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August 5, 1997


DoT plans to change telecom operators' licenses stalled

The Union Cabinet's decision to seek the law ministry's clearance has stalled the Department of Telecommunications' plans to make changes in the licence and interconnect agreements for private telecom operators.

The DoT plans which were hit by the Cabinet decision include the move to allow assignability of telecom licences; drafting of a tripartite agreement among financial institutions, DoT and the licensees; and removal of the ceiling on external commercial borrowings for the licensees.

The decision to refer the changes in the licence agreement to the law ministry were reportedly taken by the Committee of Secretaries at a recent meeting. The meeting was convened after the Cabinet asked the CoS to review the changes suggested by DoT.

The Cabinet was of the view that since the suggested changes in the agreement were 'post-tender' and would result in 'financial benefit' to the companies, it could be challenged in courts.

It further pointed out that the view of other ministries were not taken before the issue was brought up for discussion.

The CoS is learnt to have directed DoT to seek the law ministry's views on the matter. "Although we had sought the law ministry's opinion before drafting assignability and other changes, the notes were not made on the file put up to the Cabinet. Perhaps, this is why it wants the CoS to look into the matter," a senior DoT official said.

"When we drafted the assignability and the tripartite agreement, we had informal discussions with them. Moreover, we feel the government has the right to make changes even after the tender, if it is in the best interests of the country," the official added.

Apart from assignability and removal of the ECB cap (pegged at twice the foreign equity), DoT has proposed to reduce interconnect and wireless charges. These changes were to help the basic and cellular telecom projects become viable by reducing input costs. The companies had huge fees to win the operating licences over which banks and other financing agencies expressed doubts about viability.

Assignability has been one of the main demands of the telecom companies and the financial institutions who are contemplating funding such projects.

They have been asking for an assignability clause in the licence agreement so that if the license company defaults on loan repayments or in case of bankruptcy, the licences can be assigned to the financial institutions, which can, in turn, auction them.

- Compiled from the Indian media

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