Can’t have one rule for mining, another for telecom
Given the spate of cement deals that have fallen by the wayside over the past few months—Aditya Birla’s Ultratech called off deal to buy Jaiprakash Associates’ cement plants in Madhya Pradesh last month, as did Birla Corp its deal with LafargeHolcim—over the inability to transfer captive limestone mines, it is not surprising the government is planning on modifying the Mines and Minerals (Development and Regulation) (MMDR) Act that was passed by Parliament last year. Apart from the fact that the country would benefit from these cement plants working at optimum capacity under new owners, the larger problem is that many of the sellers are so debt-stressed, they need to make the sales in order to pay off their debts. While announcing that it had missed an interest payment on its $150 million bond on Tuesday, Jaiprakash Associates said it proposed to pay the money from the proceeds got from selling of a significant portion of its cement business—in other words, selling the plants is also critical if banks, mostly in the public sector, are to be able to get back some of the money they have lent to these groups.
While that is a valid reason for changing the MMDR Act which says that no mines can be transferred unless they have been acquired through auctions, the rules cannot be different for different industries. In the case of telecom, where companies have a mixture of spectrum that was assigned to them by the government on the basis of them achieving certain targets and that which was bought in auctions, the rules are the same as they are in the MMDR Act. If the rights over the spectrum are to be transferred to anyone else, by way of a sale or through the new sharing guidelines or even M&As, the market price of the spectrum has to be paid—on a proportionate basis, depending upon how many years of the licence remain. Certainly, the cement plants remain underutilised if the current owners don’t have the money to operate them at full capacity and, to that extent, national assets are being squandered. But that applies to telecom as well. There are several companies, especially the public sector MTNL and BSNL, that do not have enough customers and so just partially utilising their spectrum—transferring the use of this spectrum, either by way of trading or sharing or by being acquired—is the most efficient thing to do. But this is not taking place since, once you factor in the equalisation fee, the deal doesn’t make any sense. Among others, this newspaper had argued against this aspect of the policy in telecom on grounds that national assets would lie idle, but now that it has been done, it has to be applied uniformly. Scrapping it for telecom will also trigger a spate of deals, though the flipside is there will be that much less appetite for the spectrum the government hopes to auction over the next few years. Either way, that’s a call the government has to take—the last thing it wants is to open itself up to the charge of playing favourites.