On The Telecom Policy

Tuesday, July 27, 1999 to Monday, July 26, 1999

Press Release

The Communist Party of India (Marxist) is outraged over the developments arising out of its decision on the migration of fixed licence fee regime operators in basic and cellular service to the new revenue sharing arrangement. We are of the firm opinion (in view of the documents available with us) that the government action constitutes not just impropriety but what can be called a major financial scam.

The government is not entitled to take decision on the so-called bail out package for the private telecom operators because:

  1. The National Telecom Policy (NTP), 1999 was never placed in the Parliament after it was finalised by the government while it was having its majority in the Lok Sabha. Not only was it not placed on the table of the two Houses, but it was not even sought to be listed in the business of either of the two Houses though there was time available between the framing of the policy and the dissolution of the Lok Sabha. Parliamentary system is based on precedents and conventions which is as valid as law itself. Earlier in 1994, the Telecom Policy was placed in both the Houses on 13th May, 1994.
  2. The question of migration from fixed licence fee to revenue sharing regime was not spelt out in NTP, 1999. The manner of migration was, therefore, not covered either by NTP, 1994 nor by NTP, 1999. Therefore, the cabinet decision by the present government, which has lost its majority, constitute a new policy and is a major impropriety.
  3. The Cabinet note on which the decision has been taken admits specifically that this package will involve a revenue loss of approximately Rs. 1443.58 crores to the government by way of reduction in the receipt of licence fee. But the government had taken credit for Rs. 2,800 crores of revenue under this head. Therefore, the decision has revised the revenue projection in the budget estimates which was unanimously passed by the Lok Sabha without any discussion. The government having lost its majority in the House is not entitled to do so as this would involve, in normal circumstances, the moving of supplementary demands.
  4. The announcement of an interim 15% of the gross revenue for the revenue sharing arrangements for the current year without reference to TRAI on this preempts and prejudices TRAI decision on the subject. This is violative of TRAI Act passed by the Parliament.

However, the legal-constitutional impropriety is not the only disagreeable aspect of the government's decision. The much touted bail-out package is also largely a myth because:

  1. The package offered by the government does not, in any way, reverse the termination of the licence of atleast three operators -- Koshika, JT Mobile and Aircell. Perhaps, three more companies -- Modicom, Hexacom and Fascel -- will also follow suit. This constitute 12 out of 22 non-metro cellular service circle.
  2. The other aspect is that as a result of the package, there is a lot of activity in the equity market as Shri Jagmohan had earlier anticipated.

Therefore, the packages, whose very basis was questioned by former Minister of Communications Shri Jagmohan and former Attorney General in his opinion to the government on 6 January, 1999 is baseless.

The bail-out argument is actually a smokescreen to conceal the real beneficiary. They are primarily the eight companies who operate cellular services in the four metro cities. These companies got the licence for their services without any high licence fee commitment because the licence amount was unilaterally decided by the then government in 1993. There was no open bidding. The government's main argument for offering the present package are:

  1. High licence fee committed by the operators making the services financially unviable because of inflated projection of demand.
  2. Introduction of multiple players in NTP, 1999 as against two operators suggested in NTP, 1994.

As for the high licence fee commitment, reliable estimates pointed out that the commitment was atleast Rs. 10,000 crore less as compared to that of non-metro cellular circles which was arrived at on the basis of competitive bidding. The real payment of the metro cellular operators was to start this year at the rate of Rs. 6,023/subscriber annually, ie, Rs. 300 crores for the five lakh cellular subscribers in the metro cities. This would run into tens of thousand crores if we take into account the entire tenure of ten years of the licence period. Here again, the government has decided to extend the licence upto 20 years. With the new decision, these amounts will not have to be paid by them.

Regarding the introduction of multiple players, as well, the reasoning of the government is flawed because due to lack of availability of frequency not more than one new operator can be licensed. On this account also, the government has practically eliminated the possibility of any real competition by disallowing DoT/MTNL to enter the services before two years from now.

This is a huge bonanza. In order to ensure this, the unprecedented step of shifting of Shri Jagmohan in the caretaker cabinet from the Ministry of Communications was effected. Shri Jagmohan had earlier made categorically opposite the new policy that the government was trying to initiate by raising questions which could not be answered by the PMO.

The opinion of the AG given in January and on May 27 differs fundamentally. The shifting of Shri Jagmohan and AGs changed opinion was ensured only to facilitate this new decision which will lead to major losses for the national exchequer while handful of private telecom companies benefitted out of this. Even the Cabinet note was not vetted by the Ministry of Finance and Law is as the normal practice. Subsequently, the government has offered letters for migration to companies without getting them vetted by the Law Ministry which is the normal procedure for legal agreements. Neither has the government undertaken any exercise to properly define revenue in legal and commercial terms though this was advised by the AG.

We charge that this whole exercise by the government, which is replete with irregularities and illegalities, could not have taken place without pay-offs. And, Shri Atal Behari Vajpayee as the Prime Minister and the present Minister of Communications is personally responsible for this. We demand that the government publicly explain as to why they have extended the new package to the metro cellular companies or agree to an enquiry by a Rajya Sabha Committee by referring the issue to the Chairman, Rajya Sabha.

We urge upon the President to take initiative to stop this outrageous initiative of the government which it is not accountable to Parliament in pursuing its decision which will mean huge losses to the public exchequer and benefit a few private companies. We have already taken up the issue with the Election Commission.