Trai dials DoT, seeks package for stressed telecom firms

The telecom sector regulator has come to the rescue of financially strained telcos with a proposal to reduce goods and services tax (GST) rate on the industry to 5 per cent from the current 18 per cent by declaring it a core infrastructure industry and also increasing the deferred payment installments for spectrum to 18 years.

Telecom Regulatory Authority of India (Trai) Chairman R S Sharma had met the chief executive officers of telecom firms on June 15 to deliberate on the financial stress in the sector and the authority has now submitted its recommendations to the Department of Telecommunications (DoT).

In its proposals, Trai has said that DoT should take up with the Finance Ministry the issue of reduction in GST rate from 18 per cent to 5 per cent by declaring the telecom sector as core infrastructure industry, sources said.

Also, regarding the payment schedule for spectrum acquired in auctions, Trai has said that for all the frequency bands, an initial payment of 10 per cent of the bid amount should be charged upfront while telcos can pay the rest over a period of 18 years. As per the current regime, operators have to pay 25 per cent and 33 per cent of the amount upfront for different bands and the remaining in 10 installments after a two-year moratorium. Trai has also suggested that USO (universal service obligation) levy should be reduced from 5 per cent to 3 per cent of the adjusted gross revenue (AGR). This will decrease the applicable licence fee to 6 per cent from the current 8 per cent.

At present, operators pay a licence fee of 8 per cent, which includes 5 per cent USO levy. Trai said if USO levy is reduced to 3 per cent, the applicable uniform rate of licence fee would become 6 per cent and the 3 per cent fee that directly accrues to the government will not change. The USO levy goes to the USO fund, which was set up to provide communication services to rural and remote areas.

The reduction in GST rate, licence fees and abolition of USO levy, were key demands of the industry, which has been struggling with a debt of over Rs 4.5 lakh crore. With the entry of Reliance Jio, the competition has intensified further and most of the incumbent operators have seen a slide in revenues and profits.

Trai’s Demands
*Declare sector as core infrastructure industry
*Reduce GST rate on telecom to 5% from 18%
*Reduce licence fee to 6% from the current 8%
*SUC for all auctioned spectrum (including BWA) should be 3%
*Increase deferred payment option to 18 years, with upfront payment of 10% of the bid amount 
“…DoT may favourably consider these recommendations as they would help in minimising the financial stress of the telecom companies and enable them to offer quality services to consumers at affordable prices. Affordable telecom services would facilitate fast digitisation of the economy as well a proliferation of telecommunication services in rural and remote areas to achieve the mission of Digital India,” Trai said in its letter to DoT.

The regulator, however, did not propose anything on the issue of interconnect usage charges (IUC), as it is already in consultation process regarding the same and will give its recommendations based on the final outcome. The issue of IUC has been a bone of contention between incumbent operators and Jio. The charges are paid by a telecom operator to another when its call terminates on the latter’s network. Currently, the charges are 14 paise per minute for wireless calls, but Trai has sought comments from stakeholders for a review. Most telcos are in favour of a higher IUC, but Jio and Reliance Communications have suggested that the charges should be brought down to zero. 

Trai has also recommended that spectrum usage charges (SUC) for all auctioned spectrum should be a flat rate of 3 per cent of AGR of wireless services. For BWA (broadband wireless access) spectrum, too, it should be fixed at 3 per cent where services are provided under unified licence, according to the regulator.

The telecom sector recently had several meetings with the government to get a breather. Operators demanded wider payment duration for spectrum, preferably for the remaining period of validity of spectrum. They had also sought reduction in levies like licence fees and SUC.    

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