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Journalism of Courage
The 2G trial court may have acquitted all the accused in the criminal cases pertaining to irregularities in the issuance of telecom licenses and 2G spectrum, but the policy changes and decisions taken in the aftermath of the allegations has impacted India’s telecom sector in a number of ways. These include the Centre’s shift in stance to allocate airwaves through auctions that led to high cost for operators and the consequent debt situation, the roots of which pre-date the current non-performing asset scenario shadowing the country’s financial services sector today.
Even as the Supreme Court’s 2012 order cancelling 122 telecom licenses pertained to a different aspect of the case, the decision had an impact on banks that considered writing off their loans given to licensees given that the lenders were exposed to the sector in form of loans provided as guarantees for acquiring the licenses. It was pegged that, back then, telecom lending comprised nearly 3 per cent of the banks’ loan portfolio.
The government’s pursuit of higher revenues through auctions, which is seen to be a direct result of the CAG’s observations on the loss of revenue through administrative allocation, has also resulted in spectrum becoming costlier, one of the factors cited by telecom players analysing their financial condition.
The case, in which charges against several bureaucrats were also framed, also impacted how the auction process was designed to allocate spectrum at market discovered prices. The latest example was seen during the 2016 auction where, despite a clear lack of intent from the industry, the highly priced spectrum in the 700 MHz frequency was put under the hammer. In its internal pre-auction estimates, even the DoT did not expect the 700 MHz spectrum to be fully sold.
Throughout the auction, not a single bid by any operator was placed. Furthermore, on account of the high debt in the sector, earlier this year, the Reserve Bank of India red-flagged the telecom industry and asked banks to review their exposure to the sector. An inter-ministerial group was formed, headed by DoT Secretary Aruna Sundararajan, to suggest measures for reducing financial stress in the sector.
