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Perspective

DoT or dotty?
The next inescapable step for the telecom department might be a demand notice running into multi-billion dollars to the country’s largest corporation Reliance Industries

N Mahalakshmi

In Theatre of the Absurd, a rage in the fifties and sixties, characters are trapped in pointless pursuits. They follow rules that serve no purpose and say meaningless lines on cue so, when curtains fall, there is no resolution. Everyone is simply left bewildered. Samuel Beckett is considered a master of this theatre, but our Department of Telecom (DoT) could upstage him.

This is in the context of the share of revenue telcos owe the government after they transitioned from a fixed licence fee model to a revenue-sharing model back in 1999. The DoT has been at loggerheads with telcos over what constitutes adjusted gross revenue – the figure that determines the licence and spectrum usage fees that telcos pay to the government. This matter has shuttled between Telecom Regulatory Authority of India (Trai), Telecom Disputes Settlement and Appellate Tribunal (TDSAT) and Supreme Court for 18 long years without a final resolution. And when the Supreme Court gave its final verdict two weeks ago, the bill had escalated to a level that would chock some companies to death or simply condemn them to struggle for survival what with interest, penalty and penal interest alone adding up to 75% of the payable. The issue is hanging, as companies have not adhered to the payment deadline, hoping for the government to intervene.

Be that as it may, the absurdities reached an all-new proportion when the DoT raised demand notices, based on the Supreme Court verdict in October, on certain companies holding telecom licenses that are not actually telecom operators. The demand is as if zero has no meaning. It’s hard to tell if this is a result of less than efficient judiciary, the work of an overzealous government department, crony capitalism or simply a lack of common sense.

Going strictly by the book, DoT has raised these demand notices following the definition upheld by the Supreme Court. The court has ruled that the operators need to pay “license fee as a percentage of gross revenue under the license.” But, for this purpose, the revenue considered is the overall revenue of the entity.

Going down this path, the next ‘logical’ and inescapable step would be for DoT to place demand notices on the overall revenue of the country’s largest corporation Reliance Industries (RIL), citing the principles of corporate veil. This would include its petrochemical and retail revenues, which will run into mind-boggling sums of trillions. After all, Reliance Jio’s entry into the telecom business was through Infotel Broadband, a company owned by Himachal Futuristic Communications (HFCL) that won the Internet Service Provider License in 2010. RIL bought 98% in Infotel Broadband Limited in 2013 and changed its name to Reliance Jio Infocomm. Currently, Reliance Industries holds 99.45% in this company.

Last fiscal, Reliance Industries clocked 5.67 trillion in annual revenue on a consolidated basis. Since FY10 to FY19, the company clocked cumulative consolidated revenue of 36.56 trillion. Even 1% of consolidated revenue over this period would stand at a whopping 360 billion. One cannot pause to imagine what the amount could actually be if the same formula that has been applied to other companies is applied to RIL. Telecom license fee is charged at 4% and spectrum user charge is levied at 3-5% of adjusted gross revenue. Then, let us not forget the interest accrued on the amount due, penalty, and interest on penalty, charged at 12-18% annually, which accounted for the bulk of the liability in the case of other players.

This obviously will complete the circle of absurdity.

For now, the demand made of a few of the PSUs is far in excess of the company’s annual revenue, networth and market-capitalisation. This list includes GAIL (due 1.72 trillion), Oil India (480 billion), Power Grid (about 221.68 billion), Gujarat Narmada Valley Fertilizers and Chemicals (about 150.19 billion) and RailTel (about 58 billion). The amount demanded of GAIL India is over 3x its net worth and that demanded of Oil India is 2x its net worth.

Oil India may have staggered back in disbelief, when its oil and gas production was treated as supplementary or value-added services related to the National Long Distance (NLD) licence. It has rushed to the court with a review petition. The PSU submitted that its NLD license was acquired and is only used for internal control systems, to manage its pipeline network used for transport of crude oil, natural gas and petroleum products. It said that only spare bandwidth is leased out to other telecom operators, from which it has earned a pitiful 14.7 million since the awarding of the licence. On this income, Oil India has paid all applicable fee and other statutory dues. Similarly, GAIL maintains that it obtained the internet service provider (ISP) licence in 2002 for 15 years, which expired in the year 2017. As no business was done under the ISP license, there is no amount payable.

The fact that the amount demanded by DoT is far in excess of what these companies can afford itself makes this an exercise in futility. The payables will take down some of these companies leaving no hope of recovering the colossal sums anyway.

But what the heck, we now rank higher on ease of doing business.

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