Discussions between DoT and FinMin at an advanced stage

The Cabinet note for a government support to Vodafone Idea is not yet ready. However, discussions between the Department of Telecommunications (DoT) and the finance ministry are at an advanced stage.

Last week there were expectations that the package would be announced during the Cabinet meet. That did not happen as the departments, despite the need to step in, wish to proceed cautiously.

The challenge for the Centre in developing a Cabinet note is not only to work out a rescue package, a top level official said. There is also no precedent for it. The Centre has never stepped in to rescue any private sector company using money from its Budget and so none of the options being considered, including a moratorium on payment of adjusted gross revenue and reduction in spectrum usage charges, have a precedence.

The options have always been to offer a tax set off and that too as a sectoral support. Vodafone Idea has a cumulative debt of Rs 1.92 trillion owed to banks and the government. If the company folds up, India will be left with just two major companies as telecom service providers, Bharti Airtel and RJio.

State-owned BSNL and MTNL are already sick and depend on government support to exist as going concerns. For the scale of digital transformation, India is attempting having just two operators makes the stakes too risky. Mergers of the two state owned companies with Vodafone Idea have been ruled out.

Matters are also a bit complicated since Telecom Secretary Anshu Prakash is due to retire at the end of September. Minister for Communications Ashwini Vaishnaw has also taken over the reins just barely two months ago — in July. Given the stakes involved, there is a discussion at the top level if an OSD should be appointed in DoT right away to smoothen the working of the relief package. Since this will be a complicated exercise the Centre will execute with Vodafone Idea over a long time, it is necessary to offer the incoming secretary a feel of the issues involved.

For the Centre proceeding with care to unroll the unusual support programme is also meant to ensure that the beleaguered company does not go the way of BSNL and MTNL. These state-owned telecom companies are now entirely dependent on budgetary support and this is something, the centre is certain, which cannot be repeated. Business Standard News