[Answered] Evaluate the impact of the New Telecom Policy’s revenue-sharing model on the sector’s growth. Examine how the Supreme Court’s ruling on dues has mitigated a crippling financial blow.”

Introduction

India’s telecom sector, serving over 1.17 billion subscribers (TRAI, 2024), expanded rapidly after the 1999 New Telecom Policy introduced revenue-sharing, replacing fixed fees, catalysing competition, FDI inflows, and nationwide digital penetration.

Impact of the New Telecom Policy (NTP-1999) Revenue-Sharing Model on Sectoral Growth

1. Shift from fixed licensing to revenue-sharing boosted market entry: Before 1999, high fixed licence fees discouraged private players, resulting in poor teledensity (<3%). NTP-1999 introduced Adjusted Gross Revenue (AGR)-based revenue sharing, reducing upfront costs and making the sector commercially viable.
2. Massive growth in teledensity and affordability: India’s teledensity rose from 3% in 2000 to over 93% by 2023 (TRAI). Tariffs became among the world’s lowest, promoting digital inclusion. Prepaid innovation, discounts, and mass-market pricing expanded rural access.
3. Explosion of investment and technology upgradation: FDI into telecom increased from USD 60 million (1999) to over USD 39 billion by 2023 (DPIIT). Enabled transition from 2G → 3G → 4G → 5G. Spectrum auctions, tower-sharing, and infrastructure modernisation were supported by predictable licensing costs.
4. Strengthening of competition and consumer welfare: Revenue-sharing encouraged multiple operators, lowering call/data prices. India became the highest mobile data-consuming nation (Ericsson Mobility Report 2023).
5. But definition disputes over AGR created systemic uncertainty: AGR included non-telecom revenues, like interest/dividends—expanding payable dues. Accounting standards (AS-9) define revenue as actual inflows; operators claimed dues must apply only to realised revenue after discounts. The dispute became a structural fault line in policy–regulation coherence.

The 2019 Supreme Court Judgement: A Crippling Financial Blow

1. SC’s broad interpretation of AGR expanded liabilities: Court insisted companies pay licence fees on published tariff (MRP), not discounted price actually earned. Example: Voucher MRP ₹100 discounted to ₹75 → dues calculated on ₹100. Violated principles of accrual accounting and AS-9 norms.
2. Catastrophic financial implications: Total demand: ₹93,000 crore, of which ₹70,000 crore (75%) was interest, penalties, and interest on penalty. Principal dues: only ₹23,000 crore. Monthly-compounding interest at 14%+, plus penalty, created unsustainable financial distress.
3. Sectoral impact: consolidation, losses, and risk to competition: Vodafone-Idea faced insolvency risk; market moved from 12 operators → 3 private players. Diminished competition threatened consumer choice and tariff affordability. Counter to National Digital Communications Policy (NDCP 2018) goals.

How the Recent Supreme Court Relief Mitigates the Blow

1. Reconsideration of AGR and waiver of penal components: SC’s latest order permits: Re-calculation of dues, Possible waiver of interest and penalties and recognition that operators followed TDSAT rulings until 2019.
2. Restoring financial sustainability: Reduces insolvency risk for Vodafone-Idea, enables operators to reinvest in 5G rollout and infra and encourages lender confidence, easing sectoral liquidity.
3. Aligns judicial reasoning with economic impact assessment: SC has earlier stressed (2016) that courts must consider economic consequences of their orders. Reassessment aligns with global best practices where penalties require “wilful default” (per 1970 SC principle).
4. Supports long-term sectoral stability: Relief helps preserve a three-player market, maintaining competition. Vital for Digital India, BharatNet, and 5G/6G ambitions.

Conclusion

As highlighted in Raghuram Rajan’s I Do What I Do, regulatory clarity underpins economic stability. The SC’s reconsideration restores balance, enabling India’s telecom sector to pursue inclusive, competitive, digital growth.