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DoT brings issue of cutting licence fee for telecom operators back on table — what could change

Kiran Rathee
DoT, USOF, Supreme Court, IT ministry, NITI Aayog, Trai, Ravi Shankar Prasad, AGR dues payment, Kumar Mangalam Birla, vodafone idea

The department of Telecommunications (DoT) has brought the issue of cutting licence fee for the telecom operators back on the table, despite the committee of secretaries not approving it. Sources told FE that DoT would shortly move a proposal before the digital communications commission (DCC, and formerly, Telecom Commission) to reduce the universal service obligation fund (USOF) levy by 2 percentage points to 3%. If this happens, the licence fee which operators currently pay at 8% of their adjusted gross revenue (AGR), would come down to 6%. If the proposal is passed, it would provide a relief of around Rs 3,000 crore annually to the operators.

However, DoT has not taken any decision so far on any reduction in the rate of spectrum usage charge. There has also been no decision so far on providing any relief on the Rs 1.47 lakh crore of adjusted gross revenue dues resulting from the October 24 order of the Supreme Court.

Sources said since DCC is an inter-ministerial body, (apart from DoT, it has representatives from the finance ministry, department for promotion of industry and internal trade, IT ministry, and NITI Aayog), approval from it will be similar to approval from a body like a committee of secretaries.

Since the Telecom Regulatory Authority of India (Trai) has already recommended that the USO levy be reduced by 2 percentage points, all that DoT has to do is to process it. Trai had said since the general exchequer gets 3% from the licence fee - the 5% USO goes into the USO fund for improving rural teledensity - government revenues won't be hit by any such reduction.

While giving its recommendations in 2015 for a cut in USO levy, Trai had questioned the utilisation of the fund. It had noted that even after passage of more than 10 years, utilisation was well below 50%.

"Thus, there is ample evidence that the flows of investment from the USOF have just not met expectations. Further, since USOF monies go to the Consolidated Fund of India, and releases are controlled by budgetary processes, unutilised USOF revenues essentially provide budgetary support to fill the fiscal gap," Trai had said.

In fact, earlier this year, telecom minister Ravi Shankar Prasad had also written to the finance minister urging for a cut of 2 percentage points in the USO levy as rural tele density has increased significantly since 2003 when the rural fund was set up.

On November 20, based on the recommendations of a committee of secretaries, the Union Cabinet had cleared a package which offered some cash flow relief to the operators by way of giving them a two-year moratorium from paying their deferred spectrum dues. The operators will, however have to pay interest costs of the amounts that have been deferred.

Expectations were high in the industry then that the government will also announce a cut in the licence fee and spectrum usage charge.

Analysts said even if the government cuts licence fee by 2 percentage points, it won’t mean much for the industry unless some form of relief is given on the AGR dues payment. In fact, on December 6, Vodafone Idea chairman Kumar Mangalam Birla had categorically said the company will shut shop if the government does not provide relief on AGR dues payment. "The big elephant in the room is AGR, which is actually I think something which lies in the court of judiciary. I believe the government can have a dialogue. This was a suit filed by the government against telecom service providers. Since the government has won, it gives them headroom to talk to the judiciary and try to find some of solution. I don’t know which form or shape it takes," he added.