The Congress Frankenstein

The telecom sector in the country has been on a roller coaster ride. Most of the sector's troubles started in 2008 with the issue of 2G licenses. With license and spectrum being given to many new players, the sector subsequently saw one of the worst price wars ever. The resulting competition, hit the margins of every operator in the industry. Since then things have been more downhill than uphill. And the government with its regulations has not helped matters.

The regulators, Department of Telecommunications (DoT) and TRAI, have been working more for the government than what they have been for the sector. Everyday there are new levies and fines that they inflict on the sector. This has led the balance sheets of all operators to be stretched to the hilt. In a recent shocker, DoT has demanded an additional Rs 27.64 bn from 9 operators. These are the operators whose license was cancelled in February last year by the Supreme Court. The amount that DoT has demanded is towards the onetime charge on the spectrum held by them till their license was cancelled. As per the DoT the onetime charge on these operators is valid because they did hold the spectrum from 2008 till February 2012.

We are not going to try and get into the justification of cancelling licenses and the 2G scam. What we would like to highlight is a typical case of an industry which was doing well. Its fortunes attracted the government which seems to have descended on it like a predatory bird. And now the government and the regulators are trying to milk it for all its worth.

It is true that the government needs funds. Funds to bridge its yawning fiscal deficit. But this should not be at the cost of driving an entire industry into bankruptcy. It has already burdened the sector with higher spectrum charges and spectrum rates. The November 2012 spectrum auction was nothing but a ridiculous display of the government's greed. The levy of such onetime charges is not going to help matters.

Eventually every business will want to earn a return. And if the government continues with its predatory policies, the sector will go into losses instead of earning returns. This would not just hurt the business but would also hurt India's image in the eyes of the foreign investors that it is desperately trying to attract. The latter have already been cribbing about how business conditions in India are difficult thanks to the government. The policies do not help the common man either. If the government continues to milk the telcos for every penny, eventually the telcos will start milking the common man to earn more through higher telecom rates. It is high time that the government changed its stance and started trying to cut its own wasteful expenditures to bridge its fiscal deficit. That would be better than killing a sector that provides a necessary service.

The above is from the mail I receive from Equitymaster

The UPA government has become a Frankenstein.

Its corrupt ways has destroyed the whole system and its never ending appetite for money is making it impose newer and newer taxes.

They have already started taxing water.

In the not too distant future I won't be surprised if they start taxing for the air we breathe in and for piss and shit we pass out.