Dinesh UnnikrishnanOct 10, 2019 08:29:35 IST
For businesses to feel the confidence of promised ease of doing business, it is utmost critical that governments/regulators exercise policy consistency. Frequent changes and last minute reversals from a set policy course can upset businesses and even discourage potential entrants waiting to step in with investments. In the past, India has seen such policy flip-flops in taxation laws that has spoiled the economy's image internationally painting an anti-business climate. It is strange to observe when Governments and regulators don't learn from the past and go back to the same unwarranted policy flip-flops.
The latest instance came when telecom service provider Reliance Jio on Wednesday announced it will charge customers 6 paise per minute for voice calls made to rival phone networks forced by regulatory uncertainty over a review of sunset clause set for so-called interconnect usage charge (IUC).
In a statement, Jio said the 6 paisa charge will remain in place till the time telecom operators are required to pay rivals for mobile phone calls made by their users to other operators' networks but will compensate customers by giving free data of equal value. The question here is not about one particular operator but a larger issue it brings into open. So far, Jio had to bear the Rs 13,500 crore payment as IUC which was made to rivals such as Bharti Airtel and Vodafone Idea. To recover the losses created by the TRAI move, the company has decided to charge customers 6 paise per minute for every call they make to a rival's network. That will be the first time that Jio users will pay for voice calls (till now, the company has been bearing the cost).
The debate on IUC has been around for a while now.
In 2017, telecom regulator TRAI had slashed the IUC to 6 paise per minute from 14 paise and had said this regime will end by January 2020. But it has now floated a consultation paper to review whether the regime timeline needs to be extended. With only two months to meet the sunset clause deadline, it is surprising that regulator has done a rethinking on the IUC, which will send a bad signal.
Policy reversals are even more harmful in an economy which is already struggling with a loss of business confidence and consumer confidence. This is a time Indian economy badly needs business confidence and participation of fresh private players. The telecom sector is critical to the overall GDP growth. The industry’s contribution to GDP is estimated to reach 8.2 percent by 2020, by when industry players are slated to also leverage 5G technologies to connect with global markets and ring in a fully networked, knowledge and services economy.
In the past, Indian economy has suffered hugely on account of policy flip-flops on corporate taxation and policies on allocation of natural resources. The damage caused by the dramatic U-turns in coal, telecom wave allocation policies and subsequent interventions of judiciary during UPA-era have caused great deal of uncertainty among both domestic and foreign companies. Such uncertainties and policy reversals that eventually led to a prolonged phase of policy paralysis can be cited as one of the reasons that paved way to a subsequent economic slowdown phase.
That mistake shouldn’t be repeated now.
The bottomline is this: Telecom sector regulator had set a clear policy roadmap to the industry in 2017 with respect to the controversial IUC charges by setting a sunset clause. Two years later, if the regulator chooses to reverse the decision by mooting a revision of the proposal, it will erode confidence of all stakeholders in future policy directions. Moreover, it will then discourage even the new entrants from taking the plunge, thereby only helping the existing monopolies. If enhancing competition and customer fairness is the idea, Trai needs to stick to its laid out roadmap and avoid last minute surprises. Killing the golden goose is always a bad idea. Regulators and governments must instill the confidence of policy certainty to businesses not work the other way.
Disclaimer: Reliance Industries Ltd. is the sole beneficiary of Independent Media Trust which controls Network18 Media & Investments Ltd which publishes Firstpost