Solution for licence fee, spectrum usage charge issue may lie outside budget

The telecom industry had sought “strategic intervention to enhance financial viability” of the sector .

NEW DELHI: The finance ministry has turned down telecom companies’ requests to reduce their licence fee, spectrum usage charge, universal services obligation fee and other levies in the upcoming Union budget, people privy to the development said.

The ministry also turned down telcos’ demands for reducing their cost of fund, but advised them to go back to the telecom department, giving a possible ray of hope that some of their issues may be addressed outside the purview of budget, the sources said.

“The issues will not be taken up in the Union budget, but there can be mechanisms for addressing the issues separately,” said a person aware of the developments. “The issues need to be followed up with the concerned ministry (IT and telecom), that can then send their recommendations to the finance ministry.”

During a meeting with finance minister Nirmala Sitharaman last week, the telecom industry had sought “strategic intervention to enhance financial viability” of the sector at a time when leading carriers Bharti Airtel and Vodafone Idea are aggressively raising funds to pay off past dues emanating from adjusted gross revenue (AGR). They will also be required to invest in improving network connectivity. At the meeting, the industry sought that the overall licence charges be halved to 4%, by reducing license fee component to 1% from 3% and Universal Services Obligation Fund fee to 3% from 5%.


The industry also sought setting up of a finance corporation or infrastructure bank to provide funds to the sector at preferred rates. They also sought that carriers be permitted to issue tax-free bonds to reduce the overall cost of capital and mobilise cheaper funds.

Telcos have to pay up more than Rs 1.47 lakh crore to the government, owing to AGR’s new definition, of which Airtel and Vodafone Idea owe a large chunk.

The finance ministry also refused to intervene in the sector’s call to remove goods and services tax (GST) on license fees, spectrum usage charges and payment of spectrum acquired in auction, besides refund of accumulated input tax credit of GST – amounting to over Rs 35,000 crore – on the grounds that the issues will be taken up by the GST Council.

The industry has also called for removing 20% custom duty on imports of 4G or 5G related network products till the time local industry was able to provide the same quality equipment at affordable prices.

The industry now plans to take up its case with the telecom department and other relevant authorities. “Representations have already been made at various levels,” said the person quoted earlier.




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