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iasparliament
July 17, 2018
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What is the issue?

  • Tata Teleservices has announced a Rs 275 billion loss in 2017-18 as highlighted in a recent report.
  • This is indicative of a larger trouble in India's telecommunications sector.

How is the telecom sector performing?

  • Tata Teleservices' loss was partly due to a write-down following the transfer of its wireless business to Bharti Airtel.
  • Even so, this sets a new record for corporate India.
  • The second-highest such loss is also in telecommunications and also in 2017-18.
  • Reliance Communications lost Rs 239 billion in the same financial year.
  • Many other players have exited the sector, leading to significant job losses.
  • These underline the troubled state of India's telecommunication sector.
  • Only the disruptive new entrant, Reliance Jio, has a healthy financial position.
  • Even this is due to the funds being pumped in from the cash-rich group.

What are the concerns in the sector?

  • Competition - There has been a consumer-friendly race in the recent period to make data cheaper.
  • Consequently, past drawbacks and the current unbalanced competition have distorted the market.
  • It has also hampered the growth-focused investment.
  • Policies - The overall policy in the sector has neither helped its growth nor been consistently in favour of consumers.
  • There is a continuing concern of inconsistency and arbitrariness in the policy.
  • There have been some questionable regulatory decisions that are likely helping the newcomers.
  • It is making it easier for a cash-rich entrant to seek dominance.
  • But existing firms will also need to make investments if India is to have a healthy telecom sector.
  • Approach - The government’s view of the sector has become focused on its ability to provide non-tax revenue.
  • It is missing to see the sector as an engine of growth or provider of essential services.
  • This flawed approach has indeed led to the current impasse.

What lies ahead?

  • The communications sector has played a significant role in the past to drive Indian growth.
  • If India is to once again come close to double-digit growth, telecom is a significant sector to focus on.
  • There is thus a need for a competitive market structure in the telecom sector.
  • Companies have to be incentivised to continually improve service quality to ensure that consumers are benefited.
  • Administrative discretion that is facilitating opportunities for corrupt dealings has to be minimised.
  • These are essential reforms to alter the state's approach to the telecommunications sector and ensure its beneficial contribution.

 

Source: Business Standard

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