Banks take a 50-60% haircut on loans & taxman cuts its demands to settle cases; do the same in telecom sector
The Supreme Court’s (SC) AGR verdict that was supposed to give the government a windfall of Rs 1.4 lakh crore from the telcos and another Rs 3+ lakh crore from non-telcos is rapidly turning into a nightmare. Asking PSUs, primarily, to pay Rs 3 lakh crore would have wiped out many of them, and the SC has given them a possible way out by staying their dues till Tdsat rules on this. And, with Vodafone Idea not able to pay the Rs 53,039 crore it owes, it is becoming clear that the government could be an even bigger loser; firms like RCom, which owes Rs 20,434 crore, are, in any case, not in a position to pay, nor is BSNL-MTNL, which owes Rs 8,112 crore.
The government is facing two types of losses, apart from the big hit that India’s image as an investment-friendly destination will take if a firm that has invested $55 bn shuts down primarily due to poor government policy. For one, Vodafone Idea owes the government Rs 1.6 lakh crore in deferred spectrum dues; once Vodafone Idea shuts, the government may or may not get the spectrum back—the issue is under litigation in another case—but, even if it does, it can never sell this at the valuation it did in the past. apart from this, Vodafone Idea owes banks, several of them PSUs, Rs 49,000 crore, and much of this will also need to be written off if the telco goes to the insolvency courts.
There were several solutions available to the government, from asking the SC that it be allowed to set a schedule for the payments (this ship has, since, sailed given how angry the SC was at the last hearing) to scrapping the licence fee and spectrum usage charges (SUC) since spectrum is being sold at market prices, unlike in the past. Also, given the spread of rural telephony, especially by the private sector, there is absolutely no justification for a 5% SUC/USO charge on telco revenues that is supposedly to be used for spreading rural telephony. Indeed, the government should put out the numbers on how much has been collected under the USO and how much has actually been used for rural telephony over the years; a large part of the latter has, as it happens, also been given to BSNL, ostensibly for rural operations, but for all practical purposes, it is just a PSU subsidy.
While the government is unable to come up with a quick solution due to the likelihood of it being tagged suit-boot-ki-sarkaar, it should keep in mind that it is making huge concessions in other areas anyway, but no one has alleged favouritism of any sort. The Vivad se Vishwas scheme offers huge cuts as the penalty and interest is completely waived off and, in many cases where the taxman has lost the case at one level of appeal, even the principal tax is to be cut by half. In the insolvency courts, government-owned banks have received just around 40% of their outstanding dues in the 12 largest default cases and, in several cases, the haircuts are even larger at around 85-90%. If the government can take such huge haircuts because it makes business sense to do so, why is the same not being done in the case of the telecom AGR dues?