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June 22, 1998


Government rebuffs telecom operators' demands

Email this story to a friend. The Union government has put the two key demands of telecom operators - moratorium on payment of licence fees by two years and extension of the life of a telecom licence from 10 to 20 years - in cold storage.

The Department of Telecommunications has said in an agenda note sent to the cabinet secretariat that the finance ministry is "not willing to provide a
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commitment" on the demand for a two-year moratorium on payment of licence fees.

The ministry fears that a moratorium will result in a loss of revenue that it is not willing to bear at this juncture, when the fiscal situation is rather tight.

The agenda note, which was prepared by DoT for a meeting of the Committee of Secretaries to review the developments in the telecom sector, also made it clear that it will not be possible to adhere to the demand for extension of the licence period from 10 to 20 years.

The industry's demand is to keep the net present value of gross levy quoted by the telecom operators for 10 years constant.

"The extension (of the period of licence) cannot be done in the short term," the department has stated.

The reason cited by DoT for pussyfooting the demand for extension is the possibility of legal action by those bidders who lost out in the three rounds of bidding for telecom licences.

"The extension of the life span of the licences would have meant a change in the assessment of the viability of the licences for those who had bid and failed. Their NPV calculations would have changed accordingly," the DoT note said.

Another reason why there will be a delay in formalising a reaction of the two demands of the telecom industry is the inability of the Bureau of Industrial Costs and Prices to assess the financial antecedents of the demands.

According to the DoT, the BICP has sought four more months before it can submit an analysis of the proposals to extend the life of the licences and impose a two-year moratorium.

The Industrial Credit and Investment Corporation of India has also looked into the demands the industry has submitted.

The DoT is tight-lipped about any follow-up action on the ICICI study. "Our officers have interacted with the ICICI on the report," is all DoT is willing to concede.

What is ironical, however, is that the DoT wants the government to make a "position statement in the press" on the demands raised by the industry.

And the statement, according to the DoT note, should be the following: "The government is seized of the problems and is adopting a pragmatic approach keeping in mind the legal angle."

"It is evident that the proposed 'position statement to the press' is at variance with the position on the ground with respect to the demands made by us," a telecom industry spokesman has been reported as saying.

"Despite the new government's pronouncements to quicken the pace of telecom reforms, red tape and lack of commitment continues to bog the sector," he goes on to add.

Meanwhile, some action is anticipated on the issue of opening another round of bidding for those circles, which have not elicited an adequate private response in the earlier rounds.

A draft-bidding document is in place and is expected to be taken to the cabinet shortly. But the department is not sure how many circles will actually be included in the new round.

DoT says there are 13 telecom circles (of the total of 21 circles) which should be included in the proposed bidding process.

But of the 13, only 8 are sure to be included. The fate of the other five is uncertain as bidders have gone to court and the issue is sub-judice.

Only after the court judgements come in will it be known how many circles will figure in the next round.

- Compiled from the Indian media

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