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Indian Express Explained 14/6/2020

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Telecom sector and Policy Uncertainty  

Source – Indian Express

Syllabus – GS 3 – Infrastructure: Energy, Ports, Roads, Airports, Railways etc.

Context – Rather than be driven by short-term revenue considerations, the government should consider the long-term implications of its moves on the telecom sector.

From license fee to revenue sharing model

  1. Before 1992– Department of Telecommunication had monopoly in providing cellular and internet services before economic reforms of 1991.
  2. After 1992– The Indian government liberalised the telecom sector as per the National Telecom Policy in 1994, under which licences were given in accordance to the Indian Telegraph Act, 1885.
  • Under this law, telcos are required to pay a fixed annual licence fee for licences granted to them. Since fixed licence fee was high, telcos often defaulted on their payments.
  1. After 1999– The government in 1999 announced the National Telecom Policy, which gave these companies an option to migrate from fixed licence fee to revenue sharing fee.
  • As per the new policy, 15 per cent AGR was fixed as a licence fee under the revenue-sharing model, which was later reduced to 13 per cent and then 8 per cent in 2013.

Defining Adjusted Gross Revenue

  1. 2003 – The DoT claimed revenue share from all earnings under the AGR from the telecom companies which included revenue from telecom services as well as non-telecom services like installation charges, value-added services, interest income, dividend, and profit on the sale of assets, insurance claim and forex gain.

The operators (telecoms) suggest that it should include only the revenue from core services.

  1. 2019 – The Supreme Court widened the definition of AGR to include the government’s view.
  2. 2020– The Court has taken cognisance of the telcos’ plea of allowing them to repay their dues over a period but on the condition of providing bank guarantees as securities.

Liability on telecom companies 

  • The total amount due is ~ Rs 1.4 lac crore.

Implication of the Supreme Court Verdict

  1. Effect on other industries– Given the multiplier impact the (telecom) sector has on the economy and various other industries like as internet service providers, satellite communications providers, cable operators and even companies in power, steel and railways sector, it is of critical importance that the sector remains healthy.
  2. Debt ridden telecom sector and Rising NPA– Currently the sector is saddled with a massive debt and has almost no appetite to invest in networks and future technologies. Adding further woes to the sector, the recent ruling on the AGR, dues of the telecom service providers will lead to a disastrous collapse of the sector and steep hike in Non –Performing Assets of Banks.
  3. Impacting overall development including Digital India Policy– The world is witnessing the advent of new possibilities and business opportunities from emerging technologies such as 5G, AI, Internet of Things, etc which will redefine the way businesses and economies will work in the coming decades, it is important that India retains its leadership position in the telecom space. Increased liability will reduce the incentive to invest in new technologies.
  4. High tariff for consumers – The collapse of any one telecom company will led to end of competition and give scope for cartelization as currently there only three major players – Airtel ,VodafoneIdea and Reliance . The result will be high rise in tariff charged from consumers.

Way Forward – The AGR case is classic example of policy uncertainty in India which tends to dampen the business climate and hurt investments in long run. Amid the slowdown and lockdown induced economic issues, need of the hour is to provide certainty on payment of dues over a period of time to prevent cascading impact on whole economy.

2) Why Olof Palme matters – to Sweden, the world and India:- 

Sweden has officially closed among the world’s longest police investigations, into the assassination of its former Prime Minister Olof Palme. The prosecutor in charge said there was “reasonable evidence” against a suspect, but there could be no prosecution, as the man was now dead.

Palme and his world – a defining moment for Sweden

The assassination of Palme shook Sweden, and has been described as a defining moment in how the country saw itself, and its place in the world. It was Sweden’s first political killing in nearly 200 years.

Palme himself was Sweden’s first global politician who spoke for non-alignment during the Cold War, an anti-apartheid activist who funded the African National Congress, and a champion of anti-colonial liberation movements. India’s first Prime Minister Jawaharlal Nehru was a friend of Palme’s political mentor Tage Erlander.

In India, then Prime Minister Rajiv Gandhi declared a day of mourning for Palme, whose friendship he inherited from his mother Indira Gandhi. Indira, Palme, Julius Nyerere of Tanzania, and the leaders of Mexico, Greece, and Argentina joined hands to a form a new grouping called the “Six-Nation Initiative”, which Rajiv joined after becoming Prime Minister.

A road in Delhi is named after Palme, as in cities across the world in developing countries. He was posthumously awarded the Jawaharlal Nehru Peace Prize in 1987.

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