He has opined, for instance, that any termination of licenses of telecom operators (for non-payment of dues) ``will have an immediate dampening effect on the banks and financial institutions, both national and international, and could well result in lack of lenders confidence in the Indian telecom sector... this would have an adverse impact on the financial health of the banking institutions.''

Later, the AG goes on to say, that if due to the switch-over to revenue-sharing ``some relief accrues to the current licensees... the same should be viewed and appreciated in the context of the larger public interest in the revival and growth of the telecom industry.''

Interestingly, none of these arguments - that banks and financialinstitutions will be hurt if the telecom operators are not bailed out, or that customers will benefit from lower telecom license fees - have ever been made by the AG prior to last week, when he was asked to return to India by the Prime Minister's Office (PMO) to give a fresh opinion on the matter.

Indeed, in a tele-conference with former communications minister Jagmohan and some members of the Telecom Commission on May 27, for instance, the AG had opined that the switchover may not be practical -- it amounted to a fundamental change in license conditions -- and was fraught with legal difficulties, and public interest litigation against it could not be ruled out. Sources say that the AG was virtually cornered into giving last week's new opinion due to the manner in which the Department of Telecommunications (DoT) framed its new reference, to seek his view in the matter of allowing the beleagured telecom operators to switch to the less onerous revenue-sharing arrangement.

Interestingly, despite the AG'sopinion, and the Cabinet note circulated on the basis of this, it is still not certain whether this will break the immediate log-jam -- operators have not been paying license fees and Jagmohan was determined to cancel their licenses before he was shifted out. The DoT has now circulated the note to the law and finance ministries, and their opinion is expected only next week.

One problem, for instance, is that the AG's new opinion makes it almost mandatory for all existing players to opt for the new terms. Now, since several firms such as Reliance and Escotel have made a very large part of their payments under the existing license arrangement, it is debatable whether they will wish to move to the new arrangement -- the new arrangement allows a free-for-all, and that may not be desirable for them. The existing policy allows for just two (and possibly also the DoT) operators in each telecom circle.

And since it is mandatory to clear all dues by December 31 (the government can increase this), it is uncertainas to how firms who are already cash-starved will be able to do this. The AG has also recommended that all firms pay up at least 15 per cent of their arrears by August 15. What will also make it more difficult for firms to raise the necessary capital is that the AG has stipulated that companies should not be allowed to change their present share-holding pattern, either directly or indirectly through subsidiaries or holding companies.

The total license fees that all operators -- both basic and cellular -- have to pay right now is around Rs 2,000 crore per annum. The AG's view, that the effective date of all licenses be extended by 6 to 9months will mean a loss of revenue of around Rs 1,500 crore.

AG's proposal leaves loopholes