'The Prime Minister must take the responsibility'

Print edition : August 14, 1999

Nilotpal Basu, Communist Party of India (Marxist) member of the Rajya Sabha, has been a keen participant in the telecom policy debate in recent times. The following are excerpts from an interview he gave Sukumar Muralidharan on the issues r aised by the Government's recent moves:

You have made the point that the Government has shown undue haste in implementing the new telecom policy. Could you elaborate?

Essentially, the fact is that the procedures that are normally undertaken before ushering in these kinds of changes were conspicuous by their absence. First of all, the report of the Group on Telecom was the basis for the Cabinet's March 26 decision. Bet ween then and the dissolution of the Lok Sabha, the Government could have placed the policy on the table of the House. Although there is no law asking the Government to do this, in these matters we normally go by precedents and conventions, which are as good as law.

Secondly, we now know that the recommendations of the Group on Telecom had nothing to do with the actual policy decision. The question of migration from licence fees to revenue sharing was not covered by the Group on Telecom. So, it essentially is a new policy which cannot be introduced by a caretaker government. The President, in his wisdom, did not go into the merits and demerits of the Government's decision; he only suggested that it should wait until the next Lok Sabha is constituted. The Government was not prepared to do so. When questions were raised by the Election Commission, the Government was not prepared to provide all the details. Now we find that the Government is not prepared even to define in legal-commercial terms what will constitute r evenue, let alone quantify the revenue implications. Finally, with this observation by the Delhi High Court, any government with some sense of propriety would have realised that the decision should be delayed since so many constitutional authorities have raised questions, and since it has lost its majority . Instead, it is working overtime to bring in the new regime, which raises our suspicions further.


The situation has become very ambiguous now, with the High Court having insisted on a commitment by all telecom operators that they will abide by whatever decision is taken by the next government. So, essentially, it is a policy vacuum now.

That is exactly our point. The Government today cannot anticipate what the next government is going to decide. To try and force the entire sector into this kind of uncertainty is most improper. I do not think the heavens will fall if the Government waits for two months. Because of the mala-fide act of the Government, the whole atmosphere of the policy debate has been vitiated.

There is an argument that financial institutions have been exposed very heavily in the telecom sector and would have suffered severe distress if the issue was not quickly sorted out.

This is baseless. First of all, none of the companies whose licences have been terminated by Jagmohan is going to have its licence restored. On the one hand, you have a situation in which the companies that are short of cash will have no way, even in the new regime, of restoring their profitability. On the other hand, you have the cash-rich metro operators who never suffered a loss. Our figures indicate that of the Rs.12,000-crore business turnover in the cellular sector all over the country, 60 per cen t is accounted for by metro operators. All over the world, none of the companies even think of making a profit in telecom before the fifth or sixth year. Here, you have metro operators making profits from the first year itself, despite the initial capita l investments.

You are questioning the very assumptions behind privatisation, because this kind of imbalance was anticipated between pockets of high-demand density, such as metro regions, and regions of low demand.

That is the unfortunate part of the story. At the July 6 Cabinet meeting, there were two items on the agenda - one on the question of migration and the other on the creation of a Telecom Development Fund. The idea was that the licence fees and other moni es accruing to the Government would be ploughed into strengthening the Department of Telecommunications' network. It was the unanimous recommendation of the Parliamentary Standing Committee on Communications that a Telecom Development Fund be created by pooling the licence fees. But nothing has been done on this so far.

So you have to accept basically that privatisation is a fait accompli. The best you can hope to achieve is to redress the various imbalances that have come in.

Privatisation will only compound the inequities because you have a tremendous unevenness across regions. At the same time, we feel that if some additionality could be provided, then the money that is coming in as revenue to the Government from private se ctor participation could be used to develop the underdeveloped regions.

What is your position on the current decision - that defaulters should have their licences revoked and that fresh bids should be invited?

This is a hypothetical question because the timing of the move was such that you could not really have a proper discussion. But at least the position that Jagmohan took - and the suggestion that was inherent in the Attorney-General's view - was that exis ting licences would be terminated and that another chance should be provided to the unsuccessful bidders of 1995 on a different basis. And the entry fee could be auctioned, which would provide the Government with some revenue. If this had been done, ther e would have been some sound basis for the new policy. But what we have now is a basically flawed approach.

Essentially, you think that the metro cellular operators would be the main beneficiaries. But what about the others? What is their interest in the new regime?

This is an interesting point. You see, there have been some peculiar developments in the share markets. If you look at the equity prices, even the companies that have not been very successful have been ruling very high. Many companies were simply not int erested in improving services, only in participating in the secondary market for equities. Some of the licensees are walking out and we have something akin to distress sales and takeovers. We have a peculiar situation of one company in Mumbai having clos e to 70 per cent foreign equity although the policy does not allow for more than 49 per cent. Similar methods could be replicated wherever licensees have been unable to generate adequate revenues.

So you think that all the less profitable licensees are vulnerable to takeover, whether by more successful domestic companies or by multinationals?

It is the institutional investors who have been playing a big role in this sector, not only in our country but even overseas. There is a tendency towards monopoly which is being driven by these institutions.

The Ministry has been under the charge of three different individuals in the last year and a half. Under whose tenure were these moves the most pronounced?

I think the briefest tenure has seen the most rapid changes - that is of the Prime Minister himself. I think he owes the nation an explanation as to why he decided to change Jagmohan in the first place. That was the watershed in this entire process.

Is there, as somebody said, a needle of suspicion pointing somewhere?

Certainly. It is very obvious that the Prime Minister has to take the responsibility. And the way he has tried to override the questions raised by the President, the Election Commission and the judiciary has been most improper.

Would the regulatory authority be the appropriate arbiter in this debate?

We have to be aware of the whole bizarre role of the TRAI (Telecom Regulatory Authority of India). It is the Government which has been pleading that nothing can be done about the TRAI's recommendations. When it came out with tariff proposals that were an ti-people and anti-small subscriber, we kept opposing it on the floor of the House and elsewhere. It was the Government which took the plea that it had no authority to modify the statutory recommendations of the TRAI. Ultimately under public pressure, th ey made some modifications, albeit with the approval of Parliament.

Now look at the new proposals. Clearly, the Government has encroached upon the powers of the TRAI. When this question was raised, the Bharatiya Janata Party spokesperson said that the TRAI's powers had been challenged in court and hence there was no need for consulting it.

So you think that the TRAI has become an instrument of convenience?

Whenever the TRAI does something against the public interest, the Government goes along with it. But when the Government wants to do something against the public interest, it will ride roughshod over the regulatory body. A party like the BJP will have to do this. It is inherent in their political philosophy that they will have to curtail and circumscribe the powers of statutory bodies and institutions.

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