An apology to Mohan Guruswamy

Events of the last few days, in which the Prime Minister has gone out of his way to bail out defaulting telecom companies, while virtually snubbing communications minister Jagmohan, however, make me want to re-consider my opposition. I still believe Mohan was wrong, but he wasn’t the only one. In the event, sacking Mohan for what he did mayhave been a bit too drastic.

Briefly, the telecom imbroglio stems from the fact that almost all telecom companies have defaulted in paying their license fee dues, currently around Rs 3,800 crore, and have blamed this on the market not taking off in the manner they expected when they bid fairly high license fees a few years ago.

So, for close to a year now, they have been trying, without much success, to get the government to lower their license fee commitments. Fortunately for these companies, what also necessitated a review of the policy was that dramatic leaps in technology over the past couple of years has made the tightly stratified telecom policy redundant. In a nutshell, the current telecom policy allows companies to provide only one service in each license they have — either basic teleph-ony, cellular telephony, or internet services, to cite just a few examples. New advances, still continuing incidentally, on the other hand, allow all these services to converge, as it were, to allow cellularoperators to offer basic telephony as well, internet service providers to offer cheap long distance telephony, and so on.

In the event, the government combined both needs, and embarked upon a full-scale review of the policy a few months ago, including the license fee issue. While the new policy is yet to be finalised, it broadly appears that a new license fee structure will be agreed to, one based on sharing of revenue between the government and the telecom companies, in place of the current one which assures the government a fixed license fee irrespective of whether or not the telecom companies do well.

Such a change in license fee structure may or may not be fraught with legal problems, but that is not the issue right now. The point that Jagmohan, as well as his counterpart in the Finance Ministry, made is that even if a new policy comes into being, it cannot be applied retrospectively. So, if the government does decide to give the telecom companies the kind of flexibility they want in making licensefee payments, they would still have to pay up their existing dues.

Just last month, to go back a bit to the saga of the steel bailouts, the government rejected a move by some very senior finance ministry official (not Mohan) to refund Rs 300 crore of import duties paid by Essar Steel while importing equipment six years ago, using exactly this principle. Essar had argued that, after they contracted their imports in 1993, government policy began allowing companies to import capital goods without paying import duties, in return for a hefty export obligation. So surely they could be given a refund, in return for an export obligation.

The Ruias of Essar mooted this proposal several years ago, and this was rejected twice, but resurrected it again a few months ago. Now surely if the government opposed this move vehemently — the Prime Minister’s Office (PMO) is believed to have taken it up firmly — the same principle of laws being prospective in nature and not retrospective should apply to the telecom case aswell.

Put this to officials in the PMO who are currently spearheading the snub-Jagmohan drive, and they’ll say it’s an unfair exaggeration of things. For one, they’ll point out, they’re not saying that the telecom operators should not pay up their dues, only that they should be given more time and that a new policy will be finalised by March 31, so why not wait till then instead of, as Jagmohan did, impose a deadline of February 15?

While that sounds really reasonable, what’s the new telecom policy got to do with paying up one’s dues, even if, for the sake of argument, you assume that the new policy abolishes license fees completely, say? Besides, and this gets obscured in all the talk of Jagmohan being a bureaucrat with little or no vision, telecom companies were not even being asked to pay up all their dues — all that they had to do was to pay up a fifth of that before the February 15 deadline.

Now surely that’s reasonable? Needless to say, many of the parameters used to justify the telecom bailoutare the very ones rejected for the steel bailout. If telecom companies can’t pay their license fees because their business is bad, surely steel companies shouldn’t be forced to repay loans to financial institutions since they are in the midst of a global crash in prices; if telecom firms feel the license fees should be reduced to reasonable levels, surely steel firms have every right to demand sharp reduction in interest rates on old loans? And that applies not just to the steel firms, but to all sectors going through a bad patch, such as automobiles, cement, electronic goods … God, Mohan, are you gloating?