Of sector fortunes tied to govt...

Mon, 9 May Pre-Open

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We may be a couple of decades away from the era of licensing raj and closed economic policies. But even today there are a couple of sectors whose fortunes are completely tied to government policies. Their effectiveness or lack of it defines the ability of the sector to make a difference to the Indian economy's long term goals.

The telecom sector of India is an example of excellent business gone wary thanks to the government. The sector that was considered to be one of the sunrise sectors for investment is now one clouded with the maximum risks. The government has done everything in its power to bring the sector down to its current state of dismal affairs. Scams, ridiculous spectrum pricing, hyper competition, ludicrous merger & acquisition (M&A) rules. Name it the government has done it for the telecom sector.

Things were expected to change when the erstwhile telecom minister, Mr A Raja was ousted and Mr Kapil Sibal took charge. The latter made tall claims of ensuring that a new telecom policy (NTP) would be put up within 100 days of his taking office. This policy would deal with the woes of the operators in the sector. But much of his time was instead spent on arguing the exact amount of loss to the exchequer in the infamous 2G scam.

Now the telecom minister has stated that the NTP would definitely be framed by August this year. As per Mr Sibal, the policy is being framed in discussion with the industry players and would address the issues like pricing and allotment of spectrum, spectrum trading as well as indigenous manufacturing and security. It would look at de-linking spectrum from licensing and also concentrate on flexibility with licenses and their renewal. The NTP would also address the M&A norms and try and make them more agreeable to promote consolidation in the industry. However, each circle would have six operators at least. This would definitely be a sigh of relief for the present market wherein there are nearly fourteen operators in each circle.

Players in the telecom sector have been eagerly waiting for the new telecom policy. Operators have expressed hopes that the policy would be in the favor of the sector players. They are hopeful that the NTP brings about the much needed change that would bolster the future growth for the sector.

However, given the government's track record we would keep our hopes restrained. It is not just the power or telecom sector that has failed to become the poster boy of Indian economy's future dominance. But so far government policies have left a lot to be desired in furthering the cause of business growth.