- A few decades back, talks of disinvestment were widely prevalent when government control of some of the public sector undertakings was not yielding the desired outcome. Such a move was expected to produce two results. One, selling the underperforming entities would not only reduce the government’s hold by transferring the responsibilities to private investors, but also would rake in revenue/funds that could be utilized for other socio-welfare measures. Successive Indian governments, post-liberalization/globalization, diligently pursued the matter with varied success. However, one of the most underperforming entities must be the one representing the critical telecom sector, viz. BSNL/MTNL, which continues to enjoy the government’s patronage even now.
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- Of course, the sector was also opened to private investors who have carved out a niche for themselves and contributed to the country’s growth story by providing us with every invention seen by the global community. However, an entity like Vodafone Idea (Vi) is struggling to stay afloat courtesy of varied challenges. India’s third-largest telco, Vi, is so deep in debt that pressing it to pay up is pointless. Its debt stands around Rs.2L cr, and it owes the government over Rs.80,000cr under the head of adjusted gross revenue. For the uninitiated, AGR was supposed to be a smart policy, giving the government a share of telco revenues, but as mounting dues show, government earnings have been notional so far. Right now, GOI should help Vi. But it must exit the telco soon.
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- And it should disband BSNL and sell its assets. So, the Centre has wisely obtained SC’s nod to reassess the AGR demand on Vi. For the government, there are good reasons to save Vi. Firstly, the need to maintain a semblance of competition. There was a time when India had over 15 telcos. Now, there are three private players with over 90% of the market, and one state-owned-BSNL, which also services erstwhile MTNL subscribers. If Vi goes down, customers will literally be at the mercy of a duopoly. Secondly, after trying to wring cash out of Vi for years – in taxes and penalties, and later AGR – and almost beaching it, the government has grabbed a 49% stake. As such, it must keep Vi afloat and be mindful of the interests of lenders and investors.
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- The idea is to help nurse Vi back to health by forgoing some revenue now; the increased worth of its stake will fetch real returns subsequently. In hindsight, the government could have done this years earlier, for telcos have all along disputed the interpretation and implementation of AGR. It was never the government’s intent to be a stakeholder in non-core sectors, and here it is saddled with Vi, in addition to BSNL, thanks to its own rigidity. As of July, the combined outstanding of BSNL and MTNL was over Rs.50,000cr, despite revival packages worth many thousands of crores over the years. India should take the first exit from Vi when the price is right, and from BSNL/MTNL after monetizing their land, buildings, spectrum, and by offering a golden handshake to staff.
