Why telecommunications reforms are vital for India

Sustained reforms to tackle legacy concerns like complex paperwork and multi-layered taxation have helped India jump 23 places in the World Bank’s recent Ease of Doing Business rankings, to rank 77 out of 190 countries. 

The country’s aim is to break into the list of top 50 countries in the EoDB rankings. However, to get to there, fundamental changes are required across all sectors, with telecom being at the top of that priority list. Not only is it one of the few sectors where 100 per cent FDI is allowed, it is also the backbone of the economy, connecting and empowering a billion-plus citizens, becoming the vehicle for financial inclusion and digital literacy, playing a key role in improving macro-economic indicators and adding to GDP growth. Every 10 per cent increase in investment in telecom infrastructure can boost India’s GDP by 3.3 per cent, according to a study by ICRIER. 

Last year, Trai had issued a draft paper on the Ease of Doing Business, aggregating recommendations from the industry for consideration. The telecom sector is extremely distressed in financial terms, with mounting debts and crumbling revenues. However, once it recovers on the back of favourable policy reforms, the positive impact on a myriad of industries would be immense. And, given its cascading impact on the economy, it would also improve India’s rankings on the index. 

Apart from reforms targeted at making the regulatory ecosystem more in tune with the changing times, doing away with burdensome and expensive litigation is equally necessary for building a commercial environment, conducive to the sector’s growth. Major concerns that need to be addressed relate to licences, tariffs, accounts and finance. Further, spectrum pricing and management needs immediate redressal to ensure the sector’s long-term sustainability.

It is heartening that the principle of “input line credit” has been formally approved in the National Digital Communications Policy 2018 by the Union Cabinet. This approach is similar to the principle adopted for GST and VAT, where such a levy payable at each step of input services is set off against the levy payable by the recipient of such services. This will ensure that there is no double taxation at any stage. 

Further, we believe that DoT should accept and adopt the Trai recommendations of January 2015 on “Definition of Revenue base (AGR) for the Reckoning of Licence Fee and Spectrum Usage Charges”, in regard to the methodology suggested by the regulator for determining the adjusted gross revenue (AGR). 

On licence fees, the industry believes that the assessment of the Gross Revenue/AGR should be conducted at the central rather than the circle level. Currently, assessments are done at the circle level, on the basis of instructions on the principles to be used for GR/AGR assessment laid out by the department of telecommunications (DoT). The Controller of Communications Accounts (CCA) in the DoT is responsible for conducting circle-level assessments. 

This results in the industry facing various issues of inconsistencies in the overall process. As the applicable principles vary from circle to circle, it results in piling up of litigation cases. A centralised filing system will promote operational efficiency and bring in consistency of principles. It will also free up resources currently being used up in litigation.

Also, there are permissible deductions under the licence from gross revenue to arrive at AGR for determining the licence fee and spectrum usage charges (SUC) to be paid by the licensee. These deductions include payments of interconnect usage charges and roaming between operators. The industry believes that the process for verification of deduction claims is extremely complex and leads to disputes for which there is no process of appeal in the DoT. As recommended by Trai in its January 2015 recommendations, a system of licence fee deduction at source should be implemented, which will entail automation of LF/SUC verification like TDS TRACES to simplify the verification process.

Licence fees should be payable through an online portal, so that payment can be made by licensees directly to the credit of DoT. The set-off of the licence fee paid on input services against licence fee payable on output services should be allowed.

Another concern is the multiple audits that telecom companies have to undergo regularly, apart from the statutory audits required under the Companies Act, 2013.  Conducting an audit is a time-consuming exercise involving substantial resources. TSPs already have their quarterly and annual audits by statutory auditors, as they follow the highest standards of corporate governance. We believe that these audits are sufficient and there should not be a duplication of efforts by multiple audits in a given financial year. This will cut duplication of effort, and wastage of time, manpower and precious public resources. 

It is recommended that the functioning of the Standing Advisory Committee on Radio Frequency Allocation (SACFA) should be made paperless and a web portal like Tarang Sanchar, which is currently being used for EMF compliance, should be created. This will not only reduce unnecessary expenditure but will also act as a harbinger of optimised and enhanced operational efficiency and faster approvals. 

Moreover, free movement of equipment across the country should be facilitated. At present, import licences are provided on a LSA-wise basis and once the equipment is imported, it is mandatory for TSPs to use that equipment only in that LSA. There are various reasons why there may be a need to shift equipment from one circle to another, including increase in rollout in a LSA or lesser usage of equipment in a particular circle owing to business needs. In such scenarios, free movement of equipment should be allowed from one LSA to another.

The industry is working with state governments for the development of an online portal for granting Right of Way (RoW) permission in a time-bound manner. The RoW Portal has been operational for Haryana and Jharkhand, and discussions are underway with the governments of Assam, Odisha, Uttar Pradesh, Rajasthan, Maharashtra and Uttarakhand.

The telecom industry and the government need to work together to bolster the country’s economic strength and usher in an inclusive, connected and digitally empowered India. This is a pre-requisite if the country wants to break into the top 50 in the Ease of Doing Business index.    
The writer is Director General, COAI

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