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Current Affairs

VI promoter offers his stake to government

Date: 05 August 2021 Tags: Miscellaneous

Issue

Promoter of VI telecom, Kumar Mangalam Birla has offered his 27 percent stake to the government to keep the company running.

 

Background

VI telecom was founded after the merger of Vodafone India and Idea. The plan was to have a large entity to take on low tariff regime.

 

Details

  • VI is under debt of more Rs 1.5 lakh crore. The company owes more than Rs 60,000 crore to Department of Telecommunications as AGR.

  • It has an obligation of Rs 23,000 crore towards various banks. As spectrum obligations, it has to pay another 96,270 crore.

  • Birla had already requested help from the government after Supreme Court had upheld that AGR dues had to be paid.

 

Fears expressed

  • Birla’s letter is seen as a last effort to save the company from shutting its business in India. It is not the first time he has requested help.

  • With the company in deep debt, international players are unwilling to invest. They also desire a stable policy by the government that promotes three player telecom market.

 

Can the government take over VI?

  • Telecommunications is a strategic sector and government can take critical policy measures for the betterment of public.

  • It can convert the debt obligations of the company into equity stake and merge its operations with BSNL.

  • Considering the fact that government is trying to get rid of its stake in public sector enterprises owing to non-profitability, investing in VI is highly unlikely.

 

Future of VI

  • Unless VI raises funds from the market, it is difficult for the company to sustain its operations. There will also be a need to raise tariffs.

  • The company can only survive if it brings an investor having enough wealth to sustain its operations, cover debts and also offer competitive price for expansion.