Jio boxed in the corner; IIC and FICCI team up to seek help for telecommunications companies
New Delhi, December 1 () The rival industry associations IIC and FICCI closed ranks and wrote to Finance Minister Nirmala Sitharaman seeking relief for telecommunications companies that the Supreme Court ordered to pay Rs 1.47 lakh crore in past legal fees , in apparent attempt to counter the narrative of billionaire Mukesh Ambani-Jio on the subject.
While Jio has strongly opposed the rescue of telecommunications companies at the expense of taxpayers, saying they had sufficient financial capacity to pay the fees, the IIC and FII presidents have asked the Minister of Finance in writing to address the precarious financial position of the telecommunications companies charged with a debt of Rs 7 lakh crore and guarantee a strong competition for vitality in the sector.
The president of the IIC, Vikram Kirloskar, in the letter of November 19 sought to review the current commercial model of income distribution, where the government receives a predetermined part of the income generated by the use of scarce natural resources and replaces it with a Competitive and transparent model that also address possible adverse impacts on banks that have exposure to sectors with such a business model.
The president of FICCI, Sandip Somany, wrote to Sitharaman about the issue on November 27, which was first reported on Friday.
Recent developments in the Adjusted Gross Income (AGR) quotas for Telecommunications Service Providers (TSP) have caused great concern not only for the TSPs severely affected, but also among others that are part of the global economy of the telecommunications system.
The precarious financial health of the key actors in this sector and their enormous debt burden (estimated at Rs 7 lakh crores), threaten not only their individual existence but also the much-needed vitality in this sector of national importance, Kirloskar wrote.
On October 24, the Supreme Court confirmed the government's position that non-telecommunications related revenues should be included in the AGR calculation, a percentage of which is paid to the treasury as legal fees. Telecommunications companies such as Bharti Airtel and Vodafone Idea were asked to pay Rs 1.47 lakh crore in past installments in three months.
In this context, the IIC urges the Government to consider addressing the situation in a way that continues with strong competition in the industry and ensures greater investments in infrastructure for new technologies, said the letter dated November 19.
He went on to say that telecommunications services are a 'raw material' for the rest of the economy that serves as a productivity enhancer for many other sectors. A robust and vibrant TSP ecosystem is critical to some of the key business initiatives of the Indian government, including the drive towards a less cash-based economy and the larger Digital India program. In essence, a vibrant telecommunications sector is in the national interest.
The IIC urges the government to continue with its policy of promoting healthy competition in the telecommunications sector with at least 3-4 strong players, and to work to address the problems facing the sector with that perspective. This is essential for the national interest and the interest of the consuming masses, he said.
In the letter, FICCI had stated that the ruling of the main court would not only lead to the collapse of the telecommunications sector, but will also have a cascading effect on several other sectors, including energy, steel and railroads.
He urged Sitharaman's urgent intervention to solve problems in the telecommunications sector, saying that the indebted industry has no appetite to invest in future networks and technologies. ... As you know, the sector is currently loaded with massive debt and has almost no appetite to invest in future networks and technologies. Adding more problems to the sector, the recent decision on the AGR, the quotas of the telecommunications service providers will lead to an unfortunate and disastrous collapse of the already battered sector, the letter said. ANZ MR MR