India’s telecom crisis has deepened with Vodafone Idea and Bharti Airtel having to cough up thousands of crores in dues to the government. E-commerce platforms like Amazon and Flipkart are also in trouble as the Narendra Modi government plans to punish them for alleged predatory pricing. Such developments dampen business sentiment and hurt India’s attraction for investment.
ThePrint asks: Telecom crisis, targeting e-commerce: Is Ease of Doing Business in Modi’s India a myth?
Modi govt curbed red tape, enforced guidelines for businesses. But has been indecisive on telecom issues
Managing Director, YourNest Venture Capital
From a venture-capitalist perspective, India is doing well on the Ease of Doing Business front. Especially for startups, issues like taxation are finally finding clarity and fair guidelines are being put in place like never before.
The Narendra Modi government has very clearly stated that for venture capitalists who invest in startups, any income that they make will be counted as capital income, and not business income. Simultaneously, there is also clarity on the fact that non-residents (whether an Indian or a foreigner) can freely invest as stipulated under the SEBI Alternative Investment Funds Regulations, 2012. Red tape has been done away with and the entire process has become a lot easier.
We are able to approach the Department for Promotion of Industry and Internal Trade (DPIIT), which is the touchpoint between investors and industrialists, almost every six months and voice our concerns. We put forth our agendas, which do get adequately addressed by this department. Moreover, there is always someone taking ownership as well as creating a platform for inter-ministerial bodies to come together.
At these meetings, representatives from the Securities and Exchange Board of India (SEBI) and the Ministry of Finance are present to hear and act on the concerns of venture capitalists. The Modi government has also largely resolved the problem of angel tax.
However, the Modi government has been a lot more indecisive on issues related to the telecom industry. If the government pays more attention to get the right return on investment, then everyone will enjoy a much better quality of telecom services.
Modi govt must enforce SC order on telecos to pay dues, but shouldn’t interfere much in e-commerce
“Telecom crisis” and “over regulation in e-commerce” are two entirely different issues. The so–called ‘telecom crisis’ is mainly due to a recent Supreme Court order asking telecom companies to pay licence fee and penalty to the Centre.
Telecom operators in India haven’t paid licence fee on total AGR (annual gross revenue) for the last 18 years, hence total dues on operators is about Rs 1.3 lakh crore. This also raises corporate governance issues because these companies didn’t make the provision for these payments in their books even though this matter was in the Supreme Court since 2003.
The Modi government should enforce the Supreme Court verdict in letter and spirit. It will send a clear signal that the systems are transparent in India and that the present government doesn’t encourage crony capitalism.
Global companies and investors take such signals positively. The government has set up a committee of secretaries under cabinet secretary Rajiv Gauba to look into the financial stress in the telecom sector. Relief can be considered on other items such as the GST rate for this sector and reserve price for future auctions.
As far as e-commerce is concerned, I believe that the sector is over–regulated.The Modi government should not interfere much in this segment.
Policy uncertainty affecting Ease of Doing Business. Jio price war can harm other telecos
“Policy uncertainty” certainly affects any country’s Ease of Doing Business. That’s exactly what is happening in India right now. The telecommunication sector had singlehandedly revolutionised the growth story in India.
But today, the telecommunication sector has been pushed to astounding levels of debt and impending bankruptcy due to the absence of a healthy and competitive environment. The telecom players are now competing on an unequal footing because of the “price war” among them. Jio’s entry in the market by offering high-speed data at some of the lowest rates in the world can potentially wipe off other telecom firms in the country.
The elements of “monopoly” in the telecommunication sector, with support from the government, can have adverse consequences in the long term. However, “cartelisation” is no good either.
Yet another concern ex-post to any adverse public policy decision is “humanitarian” in nature and it also has “public finance implications”. Labour retrenchment and severance packages, plausible reduction in the retirement age of the employees and other ad hoc and arbitrary fiscal packages are only some of the examples of the latter.
SC order has little do with Modi govt’s performance in Ease of Doing Business as it’s not a policy decision
Fellow, Takshashila’s Technology & Policy Research Programme
The Supreme Court last month passed an order on the AGR of telecom companies. It has disagreed over how much room the telecom companies have for relief when it comes to paying dues.
However, it has got very little to do with the Modi government’s intervention because it was the Supreme Court that announced its decision. Moreover, I find it difficult to decipher why the Supreme Court’s order, which is an interpretation of a licensed provision, is being correlated with the Ease of Doing Business under the Modi government.
Now that the Supreme Court has passed the order, if the Modi government does recover money from the telecom firms, then these companies are likely to go bankrupt. It is in such a scenario that the question of Ease of Doing Business will arise.
So, the government could either call for a change in the AGR policy or not collect it at all from the telecom companies. Either way, I think it is too early for us to ask or answer this question.
By Revathi Krishnan and Kairvy Grewal