'It is a revival package'

Print edition : August 14, 1999

The Bharatiya Janata Party-led caretaker government at the Centre is facing a barrage of criticism from Opposition parties on the telecom package announced by it close on the heels of the Election Commission's announcement of the poll schedule. The Gover nment defended the decision, claiming that it was taken keeping in mind the interests of the industry. BJP spokesperson Arun Jaitley, a senior advocate in the Supreme Court and a key strategist of the party, spoke to V. Venkatesan about why the Opposition's attack is unwarranted. The interview was prefaced with Jaitly questioning Frontline's objectivity. Excerpts:

How do you explain the haste shown by the Government in implementing the change in the telecom policy?


There has been absolutely no haste in the matter of the recent decision of the Government in the telecommunications sector. In the early 1990s, the telecom policy was formulated when telecommunications was thrown open to the private sector. The earlier p olicy was a flawed one. In fact, in the first petition filed before the Delhi High court in this case, the petitioners categorically said that the earlier licence fee policy was flawed. The object of the policy is to expand the telecommunications network along the length and breadth of the country and make available telecommunication facilities to the people at the cheapest rate. The policy failed to achieve this target. In fact, in many areas the operators were unable even to pay the licence fee.

Even though some political parties have changed their stance now, in their representations to the Government earlier they spoke some other language. Thirty-three members of the Congress(I) wrote to the Prime Minister, stating that the licence fee regime had failed. Pranab Mukherjee wrote to him on June 7, saying that the industry had already been crippled because the Prime Minister was awaiting the Attorney-General's opinion on making revenue sharing applicable to existing licensees. "Please wait, and d on't cancel any licences," he wrote. Somnath Chatterjee went a step further. In his letter to Vajpayee as caretaker Prime Minister, written on May 12, he said: "Those who are overstating the ability of the industry to pay this licence fee are the interes ted quarters who want the industry in India to collapse. There is now an urgent need to change." I am quoting from their letters.

But both Chatterjee and Mukherjee have retracted.

They have retracted for political reasons. The economists in Pranab Mukherjee and Somnath Chatterjee wanted revenue sharing. But now, the politicians in them wants them to reap political benefit on the eve of elections. It is a dishonest change of tack b y them for political and collateral benefit.

When was the policy of revenue sharing introduced? Revenue sharing as a policy was announced on March 26, 1999, when Jagmohan was the Communications Minister. It was Jagmohan who, as Communications Minister, favoured the policy of revenue sharing. This p oint should be underlined. A legitimate question arose after the new telecom policy: everybody goes into revenue sharing. What happens to the existing licensees? For the first time, this matter was referred by Jagmohan to the Attorney-General for his opi nion.

Now you are asking why the Attorney-General gave two different opinions. It is because one was given in January and the other in June. In January, the question was entirely different. There was no policy on revenue sharing; it was decided only on March 2 6, 1999. In January, the demand was that the existing licensees should be exempted from paying 20 per cent of the arrears the Government was insisting on, since the Government was considering the formation of a new policy.

The Attorney-General at that time had said that they had no automatic right to ask for that, and therefore the Government was well-advised to ask for the 20 per cent. The second question was: should the existing licensees be covered under the new policy? The Attorney-General felt that if you have two sets of people - existing and future - it would be a discriminatory regime, and therefore, you allow them to come into it. But before you allow them to come into it, you must clear all the arrears till Marc h 31 and July 1999. Not only this, you must also make payment. You have only given them the benefit of some instalments in payments. The Government said, where the past arrears with interest is up to July, the amalgamations will take place from July, and pay 35 per cent now, securitise the rest by bank guarantees, and pay the balance before January 31, 2000.

Under the old policy, the success of the policy was to be determined by the projected revenue. But the proof of the pudding is in the eating. There was complete non-realisation of the actual revenue. The only option left was to insist on encashment of ba nk guarantees. Jagmohan did this. He then struggled to collect even 20 per cent of the revenue. The present policy ensures that all the arrears will come till March 31. The interest will come in two stages. At the same time, for the future you go in for some revenue-sharing arrangement.

When the policy was announced on March 26, why did Somnath Chatterjee, Pranab Mukherjee and their parties not oppose revenue sharing? All they are opposing is the July 7 decision, whereby revenue sharing was made applicable to even existing licensees. Th e Government has already explained this.

Under the old policy, there was real non-realisation of revenue. We projected revenues in anticipation, but the actual revenue did not come. The only option left was to cancel the licences. So you go in for fresh bids. Once you go in for fresh bids, your future would be covered by the new policy, which is revenue sharing. Same players will come back into the game. In the interim period, there will be a vacuum, and the country will be without the services. But after that you are back to square one.

The Government had two options. The first was to cancel a large number of licences, have fresh tenders, disrupt the investment environment and telecom services in the country and then start revenue sharing for the future. The other option was to introduc e a more pragmatic policy and collect the arrears. Give an option for the future and have continuity. On the very first day, the ICICI wrote to the Government - this document was made available in the court - that the people have shown interest in bringi ng in Rs.10,000 crores more in terms of investment under the new arrangement.

Under the old policy, one of the reasons why the companies were not able to pay the money was that a lot of banks and financial institutions (FIs) did not regard the arrangement as bankable.

Under the new arrangement, because the industry can survive, money will be forthcoming from FIs and banks. Therefore the present arrangement is a pragmatic one. It prevents existing companies from becoming bankrupt. The same money is transferred to FIs.

Granted the policy is sound, but why could the Government not have postponed its implementation until after the elections?

The budget for this financial year provided for the collection of Rs.17,000 crores from the industry. Half the year has gone by and we have still not been able to collect it. If the August 15 deadline is met, you will be able to collect, on the basis of the 35 per cent. Every time you have a caretaker government, the country cannot come to a standstill.

Do you assume that the next government will also be short-lived?

There is no assumption. But past experience has been bad. A caretaker government is not a non-responsive government. The BJP government came out with a policy on March 26 and has implemented it in relation to the industry. It has discharged its duty to t he economy. This is not a bail-out package, as is made out, but a revival package intended to ensure that a major infrastructure industry does not collapse.

The Government's claim that the FIs have taken on exposure of Rs.10,000 crores in the telecom sector has been disputed.

I don't have the details. But obviously, FIs have a very large stake in the industry.

What about the ethical question in condoning defaults on licence fees by companies that won contracts for telecom services on the basis of competitive bidding?

There is no question. If the policy is made applicable to everybody across the board, everyone has the option of either switching over to the new policy or not. If somebody doesn't benefit from the new option, he can have the old option. The new policy a lso ensures that two more players come into every segment. When you have a larger number of players, they will compete with each other to cut down rates. The TRAI will ensure that the companies which make profits transfer their advantages to the consumer . Eventually, the consumer will pay less.

The Congress(I) has alleged that certain individuals from the Prime Minister's Office have taken undue interest in the new policy regime.

Not a shred of evidence has been seen. The words of the Congress(I) and the CPI(M) do not hold credibility since they have changed their stand on the issue. It is an irresponsible allegation that must be repelled.

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