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No Relief: DoT Rejects Flat Rate Proposal

The government may have said in its new telecom policy document that it will review levies like licence fee and spectrum usage charge as a relief measure to the financially stretched and troubled industry, but when it comes to actually doing it, the department of telecommunications (DoT) refuses to make changes.

According to official sources, a DoT panel has rejected a recent recommendation of the Telecom Regulatory Authority of India (Trai) for fixing a flat spectrum usage charge (SUC) for operators at 3% of their adjusted gross revenue. Currently, the SUC operators pay varies between 3 and 5% because they hold a mix of administratively allocated spectrum and through auctions. A higher SUC on administratively allocated spectrum is understandable but SUC on spectrum won through auctions also varies. For instance, operators pay 5% SUC on spectrum won in earlier auctions and 3% in the one held in 2016. As a result there’s a weighted average formula to calculate SUC of the operators.

The Trai had suggested that SUC on all spectrum won through auctions held in 2014 onwards should be made flat 3% and gradually decreased to 1%. The idea was that since operators pay high prices in auctions, SUC should cover only administrative cost which should be marginal. However, a DoT panel, which was formed to look into the proposals of Trai, has rejected the recommendation of flat rate SUC.

Instead, it has decided to continue with the weighted average formula. The panel’s report will be placed before the digital communications commission (DCC) (formerly telecom commission), which is the highest decision making authority of DoT and has members from other ministries also.

“We have not accepted the proposal for charging a flat rate SUC. We will continue with the weighted average formula,” a source in DoT told FE.

Earlier this year, in the new telecom policy document, which has been approved by the Union cabinet, the DoT had expressed its intention to rationalise the levies imposed on the sector. Apart from SUC, telecom operators pay 8% of their AGR as licence fee.

The industry has been demanding lower taxes and levies, which add up to about 30% of the revenues.
The outstanding industry debt is pegged at over Rs 7 lakh crore.

The reason for the government dithering on reducing levies like SUC is that its revenues from the sector is declining as the tariff war post the launch of Reliance Jio in September 2016 has led to declining industry’s revenue. In FY18, the industry’s AGR stood at Rs 155,680 crore against Rs 190,658 crore in FY17. As a result the government’s revenue from licence fee educed to Rs 12,976 crore from Rs 15,975 crore. Similarly, SUC reduced to Rs 5,089 crore from Rs 7,574 crore a year earlier. – Financial Express

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