DoT to finally rationalise penalty norms for telecom companies

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Sanjay Singh | January 03, 2015 4:24 AM

After dilly-dallying for more than a year, the government appears to be moving ahead on rationalising penalty norms for telecom companies...

After dilly-dallying for more than a year, the government appears to be moving ahead on rationalising penalty norms for telecom companies, where penalty for violations will not be automatic and financial penalty will be dealt on a case-to-case basis with technical and financial checks.

The department of telecommunications (DoT) has been heavily criticised by the telecom industry for imposing maximum penalties and fines of Rs 50 crore even for minor violations like absence of placards on mobile towers or late submission of papers.

Member (finance) of DoT, Annie Moraes, wrote to telecom secretary Rakesh Garg last month stating: “With regard to financial observation, it is agreed that penalty cannot be levied automatically and each violation and related financial penalty will be analysed and levied on a case-to-case basis which will involve technical as well as financial examination.

The issue was discussed on December 18, following which Moraes wrote to Garg, raising hope among telcos that DoT would have a new and more rational approach to penalty norms for telecom operators before the commencement of the next spectrum auction scheduled for February this year.

DoT is looking at having a two tier structure, one level on imposition of penalty  and the other for appeal, rather than going for a four-tier structure of penalty imposition and appeal mechanism, as recommended by its access division.

However, in order to safeguard government interest, it would be appropriate to take a reasonable amount of performance bank guarantees (PBG). It was agreed that there should be a provision for cancellation of licence in case of performance violations beyond a point.
DoT has to amend the terms and conditions of condition number 10.2 of  Unified Access Service Licence and Cellular Mobile Telephone Service for spectrum holders. According to this rule: “The licensor may also impose a financial penalty not exceeding Rs 50 crore for violation  of terms and conditions of the licence agreement. This penalty is exclusive of liquidated damages as prescribed under clause 35 of this licence agreement”.

DoT remained indecisive on rationalizing penalties norms on telcos for over a year now.

Telecom Regulatory Authority of India (Trai) in April 2013 had recommended classifying penalty in two categories — minor and major. It had suggested imposition of a maximum penalty of up to Rs 25 lakh in case of minor violation and up to Rs 10 crore for a major violation.

Industry estimates suggest DoT has imposed penalties of Rs 6,850 crore on telecom companies. When DoT imposes a high penalty, telecom operators usually contest it in court. This leads to delay in realization of amount.

Seven leading telcos, namely Bharti Airtel, Vodafone, Idea, RCom, Aircel, Tata Tele and BSNL alone have not paid penalties totalling Rs 2,116.95 crore levied on them for non-compliance of subscriber verification rules that are important for national security, according to a report by the Comptroller of Auditor General.

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