Contents
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
- 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.
- 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.
- 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.
- 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).
- 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
- 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.
- 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.
- 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
- 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.
- 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.
- 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).
- 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.
