Former finance secretary Subhash Chandra Garg has called the state of the telecom industry in India ‘broken’. In an extensive blog post, Garg writes that the industry faces four problems beyond the obvious one of the massive AGR dues its players are now liable for.
These problems have put the sector into a crisis worse than the one the industry suffered in 1998, according to Garg.
“While the telecom service has become almost universal in the country and the prevailing tariffs in India are possibly the lowest globally, the businesses which deliver these services are quite broke. The telecom business is in bigger crisis that it was in 1998. Vodafone-Idea is sitting on the edge of precipice- to get into the ditch of bankruptcy any day,” he writes.
Garg warned of the industry descending into a duopoly where only Airtel and Reliance Jio are the primary players, as Vodafone-Idea approaches bankruptcy and BSNL/MSNL face appearing to be on their 'death bed’. Saying that BSNL/MTNL are hurtling towards eventual shutdown, Garg argues that the expensive revival plans for these state-owned companies should be aborted, in favour of other solutions.
“Only justification provided by the Government publicly for such a massive ‘revival package’ is that these two companies are ‘strategic’. No more details of what kind of ‘strategic’ interest these two companies are serving and why a revival package of Rs. 70,000 Crore is the right strategy to serve this strategic interest have been provided either. It is difficult to think of what such a strategic interest could be. If it is providing some secure lines of communications to Government officials, there are surely several other better technical solutions which can secure this strategic interest at a fraction of the cost of proposed investment,” he writes.
Garg’s suggestions were to have the government offer a one-time settlement scheme to telecom companies (including those that are already under resolution), encourage the transfer of spectrum from telecom companies that have closed or are closing shop by discarding AGR-based fees on the value of spectrum to be sold, abort the revival plan of BSNL and MTNL and make the cost of 4G spectrum (which BSNL has yet to tap into) affordable and encourage investment in 5G services.
Garg served as the Economic Affairs secretary of India between July 2017 and 2019, while he served as Finance Secretary between March and July of 2019. Garg said he had an 'unceremonious' exist from the finance ministry on account of his 'bold and unconventional' decisions. Garg announced that he would be taking his voluntary resignment after he was shifted from finance to the power ministry—a move that was seen as a demotion.
His suggestions come on a day when Vodafone Idea chairman Kumar Mangalam Birla and Bharti Airtel chairman Sunil Mital are both meeting with Finance Minister Nirmala Sitharaman.
