Policymakers should not look at spectrum sale only to rake up non-tax revenues or present a rosy balance sheet of the government finances. Managing macro-economic fundamentals may definitely be a Herculean task for finance minister Arun Jaitley when he rises to present the last full budget of this government on February 1. But telecommunications industry cannot become the whipping boy and provider of steady revenue source for successive finance ministers.
From days of Palaniappan Chidambaram, spectrum auctions and resultant revenues were always factored in designing the Rs 20 lakh crore plus federal budget. In a couple of years, finance ministers could actually put up a decent budget show only because they were able to realise over Rs 100,000 crore through spectrum sale. This must stop forthwith if the telecom companies have to do their core job of providing quality services at affordable rates and still stay competitively ebullient vis-à-vis their global peers.
Telecom spectrum scam is behind us, good, bad or ugly. Now, the industry has to move on with transparent pricing of its services especially the value add data offers. Also, if telecom companies were not to default on repayment of over Rs 450,000 crore borrowing from the banks, then finance ministers must desist the temptation of huge expectations from spectrum auctions. Staggered and deferred repayments by telecom companies show their financial stress. Tight liquidity with the telecom companies was one big reason for the government to postpone spectrum auctions.
In last fiscal, finance minister Jaitley fetched nearly Rs 34,000 crore lower as against the projected non-tax revenues worth Rs 98,995 crore through sale of spectrum airwaves. This fiscal also, Jaitley was unable to mop up a single rupee even after the government scaled down revenue accruals from spectrum sale to Rs 44,342 crore as against an earlier projection of Rs 47,304 crore.
Financial Chronicle lead story in Tuesday’s edition outlines the possibility of postponing the auction of the high value 275 mhz airwaves to rollout 5G services and unsold 4G spectrum in seven bands at 1389 mhz later this year.
There’s no guarantee that government will succeed in selling airwaves fully. Biggest factors in spectrum auctions from now on would be three fold. Determining the base price for different spectrum bands will be the starting point to kick off auctions with decent traction. Secondly, cut throat competition in the highly competitive data services market between the top players like Airtel, Idea and Vodafone as against Reliance Jio could possibly trigger interest in spectrum auctions to corner high value airwaves. Thirdly, 5G auctions elsewhere in more advanced markets of United Kingdom and South Korea may serve as pointer on what’s to be expected back home.
In this backdrop, Jaitley will do well by moderating his expectations of collecting non-tax revenues from spectrum sale. More than the revenue, India’s target should be to quickly rollout high value 5G data services like Internet of Things (IoT), broadcast communication and serve as crucial lifeline communication in natural disaster management. If India expects to do a catching up act, then making spectrum sale hassle free should be the way to go. Secondly, leveraging the 5G data speeds and expanding 4G matrix could have cumulative effect for digital transformation that Narendra Modi proposes to bring about at the grassroots level. Thirdly, India must aspire to become a global telecom power with transparent pricing, fierce competition that’s hitherto unknown and export telecom services as a huge component of services trade globally.
Companies eager to prove domineering role cannot lose sight of the larger responsibilities they have to shoulder in establishing India as a major telecom services brand destination. Unless these issues are factored in, spectrum auctions will have very little positive impact for a bourgeoning Indian economy.