies with telecom licenses to pay dues after the nation’s Supreme Court said it can take into account a firm’s entire revenue for calculating licensing fees.
Gujarat Narmada is a joint venture by the government of the western Indian state of Gujarat and the Gujarat State Fertilizers & Chemicals Ltd., according to its website.
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