Need out of box solutions for telecom sector in the interest of consumer welfare: CUTS International

KNN India, July 27, 2019

Need out of the box solutions for the telecom sector in the interest of consumer welfare, said CUTS International, a leading global public policy think tank.

“The Supreme Court judgment seems like a Nelson’s eye, where one deliberately chooses to ignore the problem or convinces itself that the problem does not exist. The apex court has turned Nelson’s eye to the financial health of the telecom sector and ingenuous errors by DoT in AGR calculations, as claimed by telecom companies,” said Pradeep Mehta, Secretary General of CUTS International.

On July 23rd, 2021, the Supreme Court (SC) dismissed the plea by Airtel Ltd and VodafoneIdea Ltd (VIL) seeking direction for correction of Adjusted Gross Revenue (AGR) calculation, as demanded by the Department of Telecommunications (DoT).

“The judgment is likely to prolong the steep recovery of the telecom sector and moreover, the consequences of the judgment seem dire on the economy and consumer welfare,” Mehta added.

In an event if a telecom operator exits the market, the telecom sector would theoretically become a duopoly. Although government-run telecom Bharat Sanchar Nigam Ltd (BSNL) would be the third company in the market, its subscribers have also been declining. Amongst the private telecom companies, VIL seems to have suffered a severe blow from this verdict, which owes about Rs 61,000 crore in AGR dues to DoT.

“To rectify consumer welfare loss due to a potential exit of a telecom operator from the market, the government must explore relief to VIL and privatisation of BSNL as alternate strategies to remedy market competition,” said Mehta.

“Otherwise consumers will suffer from lack of competition,” he added.

In 2019, the Union Cabinet approved Rs 70,000 crore revival package for BSNL and MTNL, out of which Rs 29,937 crore was spent towards voluntary retirement scheme for employees above 50 years of age.

Any positive intervention by the government could be crucial to pacify the struggling telecom sector.

“Another pragmatic remedy for the telecom market could be setting a floor price for telecom voice and data services by the government,” he added.

Floor price may hurt the consumer in the short term, but in the larger scheme of consumer welfare and market competition, consumers will ultimately win.

“The need of the hour is out-of-box and pragmatic solutions for the telecom sector in the interest of consumer welfare,” Mehta sums up.

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