Kumaramangalam Birla has resigned from the chairmanship of Vodaphone-Idea combine. He has even offered the government to buy Idea’s share in the company. Now what has gone wrong with the telecom sector? Sam Pitroda, during the Congress regime, had gifted this new sector as a game-changer. Even the Modi government brags of a ‘digital India’. But then why this ‘sunrise’ industry is plunging into darkness?
The ailment of this industry dates back to the Congress government itself. We have all heard of the ‘2G scam’ and the allegations of how the ‘spectrum’ was auctioned and given away to the telecom companies almost free of charge. The parliament was on fire, a minister had to resign and the issues were taken to court. To quickly settle the issue, the government introduced a ‘retrospective tax’. This was a regressive move that has almost killed the telecom industry. The telecom companies refused to pay and a global company like Vodafone took the Indian government to the International tribunal where the corporate house ultimately won. Pranab Mukherjee, the then finance minister, tried to remove the retrospective tax but faced stiff resistance in the parliament. The tax led to accumulated debts of the telecom companies to the government into thousands of crores.
Let us try to understand how this retrospective tax was suicidal for the government. It was not just a rebuff from the international courts. It was not merely killing a modern industry. Government owned companies like GAIL, Oil India or Power Grid Corporation were badly hit by the bills they received for using the spectrum. GAIL which has a market capitalisation of Rs 66,000 crores was given a bill of Rs 1.70 lakh crores for using the spectrum for its own use. Power Grid Corporation which has a market cap of Rs 1.22 lakh crores was served a bill of Rs 1.25 lakh crores. Oil India whose market cap is Rs 18000 crores was also served a bill of Rs 48000 crores. The calculation of this retrospective tax was evidently absurd – it was calculated not just on the usage of spectrum but on the company’s total turnover.
It is only after the threat of Kumaramangalam Birla that the government has finally decided to withdraw this tax and a bill to that effect has been passed in the parliament. But the damage has already been done. May be the government owned companies will now be off the debt trap. The banks have been already drained to pay these debts. In the race among the telecom companies – the two - Airtel and Vodaphone – are both limping. The only beneficiary is the Reliance Company Jio which has entered the race much later than the spectrum imbroglio and therefore was never burdened by the retrospective tax. The Mukesh Ambani Company Jio bought the spectrum from his brother Anil – whose telecom company has already gone bankrupt.
It is imperative that the telecom companies of India survive because that is an essential component of modern digital India. Many other international telecom companies which entered India before have withdrawn and the only survivor is Vodaphone. The government’s move finally to drop the retrospective tax may be a last ditch battle to hold back this international group in India. We only hope it is not too late. The opposition has already pointed a finger that the whole drama of the spectrum with which the telecom companies were being beaten up was enacted to benefit a particular group of companies. Withdrawal of the tax was a step in the right direction. Better late than never. We do not want to step back from a modern digital India