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COAI expects new government to reduce levies after Lok Sabha polls

Kiran Rathee

The telecom industry is hoping that post-elections, whichever government comes to power, will focus on reforms in the sector by reducing various levies. The reforms have been promised in the new telecom policy document prepared by the department of telecommunications.

Reduction in levies like licence fee, spectrum charges and other taxes, has been a long pending demand of telcos, which have been struggling financially over the last couple of years. The new National Digital Communication Policy (NDCP) also talks about rationalisation of telecom sector levies but despite the notification of the policy in November last year, there has been no movement on the issue.

Industry body Cellular Operators Association of India (COAI), wants the new government to set out a roadmap for reduction in levies, starting with a cut in licence fee and spectrum charges within 6-9 months of assuming office. The industry body also wants the definition of adjusted gross revenue (AGR) to be reviewed and Trai recommendations on it to be adopted.

According to COAI s director general Rajan Mathews, the NDCP talks about all the issues and it should be implemented at the earliest to ease out the burden on telecom operators. He said revenues of the sector remain under pressure and debt has increased to `7.7 lakh crore in FY 18.

Telecom Ebitda continues to contract while the interest expenses of the industry continue to rise. In Q2 of FY19, interest expenses have become greater than Ebitda of the telecom industry, he said .

As per data shared by COAI, in Q2 of FY19, Ebitda of the industry stood at `7,305 crore while interest expenses were `8,279 crore.

Regarding definition of AGR, the industry wants income from interest, dividend, capital gains from sale of fixed assets, gains from forex fluctuation, income from rent, insurance claims, distributors margin, bad debts recovered and excess provisions written back not to be included in the revenue of telecom operators.

Similarly, revenue from sale of handsets and other subscriber terminals like routers, set top boxes etc should not be included in the AGR. Telcos pay licence fee (LF) and spectrum usage charges (SUC) on the basis of their adjusted gross revenue (AGR). Currently, LF is 8% while SUC varies between 3% to 6% for different operators.

Mathews said once the issue of AGR is addressed, it will have cascading benefits for the sector. Regarding taxation, he said currently the telcos are charged doubly as they get spectrum through auctions but despite that, they have to pay SUC. The Telecom Regulatory Authority of India (Trai) has already recommended that SUC should come down to 1% and LF should come down too.