India’s prominent mobile-phone companies, Bharti Airtel, Vodafone Idea and Tata Teleservices are facing the risk of closure if statutory dues amounting to Rs.1.64 lakh crores (Rs.1, 640 billion) are not paid to the Government of India (GoI) before March 17.

On this day the Supreme Court will next hear on why a Department of Telecommunications (DoT) official overruled its earlier October 2019 order of collection of all dues from the firms by Jan. 23.

The managing directors and directors of defaulting operators who have also been show caused on Feb. 14 will need to furnish reasons as to why contempt proceedings should not be initiated against them.

Interestingly, it was the DoT that had initiated legal proceedings against the firms for payment of an amount arrived at by the Comptroller & Audit General report and its own internal report both submitted to the court and the Parliament, but after the October 2019 order it has been dilly dallying on the collection of the dues.

In November 2019 the DoT asked the operators to self-assess their dues and make payment accordingly and self-computation by firms meant vastly varying figures from those arrived at by the government.

According to the revenue computation rules the adjusted gross revenue (AGR) is license fees, interest and penalties that till 2017 amounts to Rs.926.42 billion, and spectrum usage charges (SUC) till Jan. 23, 2020 is Rs.708.69 billion.

Further there are concerns that if AGR of 2018 and 2019 were to be put up for calculation it would easily tantamount to an additional 40% and with wide variations in self-assessments and government reviews the industry would be embroiled in more legal disputes.

As of now Bharti Airtel has paid Rs.100 billion and Vodafone Idea has paid Rs.35 billion.

The now-defunct Tata Teleservices claims it has made the “full and final payment” of Rs.21.97 billion but the GoI insists that the firm still owes interest and penalty components of the AGR.

This problem with these firms became aggravated about 14 years hence when the firms moved to a new system (1999) that mandated operators to share a certain percentage of their revenue, thereby including income from non-core items, to the government.

While initially the operators signed in for the new system but then aired grievances against it and insisted on sharing of revenue from telecom services, throwing open the law to adjudicate on it and which was decided in favor of the government.

Government sources inform that the government department is consulting legal eagles on the whole issue and whether it can invoke bank guarantees in the case of defaults though in the twin cases of RCOM and Aircel the GoI hurriedly encashed all bank guarantees as even their dues amounted to far less than those to be paid up by the three operators currently in the dock.

It is learnt that Bharti Airtel Chairman Sunil Bharti Mittal, and Vodafone Idea Chairman Kumar Mangalam Birla have met up with Telecom Minister Ravi Shankar Prasad, Finance Minister Nirmala Sitharaman and the Prime Minister’s Office, to lobby for resolution to the “unprecedented crisis” in the form of tax and levy reduction to the industry and raising of tariffs as their cash strapped firms are clearly on the verge of bankruptcy if they are pushed to cough out the entire amount of dues.

Astonishing as it is to imagine the government showing no leniency, in the beginning when it knocked on the legal doors for its share of the revenue pie, the operators too did not display any intentions of returning making provisions for payment even when they were in the capacity to do so.

As matters stand the government that has aired its keenness to retain at least three players in the telecom sector, in keeping with the consumer interests and loss of jobs scenario in mind, it will need to come up a bail-out package, probably by annulling some part of the payment, coupled with revamping of its policy and changing its model for calculation of license fee, revenue sharing on non-core items and interest penalties, etc. for prevention of future similar conflicts.

There are talks of creation of a stress fund by banks that could lend to distressed companies and deferment of SUC and license fees for a substantial period.

Though prospects of Bharti Airtel look bright as it recently managed to raise $3 billion through share sale and a bond issue, Vodafone Idea appears to be staring down the barrel of bankruptcy.

Besides the three operators, publicly owned non-telecom companies, GAIL (India) Ltd, Oil India Ltd and Power Grid Corporation of India Ltd, who were issued spectrum are also mulling on moving the DoT for two year moratorium and waiving of interest and deferred payment of dues as they too have AGR and other dues amounting to Rs.1, 830 billion (GAIL), Rs.480 billion (Oil India) and Rs.220 billion (Power Grid).

At a precarious time when global perception on India’s investment credentials are at stake, the country’s GDP has dipped and unemployment on a 40 year high, the idea of Vodafone Idea crashing and approximately 13,000 losing their jobs has stirred and shaken the entire telecom industry that was among the handful of success stories of post-liberalization India.