Telecom firms see opening of Pandora's box with SC order

The Supreme Court order Thursday that the national auditor CAG can audit telecom operators could open a Pandora's box and lead to similar demand in other industries, unhappy service providers said.

"Yes, whatever judgment Supreme Court has given to us we will abide by it. But it has certain other connotations which we should be aware of. This judgment has no precedence and any company that contributes to the Consolidated Fund of India is liable to audit by the CAG. This is opening of Pandora's box," Ashok Sud, secretary general, Association of Unified Telecom Service Providers of India (AUSPI) - the CDMA operators association - told IANS.

An apex court bench headed by Justice K.S. Radhakrishnan upheld a Delhi High Court order that the Comptroller and Auditor General (CAG) can audit the revenue receipts of telecom operators.

Companies and individuals contribute to the Consolidated Fund of India by paying in the form of taxes and royalties. Any under-reporting will result in a loss of revenue to the exchequer.

"There are immense long-term implications. As it is, the Department of Telecom has the right to conduct special audit if they wish to, and now CAG is the third provision," he added.

Justice Radhakrishnan said the CAG audit was needed to ensure parliamentary control over the use of natural resources which exclusively rest with the government and are given for use to private operators.

Rajan S Mathews, director general, Cellular Operators' Association of India (COAI) - the GSM body - said: "We have two concerns. Firstly, multiple audits by multiple agencies (DoT, TRAI, TERM, SEBI and now CAG), increasing the costs and time to operators."

"Secondly, increasing the scope of CAG to private entities. By the logic of the court, every tax payer should also be subject to audit by the CAG, in addition to the IT department. This ruling will become a larger issue for corporate India and not just mobile operators," he added.

The Supreme Court passed the order over petitions filed by both AUSPI and COAI challenging the Jan 6 Delhi High Court verdict which had given the go ahead to the CAG to audit telecom companies' accounts.

"Industry is definitely not happy with the situation and that is the reason it went to the Supreme Court. We already pay a chunk of our earnings to the government. Recently the spectrum auction got completed and most of the operators have bought airwaves. Now if we cannot keep a margin for all these stringent rules, the burden will be passed on to the subscribers," an industry source said.

Private telecom companies are required to pay three to eight percent of their revenue as spectrum usage charges, depending on how much spectrum they use. The companies are also required to pay to the government six to eight percent of their revenue as licence fees.

The government this February mopped up Rs.61,162.22 crore in the second generation (2G) spectrum auction in 900 MHz and 1,800 MHz airwaves.

Eight mobile phone service providers took part in the auction that began Feb 3 for 46 MHz in 900 MHz band and 385 MHz in 1,800 MHz band. The service providers who took part in the auction are Reliance Communications, Reliance Jio, Bharti Airtel, Vodafone, Telewings, Aircel, Tata Teleservices and Idea Cellular.

Mahesh Uppal, director of telecom consultancy firm Com First, told IANS that "not all operators will be equally impacted from this decision but implementation will remain a concern since it involves billions of dollars of revenues of around 200 licences over 22 service areas".