Govt In Favour of Floor Pricing, TRAI Not In Support of Move

A lot of discussions seem to be going on behind closed doors in the government offices as there are multiple proposals on the table to aid the financial health of the sector, especially Vodafone Idea, which is the worst-hit of the telcos.

Highlights

  • The telecom industry could surely use regulations that put in a floor pricing for the companies
  • The government is also in favour of allowing Vodafone Idea to convert its debt to equit
  • Vodafone Idea has dues above Rs 1.5 lakh crore

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Govt Favour of Floor pricing

The telecom industry could surely use regulations that put in a floor pricing for the companies. However, until now, there had been no breakthrough in this matter, but it seems that now the government seems to be in favour of bringing in a floor pricing regulation. As per the latest reports on the matter, a Department of Telecommunications (DoT) officer has remarked that the Finance Ministry and the DoT happen to be in agreement about floor pricing. On the other hand, is the sector regulator, Telecom Regulatory Authority of India (TRAI), which has not been in favour of floor pricing. As per TRAI, a floor pricing regime would be a step against the consumers’ interests.

Floor Pricing to be Similar to FRP

A lot of discussions seem to be going on behind closed doors in the government offices as there are multiple proposals on the table to aid the financial health of the sector, especially Vodafone Idea, which is the worst-hit of the telcos. The DoT official compared the floor pricing mechanism to the Fair and Remunerative Prices (FRP) mechanism of the sugarcane industry, which helps the farmers get justified prices for their sugarcane produce. Not only this, but the government is also in favour of allowing Vodafone Idea to convert its debt to equity. However, one idea which did not find much support from DoT is the provision of a moratorium for spectrum payments. As per an Indian Express report, DoT receives Rs 6,000 crore worth of guarantees from Bharti Airtel and Vodafone Idea. The government also opposed the idea of encashing the bank guarantees.

DoT Officials Examining Every Possible Option

The DoT official further added that no options are off the table, meaning that the government will try to hold every stakeholder's interests while deciding on an option. Vodafone Idea has dues above Rs 1.5 lakh crore, a lot of which is because of the Adjusted Gross Revenue (AGR) ruling by the Supreme Court. Vodafone Idea has already shown concerns about shutting shop if no relief comes its way from the government. The company’s executive, Kumar Mangalam Birla, is also ready to give up his 27% stake in the company to any taker, private or public. This move has further turned up the heat in the sector and raised eyebrows about telco’s survival.

Reported By

Junior Editor

Arpit spends his day closely following the telecom and tech industry. A music connoisseur and a night owl, he also takes a deep interest in the Indian technology start-up scene and spends rest of his time spilling poetry and stories on paper.

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