Kapil Sibal, former minister for communications and IT, believes that the current system of allocating spectrum through auctions needs an urgent relook, given the fragile financial health of the telecom industry. In an interview with tele.net, he shares his views about the areas that need immediate policy attention, as well as the future outlook for the industry. Excerpts.…
How would you assess the progress of the sector over the past two decades?
The Indian telecom sector was the golden goose that laid the golden eggs. Now, that golden goose does not lay any eggs. The sector had been liberalised under the Narasimha Rao regime. Post the spectrum allocation in the early 1990s, the sector witnessed a serious crisis. Later, during the Atal Bihari Vajpayee regime, it started to grow as the revenue sharing regime was introduced. The sector took big strides during the UPA-1 and UPA-2 regimes. But, in the middle of the UPA-2 regime, another crisis hit the sector when the erudite CAG expressed issues with the 2G spectrum allocation of 2008 and pegged the notional loss at Rs 1.76 trillion. Eventually, the licences were cancelled by the Supreme Court, which impacted the growth of the sector. Further, the players, in a bid to enhance their spectrum holdings, made unrealistic bids during auctions. Since there was not enough revenue in the sector, paying back loans became a challenge. The sector is today reeling under a debt of Rs 6 trillion.
What are some of the areas that need immediate policy and regulatory intervention?
One of the things we need to change in particular is the manner in which spectrum is being dealt with. Spectrum must be given at a price that is reasonable, which allows the telecom sector and telecom companies to invest in infrastructure for efficiencies and gives them enough room to fix call rates that are reasonable for the consumer.
What are your views on the sector’s changing competitive landscape?
There were 12 to 14 players in the sector at one point in time; now we are left with three private players. And of those three, one may fold up. Vodafone has lost billions of dollars worth of investments in the Indian telecom sector. If it opts out, it will impact the foreign investor sentiment substantially and hamper foreign investment into the country for a very long time.
Telcos are concerned about the exorbitant spectrum prices for the planned 5G auction. What is your view?
I don’t think the auctions will see a lot of bids.
Spectrum aside, do you think the industry has the wherewithal to bring in 5G?
Not at all. Take for instance the BharatNet project. The progress has been very slow. The target was to connect 250,000 gram panchayats several years ago but, till date, that fibre optic network is not in place. And even if the network does ultimately get installed across all gram panchayats, one has to ensure last-mile connectivity too. Who will invest? Players are making losses. They do not have money.
How was your experience as minister of communications and IT?
I took charge in the midst of a crisis and my whole objective was to handle the crisis and keep the ministry out of trouble. We managed that. We are the ones who conceived the idea of setting up the fibre optic network. But I think down the road, its implementation got into a big mess.
What is your outlook for the sector?
I am not very hopeful. A key objective of any infrastructure project is to bring returns. Take the roads sector. It is important to build first-class roads based on global standards. But this entails investments, and such projects must bring enough returns on the revenue side to make them justifiable. A lot of these infrastructure projects have become non-performing assets today because the economic model is bad. So, it is crucial that the economic model is changed. There is an urgent need to rethink.