Centre for Internet & Society

Pay government dues and enable high-speed connectivity

This article first appeared in the Business Standard and on May 7, 2020.

Amidst the welter of problems the government is dealing with, one hopes that the removal of restrictions and lockdown status are being thought through with expert inputs and analysis. We can conjecture on the priorities for economic revival, and here is a short wish list.

Cash flows have to start for any downstream problems to be addressed, without questioning that a major remediation to India’s lockdown trauma is providing food and shelter to stranded workers, and getting them to where they want to go. Many will scatter from their work or holding areas back to their homes. What’s needed for economic revival is the opposite: For workers to return to work and resume productive activities. But this may be unrealistic to expect after the loss of confidence from the shocks of the peremptory lockdown, the deprivation of livelihood, and of food and shelter.

Other stranded people who have the means also need the right to move freely while maintaining prudent constraints. Indians abroad are being flown home; Indians in the country need facilitation too.

Next on the list is restarting the economy by ending the forced closure of productive activity for compensation, spending for products and services, and of economic flows. Recall that before the lockdown, we had a monumental late-payments problem, namely, the non-performing assets (NPAs) of the banks and financial institutions. While there has been considerable scrutiny of the NPAs and fraudsters, much less attention is directed at a major component — that is, late payment of dues and refunds by government and its agencies. These encompass all payments, such as to state and private electricity generators and distributors, airlines, hotels, restaurants, manufacturing companies and service providers, and all refunds of taxes, including goods and services tax (GST) and customs duties.

This aspect escapes corrective action despite its magnitude, although it is remediable through decisive action. It has to be resolved through executive intervention, because it is a precursor and cause of a significant proportion of NPAs.  Among larger commercial enterprises, late payments are a problem for some countries more than others, as seen in the heat map for 2018 by Euler Hermes, a trade credit insurance company (see chart). Surprisingly, India has a reasonable rank of 24 out of 36 countries, and its average at 67 days is close to the overall average of 65 days. Also, 25 per cent of corporations paid before 30 days, although another 25 per cent paid after 96 days. China had the highest average at 92 days, followed by Greece, Italy and Morocco.

However, smaller enterprises suffer considerable delays, as represented to the finance minister before the Budget recommendations in January this year, because their receivables take months to clear.

The biggest problem is not reflected in the chart: It is in delayed government payments and tax refunds.

All the delays have a cascading effect resulting in NPAs. For instance, Nasscom complained in 2017 that overdue payments from central and state governments and public sector undertakings for IT projects amounted to nearly Rs 5,000 crore. A survey is under way on the present status. Another example is delayed subsidies to fertiliser manufacturers that are notorious for creating cash flow crises. A third example is large dues and contested payments owed by the National Highways Authority of India (NHAI). In August last year, the NHAI was the focus of an effort by the Prime Minister’s Office (PMO) to clear its enormous debt overhang, and its contested dues.

Yet, the government resists timely payments even towards public sector dues, while being remorseless with its charges and collections. It is as though there is no understanding of cash flows, except perhaps for election funding. Overdue government payments are an obvious starting point to clear NPAs and create confidence through liquidity, emulating what is already practised here by India’s best corporations.

Another inexplicable impediment is the totally conflicted approach to information and communications technology (ICT). As the past two months have shown, reviving and remodelling our economy depends on effective digitisation and communications for two streams. One is for more efficient production and service delivery in all areas, such as agriculture, dairy farming and horticulture, and so on, as well as finance, manufacturing, trade, logistics, tourism, and in compliance. The other is in functioning in an altered paradigm that depends on effective support for remote working. Yet, telecom companies and high-tech manufacturers are beset with overdue payments on the one hand, while the former are crushed by government charges and retrospective demands. Meanwhile, a failed approach of high-priced spectrum auctions continues, while the most elementary and logical regulatory reforms for wireless broadband are ignored, such as enabling 60GHz and other spectrum bands discussed below.

Is it possible that the authorities do not understand that without wireless reforms, India is just holding itself back, or are they simply not acting on what they know? Consider what other countries are doing to improve productivity. Last month, America opened up the entire 6GHz band consisting of 1,200MHz of spectrum for unlicensed use for faster Wi-Fi.1 Licensed primary users of microwave for backhaul, utilities, and public safety were protected. The EU countries are likely to follow soon. For India, following this lead for Wi-Fi is a foregone conclusion. Dithering because nobody in power cares to even follow feasible measures wisely will only hold India back, as in disallowing the use of unused spectrum bands (60GHz, 70-80GHz, and 500-700MHz).2

If only the PMO would task appropriate authorities to consider permitting the use of four bands, namely, 60GHz, 70-80GHz, 500-700MHz, and 6GHz, the likelihood of better connectivity for high-speed broadband countrywide would greatly improve. The first three bands would be for licensed operators excepting indoor use of 60GHz, and the fourth would be for Wi-Fi. Such action will comply with the Supreme Court’s requirement of having public-interest policies in place for not auctioning spectrum.

Acting on cash flow plus connectivity, both initiated by the government, can effectively kick-start the economy.

The views and opinions expressed on this page are those of their individual authors. Unless the opposite is explicitly stated, or unless the opposite may be reasonably inferred, CIS does not subscribe to these views and opinions which belong to their individual authors. CIS does not accept any responsibility, legal or otherwise, for the views and opinions of these individual authors. For an official statement from CIS on a particular issue, please contact us directly.