DoT, Law Ministry recommend dropping OTSC Case, SC Decision on Nov 17

In another twist in the ongoing OTSC Case, the DoT and the Law Ministry have recommended the government to withdraw the case and settle it out of the court.

The Supreme Court has heard the case and will give its decision on 17th November. So, the government has less than 10 days to pull out the case.

Essentially, the OTSC, or the One-Time Spectrum Charge, has been levied by the DoT on the operators for holding excess spectrum beyond 4.4 Mhz. The UPA government, in the aftermath of the 2G spectrum scam, started levying OTSC on any administrative spectrum allocation. Since the center is again looking at that method for the 5G spectrum, the case has become more relevant for the industry.

Why the OTSC Case?

The OTSC Case goes back more than a decade; the telcos and the government have been at it since 2008, before multiple high courts, and the SC.

Before 2010, incidentally, the operators only got 4.4 MHz spectrum, along with their telecom licenses. The government would issue subsequent tranches based on telcos achieving certain subscriber goals.

Back in February 2012, while canceling the licenses wrongly issued by A. Raja, the then telecom minister, the government decided to charge for spectrum given to the operators beyond the contracted amount through administrative orders. The government had to charge the OTSC as the spectrum licenses were given at 2001 rates of Rs. 1,658 crore.

According to the government, it could only give 4.4 MHz, as it was contractually bound to, and it can charge for any additional amount allocated. At that time, most telcos held either 6.2 MHz, 10 MHz, and in some cases, more than 10 MHz. The operators contest that since they were paying the SUC for spectrum beyond 6.2 MHz, any OTSC was illegitimate.

However, the government still raised the demand, and the telcos moved court.

The OTSC case came to a head in July 2019, when the TDSAT ruled that the government can only charge for the spectrum it allocates administratively beyond 6.2 MHz, not 4.4 MHz as the government claimed. TDSAT added that the government can't charge the OTSC from a retrospective basis. Moreover, in 2020, when the center moved the SC to stay the tribunal's order, it refused.

Burying the Hatchet

Given the timeline of the OTSC case, it's safe to say that if the DoT withdraws the case, it will end a lot of legacy issues in the telecom sector. What's more, Bharti Airtel and Vodafone Idea, the only two legacy telcos still operating, will gain a lot of relief. The two legacy telcos have about Rs. 42,000 crore stuck in government cases; sorting out litigation in the sector will help them regain some financial stability.

Last month, DoT had sought three weeks' time from the SC, as it wanted to reconsider the matter relating to OTSC. However, the court had said that DoT’s decision regarding withdrawing the matter must “satisfy the court” as it involves a question of “public money”. As such, this reflects on the government’s willingness to reduce litigation in the sector, which will further improve the sector’s health.

Per sources cited by FE, the law ministry has given a positive opinion to DoT. However, the telecom department needs to address some issues first before moving in any direction.

All of this, though, depends on what the Supreme Court thinks; the case will come up in the apex court on November 17.