Vodafone Idea: Government May Exit as Financial Relief Continues

Answer: B

Statement 1 is incorrect. The Supreme Court, in its 2019 judgment, upheld the Department of Telecommunications' (DoT) definition of AGR, which includes all revenue earned by a telecom company, including non-telecom sources like rent, dividend, and interest income, in addition to revenue from telecom services. This significantly broadened the base for calculating statutory dues. Statement 2 is correct. The Supreme Court's ruling on AGR indeed led to a massive increase in the financial liabilities of telecom operators, as they had to pay dues based on the expanded definition of AGR retrospectively. Statement 3 is correct. The 2021 telecom relief package included a four-year moratorium on payment of spectrum usage charges and AGR dues, among other measures, to provide financial relief to the struggling sector.

Answer: B

Statement 1 is correct. Strategic disinvestment involves the sale of a substantial portion of government shareholding (often 51% or more) in a Public Sector Undertaking (PSU) to a private entity, accompanied by the transfer of management control. This is distinct from minority stake sales where management control remains with the government. Statement 2 is incorrect. While revenue generation is a benefit, the primary objective of strategic disinvestment is to promote economic efficiency, modernize PSUs, introduce private sector management practices, and unlock the true potential of the enterprise. Revenue generation is often a secondary objective, unlike minority stake sales where it's a primary goal. Statement 3 is correct. The Department of Investment and Public Asset Management (DIPAM) under the Ministry of Finance is the nodal agency for all disinvestment activities of the Central Government, including strategic disinvestment.

Answer: C

The concept of 'lender of last resort' traditionally refers to a central bank (like RBI) providing liquidity to solvent banks facing temporary cash flow problems to prevent a financial crisis. However, in a broader sense, a government can act as a 'lender of last resort' for strategically important industries or large corporations when their failure could have significant economic or social repercussions. In the Vodafone Idea case: Option A is incorrect. The government did not provide direct loans; it converted existing dues into equity. Option B is incorrect. The RBI acts as the lender of last resort for banks, not directly for private telecom companies. Option C is correct. The government's action of converting Vodafone Idea's statutory dues (AGR and spectrum payments) into equity, thereby becoming a major shareholder, was a measure to stabilize the struggling company and prevent its potential collapse, which could have led to a duopoly in the telecom sector and significant job losses. This intervention, though not a direct loan, served a similar purpose of preventing a crisis by providing financial relief and stability. Option D is incorrect. While public sector banks might have exposure, the government's direct intervention was through equity conversion, not by mandating fresh capital from banks.