‘Telecom relief package ‘difficult’ as cos not in unison on financial stress’
NEW DELHI: The government may find it "difficult" to respond to calls for relief package for the telecom sector given the differences among operators on financial stress, a source said.
At the same time, there is some movement on the sector's other demands including review of import duty on telecom equipment, said the senior government official who did not wish to be named.
Telecom sector has been battered by falling tariffs, eroding profitability, and mounting debt, in the face of stiff competition triggered by disruptive offerings of Reliance Jio, owned by Mukesh Ambani.
The industry association has been seeking urgent relief measures for the troubled sector, entailing debt restructuring, cut in levies like licence fee and spectrum charges, and release of GST input tax credit locked up with the government.
The official familiar with the ongoing parleys, said action has been initiated for a way out on two of the concerns -- review of import duties for telecom equipment and GST payments locked up with revenue department.
However, the telecom players are not speaking in one voice on the overall issue of financial stress. This, the official explained, makes it "difficult" for policy makers to respond to operators' call for 'relief package'. Without naming any particular company, the official said while certain operators had expressed concerns on severe liquidity crunch in the sector and high spectrum payments, one of the key players had disagreed with the position. This polarisation reflected in the industry association's representation to the government too.
On issues like GST where there is convergence of views within the industry, the telecom ministry has already taken up the matter with revenue department.
Also, a committee has been set up to look into the issue of recently-hiked import duty on telecom equipment, the official said adding that the panel comprises officials from revenue department, electronics and IT ministry, communications ministry and Ministry of Commerce. Recently, billionaire Kumar Mangalam Birla, head of India's biggest telecom company Vodafone Idea had sent an SOS to the government for deferring statutory payments in a sector that is not generating enough cash to even service loans.
The Vodafone Idea Chief had also expressed concern over Rs 30,000 crore that is locked up on account of GST payment under 'reverse charge mechanism'.
Over the past few years, India's telecom market has become cut-throat where nearly a dozen players jostled for market share, pummelling the call rates to amongst the lowest in the world. Competition has only intensified since 2016, when Reliance Jio Infocomm stormed into the market and offered free calls and dirt cheap data. This triggered consolidation in the industry.
Last month, at its maiden earnings announcement as a joint entity, Vodafone Idea reported a consolidated loss of Rs 4,973 crore for the September quarter and announced a fund infusion of Rs 25,000 crore to help it take on the brutal competition.
Bharti Airtel reported a drop in consolidated net profit for the 10th straight quarter as losses on mainstay India business widened due to pricing pressure from aggressive competition. Overall, its profit of Rs 118.8 crore in July-september represented a drop of about 65 per cent from Rs 343 crore in the year-ago period.
Airtel's loss from India operations (before exceptional items) mounted to Rs 1,646.4 crore in the second quarter of the current fiscal compared to about Rs 940 crore in the preceding three-month period.
Meanwhile, on recent reports that railway ministry has sought 5G spectrum in 700 MHZ band, the source said telecom department has pointed out the pros and cons of such a proposal, and that the Cabinet will take a decision on the matter.
The department is believed to be of the view that the band has the potential to provide services to a significant portion of Indian population, and hence public services could get affected if it is allotted to the railways.