Telecom would become unaffordable for those at the bottom of the income pyramid, just when Digital India offers them multiple ways to combat deprivation. Allowing three companies to fix a minimum price would be cited as a precedent by players in other industries, say, cement.
Fixing a floor price for telecom tariffs is a bad idea, from multiple points of view. Instead, the right course is for the government to offer relief to the telcos on their AGR arrears as unfairly assessed, including interest and penalty that amount to 70% or more of their dues, spectrum dues, future licence fees and spectrum usage charges. The telecom sector is under financial stress, particularly VodafoneIdeaNSE -3.08 % (Vi). Companies need relief, indisputably. But the solution does not lie in setting a floor price, an idea sector regulator Trai has rejected repeatedly. Now, the Cellular Operators’ Association has supported the idea and the government itself is reported to favour it. The government should refrain from any such move.
Suppose the regulator were not in the picture. If three companies together decide to fix a price, how would the Competition Commission of India view the decision? It would be deemed a blatant act of cartelisation. Data and call tariffs would go up. Telecom would become unaffordable for those at the bottom of the income pyramid, just whenDigital Indiaoffers them multiple ways to combat deprivation. Allowing three companies to fix a minimum price would be cited as a precedent by players in other industries, say, cement. The right to equality and non-discrimination would be invoked in the highest court of the land and the right to rig prices accorded to the telecom industry would be demanded as an equitable right for other industries as well. All this is entirely avoidable. It was the government’s fault that it persisted with demands for inflated shares of revenue into which non-telecom revenues had been inserted. In keeping with the government’s mood to correct past policy mistakes, it should scrap its AGR demands, passing an ordinance to get over the Supreme Court order on the dues, if necessary.
Raising the floor price would further tilt the playing field in telecom, the degree of benefit accruing to a player varying inversely with AGR dues. That would open another can of worms for the government as well.