NEW DELHI: TOP telecom players such as Bharti Airtel, Vodafone Essar, Reliance Communications and state-owned BSNL could benefit from a government move to speed up a relief package that will ease some burden off the sector saddled with shrinking revenues and margins triggered by a raging tariff war.
The department of telecom (DoT) will seek a fast-track approval from the finance ministry to slash the annual licence fee by up to a third for telecom operators with large network presence. It will also propose to the finance ministry that all licence fee be exempted for landline services, a top official in the communications ministry told ET.
The licence fee cut will benefit the four top operators the most, since their networks cover all census towns and large villages in several states.
Also on the anvil is a plan to speed up the introduction of a single-levy structure, after sector regulator Trai gives its recommendations on this subject next month. At present, telecom operators pay up to 30% of their revenues towards different levies to the government.
Along with these measures, the communications ministry is also working with the finance ministry to release up to Rs 16,000 crore from the Universal Service Obligation Fund in the next 24 months to subsidise both private and state-owned operators’ expansion to rural and far-flung areas.
All telecom operators have been paying 5% of their annual revenues towards this fund since 2002, taking the kitty to Rs 20,000 crore, which has been lying idle. Every consumer, who makes a phone call (mobile and landline), contributes towards the fund.
Earlier this year, the government had shelved its decision to slash the licence fee for telecom operators with large network presence by up to a third from April 1, following opposition from the finance ministry.
After this, the communications ministry had informed all telcos that the “licence fee cut has been kept in abeyance”.
Telecom minister A Raja will now seek fresh clearance from the finance ministry on the issue, as this proposal will help the industry save up to Rs 2,000 crore annually, the communications ministry official added.
Last year, DoT had announced that the proportion of the revenues telecom operators pay as licence fee to the government would be cut by 2% of their total revenues if they prove that their services are available in 95% of the residential areas in a state or a telecom circle, with effect from April 1, 2009.
At present, telcos pay 10% of their revenues as licence fee in category ‘A’ circles (Tamil Nadu and Maharashtra, among others) 8% in ‘B’ zones (Kerala, Punjab and Haryana, among others) and 6% for ‘C’ circles (Himachal Pradesh, Bihar and Orissa, among others).
As per last year’s announcement, these would have come down to 8%, 6% and 4% for operators with networks covering over 95% of the residential areas in a circle, but the proposal was never implemented as the DoT could not obtain Cabinet clearance for the same due to opposition from the finance ministry.
Similarly, the finance ministry’s objections also resulted in the DoT failing to implement its decision to exempt licence fee for fixed-line telephony in rural India from January 2009 onwards. Had this proposal been implemented, BSNL would have been the largest beneficiary, as the PSU would have saved up to Rs 1,200 crore annually.
The DoT is now working on a modified proposal under which licence fee will be exempted for all fixed-line services. Mr Raja discussed this proposal that will offer incentives to fixed-line operators during his meeting with top telecom industry executives in Delhi on Tuesday, a CEO of a mobile operator told ET.
While the fixed-line operations of private players are largely restricted to metros and large cities, the move will enable the industry to save about over Rs 1,600 crore in levies annually, another industry executive aware of the development told ET.
The department of telecom (DoT) will seek a fast-track approval from the finance ministry to slash the annual licence fee by up to a third for telecom operators with large network presence. It will also propose to the finance ministry that all licence fee be exempted for landline services, a top official in the communications ministry told ET.
The licence fee cut will benefit the four top operators the most, since their networks cover all census towns and large villages in several states.
Also on the anvil is a plan to speed up the introduction of a single-levy structure, after sector regulator Trai gives its recommendations on this subject next month. At present, telecom operators pay up to 30% of their revenues towards different levies to the government.
Along with these measures, the communications ministry is also working with the finance ministry to release up to Rs 16,000 crore from the Universal Service Obligation Fund in the next 24 months to subsidise both private and state-owned operators’ expansion to rural and far-flung areas.
All telecom operators have been paying 5% of their annual revenues towards this fund since 2002, taking the kitty to Rs 20,000 crore, which has been lying idle. Every consumer, who makes a phone call (mobile and landline), contributes towards the fund.
Earlier this year, the government had shelved its decision to slash the licence fee for telecom operators with large network presence by up to a third from April 1, following opposition from the finance ministry.
After this, the communications ministry had informed all telcos that the “licence fee cut has been kept in abeyance”.
Telecom minister A Raja will now seek fresh clearance from the finance ministry on the issue, as this proposal will help the industry save up to Rs 2,000 crore annually, the communications ministry official added.
Last year, DoT had announced that the proportion of the revenues telecom operators pay as licence fee to the government would be cut by 2% of their total revenues if they prove that their services are available in 95% of the residential areas in a state or a telecom circle, with effect from April 1, 2009.
At present, telcos pay 10% of their revenues as licence fee in category ‘A’ circles (Tamil Nadu and Maharashtra, among others) 8% in ‘B’ zones (Kerala, Punjab and Haryana, among others) and 6% for ‘C’ circles (Himachal Pradesh, Bihar and Orissa, among others).
As per last year’s announcement, these would have come down to 8%, 6% and 4% for operators with networks covering over 95% of the residential areas in a circle, but the proposal was never implemented as the DoT could not obtain Cabinet clearance for the same due to opposition from the finance ministry.
Similarly, the finance ministry’s objections also resulted in the DoT failing to implement its decision to exempt licence fee for fixed-line telephony in rural India from January 2009 onwards. Had this proposal been implemented, BSNL would have been the largest beneficiary, as the PSU would have saved up to Rs 1,200 crore annually.
The DoT is now working on a modified proposal under which licence fee will be exempted for all fixed-line services. Mr Raja discussed this proposal that will offer incentives to fixed-line operators during his meeting with top telecom industry executives in Delhi on Tuesday, a CEO of a mobile operator told ET.
While the fixed-line operations of private players are largely restricted to metros and large cities, the move will enable the industry to save about over Rs 1,600 crore in levies annually, another industry executive aware of the development told ET.
POSTED BY:
PALLAVI SINGH
PGDM III SEM
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