Sunil Jain: Broadcast this call

RATIONAL EXPECTATIONS

Within just a few weeks of the Tatas approaching the TDSAT for justice, and the Chennai High Court giving a stay on the TDSAT's orders (see "Watch this broadcast," April 9), they were back at the TDSAT last week. Not for their TataSky DTH venture this time, but for group firm Tata Teleservices Ltd, and this time the TDSAT delivered, and within minutes!

The ministry of communication was planning to encash bank guarantees of the firm last Friday""the firm said it was unfair, approached the TDSAT on Thursday and the matter was listed for the very next day. Given, perhaps, the TDSAT's anger in the DTH matter, and the speed at which this matter was listed, the government lawyer quickly backed down, and within minutes of the hearing, said the ministry would now examine the points made by the Tatas (for more than a year!) and issue a fresh notice""not satisfied with just this, the TDSAT members got him to commit that there would be no unilateral threats of encashing bank guarantees until the tribunal examined the matter.

What makes the case so interesting, of course, is not just the amounts involved""at a few hundred crore rupees, the sums are moderately large. But even if you dismiss the idea that the ministry of communications has it in for the Tatas after their spat with Sun TV, the case shows just how much power the ministry, any ministry, has over private firms and how arbitrarily this power is used. In such a situation, if a company chooses to pay off a politician/bureaucrat, you can hardly blame it.

The case itself is a simple one, and concerns the fees that telecom firms pay for what is called "microwave access" and "backbone", essentially what is required for them to transmit telecom signals from their towers to a controlling base station. The fees for such facilities were calculated through a complex formula in the past, though in April 2002, this was changed for cellular phone firms, who were asked pay a share of their revenue for this""for the old basic phone firms like Reliance Infocomm and Tata Teleservices, which migrated to full mobile phones in November 2003, this revenue-share model became applicable only in November 2006.

Don't get lost in the dates, the only thing that matters is that the fees were payable only when the mobile services became operational""there are enough letters of the ministry to show this is the case, and the fact that the cellular firms were paying their fees as revenue share goes to prove this as well (you can pay revenue-share only after a service has begun!). Curiously, however, around the beginning of last year, the ministry started sending letters to Tata Teleservices, saying the firm needed to pay up its dues on account of the "microwave access" and "backbone" charges. One letter, pertaining to 10 telecom circles, for instance, said Rs 28 crore was pending, another said Rs 63 crore was due for the Andhra Pradesh circle alone. The Tatas' reply to each was the same""the ministry's calculations were incorrect since it was charging from the date of allocation of the spectrum, and not the date of the service beginning, which is what the law was. Various government documents and letters were cited to show this was indeed the case.

The government, however, responded by saying it never bought the argument, and the date of allocation of frequency was important, not the date from which the firm using that frequency""it, however, did not cite any documents to show the change in the law.

The Tatas then argued that, under the law, whenever any new licence is to be signed, a firm has to get a "no dues" certificate from the ministry, not just for itself but for all allied/sister concerns. The fact that the company got this when it migrated to the Universal Access Service Licence (that's when the fixed line/WLL firms were allowed to offer full-blown mobility) in January 2004, the Tatas argued, clearly showed the alleged dues were an afterthought. (By the way, the fact that the Tatas now have pending "dues" means they cannot be granted the long-distance licence they've been trying to get for so long!)

The firm persisted and kept asking the ministry to provide details as to when the policy was changed to charge "microwave access" and "backbone" fees from the date of earmarking/allotment instead of the date the firm began using the service""this was obviously critical since, not only did the ministry apply a 15-16 per cent annual penal interest rate on the dues, it even applied a 150 per cent penalty. On March 28, 2007, the ministry's letter said, "the decision to charge royalty & license fee w.e.f. date of earmarking was taken during March 2005 only"!

A major policy change made, and it was taken without consulting anyone, without the mandatory public hearing. And, if the decision was taken in March 2005, how did the ministry justify calculating the Tatas' "dues" all the way back from 1999-00, and then multiply this manifold by applying penalties and penal interest rates on this?

While it is true the ministry may now alter its demand notice taking all this into account, especially now that it knows the TDSAT is watching it closely, the issues of unbridled power and the ability to change things with retrospective effect are truly chilling. So it would be unfortunate if, presuming the next demand notice substantially waives off the earlier "dues", the matter is allowed to die a natural death.