Why Sibal overruled his bureaucrats on RCom penalties

When bureaucrats of the Department of Telecom presented Communications Minister Kapil Sibal with a file demanding the imposition of a fine of Rs 50 crore on Reliance Communications (RCom) of the Anil Ambani group, he was probably flabbergasted.

He had hardly come into the job a few days ago and here was a file seeking to impose a fine of Rs 50 crore for alleged breach of contract in the Universal Service Obligation space (USOF).

[caption id=“attachment_35377” align=“alignleft” width=“380” caption=“RCom’s agreement with the Universal Service Obligation Fund had its own clear penalty clauses, which called for fines of Rs 500 a day for service disruption . Reuters”]  [/caption]

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The case was simple. RCom had unilaterally informed the USOF administrator in December 2010 that it was pulling the plug on several base tower stations (BTSs) in rural areas that it had contracted to run because it found them unviable.

Sibal knew that he was sitting on a landmine. While the RCom move was patently ill-advised, the company’s agreement with the Universal Service Obligation Fund had its own clear penalty clauses, which called for fines of Rs 500 a day for service disruption .

The ministry bureaucrats, on the other hand, used the maximum penalty prescribed under the Unified Access Service Licence (UASL) - which is the general licence issued to all basic and mobile telephony services companies.

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Sibal clearly saw that in the current climate where telecom was widely seen as the source of trouble with the law, bureaucrats were being extra careful to protect themselves from allegations of wrongdoing by prescribing unduly harsh punishments for RCom’s transgressions.

But he decided to do what he felt was right. He, therefore, over-ruled his babus and took the bold decision to set things right by invoking the penalty clause under USOF, and not UASL.

This is how he saved RCom from a bigger fine.