How long can companies overlook unsustainable charges? The Government must intervene on taxes
British telecom giant Vodafone’s threat to quit India seems to have jolted a few officials in the Government. After all, if such a famous corporate name could be jolted by policies and unfair tax demands, how would smaller, less famous foreign investors fare in the country? There has been a degree of damage control exercise by both Vodafone and the Government after the first stories emerged in London newspapers but the single best thing that seems to have happened since then is that Indian telecom companies across the board have realised that their current charges are unsustainable. They are now speaking of increasing tariffs next month onwards. This is on expected lines for, in real-money terms, telecom charges have been declining year after year even if data is excluded. Data charges per megabyte transmitted today are barely a per cent of what they were a decade ago. Low charges have helped put data in the hands of virtually every Indian but good times were never going to last forever.
While the quantum of the increase remains to be seen, after years of unsustainably low charges, coupled with the constant need to invest in new infrastructure, most telecom operators in India are bleeding. The desperation to be seen as the largest player in a huge market led to unsustainable rates, first for voice communications and later for data after the entry of Reliance Industries’ Jio, which benefitted from several aspects of a late entry. It was able to invest in better and cheaper infrastructure, not needing to carry the can for low revenue consumers. Surely, the Supreme Court’s ruling on taxes being applicable to “annual gross revenues” for telecom operators rather than for “revenues” must be seen as a harsh one. The Government should do something to mitigate the extent of the payment but an increase in call and data rates is much needed now. Complaints about call quality and lack of network connectivity have become far too common and networks need investment to improve services. For that, India needs a sustainable telecom industry. It is almost certain that with the Voluntary Retirement Scheme (VRS) being taken up in droves by Government-owned telecom operators BSNL and MTNL, the State might be exiting the telecom space once and for all, keeping just a secure communications backbone for intelligence and military purposes. If that indeed is the case, the Government must ensure that all telecom operators are in good financial health. At the same time, the coming years will see next-generation 5G networks, with the Government expecting to make thousands of crores in the spectrum auctions, something that appears to be more of a pipedream than anything else right now. The Government runs the risk of killing the golden goose and finding a hollowed out shell inside. That means allowing operators to raise prices and most importantly, refute allegations of favouritism that tend to stick when it comes to Mukesh Ambani.