Reforms were started in India more than eight years ago on the premise that Government would get out of business. It would also globalise the economy by reducing import tariffs and allowing foreign investment. A prerequisite of such a strategy was that the Government kept its revenues buoyant by some means or the other since reduction of duties meant there would be less taxes being collected on a comparative basis. In most countries this has been achieved by selling licences in keysectors of the economy like telecom, mining, oil exploration and by actually divesting the Government stake and in-some cases-management in companies.

It is necessary not to lose sight of this basic fact when looking at the goings on at present in the telecom industry. To recollect, several years ago the Government put out tenders for various segments of the telecom sector starting from paging services and then expanding it to cellular and basic telephony. There was enthusiasm bordering on euphoria when these were announced. Everybody who was anybody and thought he has some cash jumped into the fray. Very soon the licences were awarded. No surprise, the winners were....Tata, Birla, Reliance, RPG, Essar, Escorts, Modi, Ispat.

The next few years showed that the euphoria was both unwarranted and short-lived. As far as the paging business was concerned, companies were quickly off the ground but found that there was little money to be made. Cellular was slightly better with high density centres like Delhi andMumbai performing better than the other cities like Bangalore, Chennai and Karnataka. Basic licences have been the biggest disaster with hardly anybody off the ground. The Indian telecom services sector has gone from inception to sickness without even a whiff of the intervening prosperity. Industry then did what it knows best. It decided that it would not pay up but ask for a package. After all, the companies involved have dealt with the Government for years and know how to orchestrate a case. Such licence overdues now exceed Rs 3,000 crore and are at the core of the dispute.

The consequences of this failure of telecom companies to deliver have been tragic. The people have every reason to feel disgusted with these big business groups which had totally failed to deliver on the licences, however valid the reasons may be. Even in relatively successful areas like cellular, we have the worst form of private capitalism in terms of cartel pricing; in Delhi customers pay huge tariffs to cellular companies even toreceive calls! Even so, for once the people are looking forward to having MTNL come with a cellular service that is better value for money.

As pointed out earlier, one of the prerequisites of a successful reforms programme in any country is the ability of the Government to sell licences and assets so as to generate cash. It has been the experience in many countries that telecom licences are the most valuable and generate cash in the quickest possible time. This being so I can understand the chagrin of the union communications minister in finding the country's top 6 or 7 business groups which everyday announce high profits, new automobile launches and major acquisitions refusing to pay under a contract with his Government.

This is not to say that the telecom companies are totally to be blamed for this imbroglio. If their propaganda is to be believed--and a lot of this very technical-the Government appears to have fallen behind in its commitments to provide infrastructure. Also the financial institutionsare dragging their feet about lending to these companies. In all fairness, it does not surprise me that there have been Government delays. However if this does amount to a breach of contract, the telecom companies should pay up. On the issue of the reluctance of All India Finance Institutions, I am personally very happy that at least for once they have been not rushed in without understanding the basic profitability of a new business. What surprises me in this whole affair is how telecom companies made such a faux pas in making business plans. In at least two cases I know of bids made by large companies which were so much off the market in over estimating the market size that foreign telecom companies described these bids as ``pie in the sky'' projections. There also appears to have been overdue optimism as regards their ability to make the Government give the necessary clearances within the time frame promised. Telecom is something new to Indians and these business houses who had no experience ought to havebeen more cautious. It is not surprising that the Bharti Group who did their homework and have stuck to telecom have been one of the success stories and deservedly so.

I am sure there would be many people in this country who would hope that the Government continues to take a strong stand and gets at least 20 per cent of the licence fees paid by these companies. No Government can retain its credibility if it goes about increasing the price of food items sold in ration shops in one breath but permits the country's largest business houses from paying up on signed contracts in the other. Unless a court upholds the views of the telecom companies and directs not to pay the fees, the Government should demand its pound of flesh. It can simultaneously take steps to help these companies within the ambit of commercial prudence. The telecom companies should remember an American slogan made popular under Kennedy--What is good for America is good enough for General Motors!

(The author owns a private investmentbanking firm in Delhi. He also served as Country Head --Merchant Banking ,Citibank)