New Delhi: While the speculation continues over whether the cellular operator lobby has asked the Finance Ministry to retain the effective 51 per cent duty currently being imposed on CDMA terminals, the Association of Basic Telecom Operators (ABTO) has fired its own counter salvo. The ABTO has appealed to the Finance Ministry in a letter sent on Monday asking it to reduce the duties on CDMA handsets for WLL and infrastructure equipment to a basic duty of five per cent (effective duty, including countervieling duty adds up to 22 per cent) from the existing basic 25 per cent (effective duty 51 per cent), so as to keep infrastructure costs for setting up basic services as low as possible. In a letter sent to the Union Finance Minister, Mr Yashwant Sinha, on February 19, the ABTO has made a case for lower duty structures based on the fact that the WLL services are targeted at the masses. "It is therefore very important that the handsets for WLL services should have a duty structure that is at par with the rest ofthe telecom services industry, including the cellular industry," said Mr S C Khanna, secretary, ABTO.The cellular operators deny having made any representation to the Finance Ministry for charging 51 per cent custom duty on code division multiple access (CDMA) wireless in local loop (WLL) mobile handsets. Expressing surprise over the reports Mr T V Ramachandran, director general, Cellular Operators Association of India (COAI), categorically denied any such development: "We have not asked for any such things. Why would we want the custom duties to be increased for another industry? Our name is being unnecessarily dragged into this whole affair," he added.
Despite the cellular industry being a "premium service" the lower duties on GSM handsets ensure availability of handsets for as low as Rs 5000 per terminal, subscribers to basic services will have to pay far more, according to the letter. The basic duty on GSM handsets is five per cent and the effective duty is 26.7 per cent. The cellular operators have asked the Government to reduce the duty and bring it down to zero per cent in a pre-budget proposal.
The letter sent by ABTO follows media reports that the cellular industry representatives have asked the government to keep duties on the WLL handsets at 51 per cent based on the fact that these handsets do not use SIM cards.
According to the basic telecom players, the nascent industry will be in trouble if prohibitive duty structures are imposed. "A case for higher duties does not exist since there were no domestic WLL-infrastructure manufacturers," add these players.
There are different technologies for WLL infrastructure in India, some of them indigenous, others not. For technologies like CDMA there is no company which manufacturers handsets in the country. As such, all CDMA-based WLL infrastructure equipment and CDMA WLL handsets has to be imported in order to deploy WLL infrastructure in the country. According to the basic operators, if the duty is as it exists today, the difference in duties between the cellular and WLL handsets is 32 per cent. "The moment the additional duty is removed the cost of the handsets will come down by a third," adds a basic operator. According to industry experts, while the CDMA Fixed Wireless Terminal is available in the range of Rs 15,000, the CDMA mobile handsets are priced at Rs 7,000.
Recently, the government passed the guidelines for fixed service providers, which envisaged the use of Wireless in Local Loop (WLL) to provide mobility within the local call area. While this was opposed by the cellular operators on the grounds that their exclusive turf was being invaded, the government went ahead with the guidelines on the twin reasons of faster roll-out and affordability. Since then there have been over 120 applications for basic service licenses.
Affordability at Rs 1.20 for three minutes of airtime was the plank on which the battle for WLL-based mobile services was fought. Hence, high customs duties on equipment for WLL services will automatically change that Unique Selling Point (USP) of affordability.
Copyright © 2001 Indian Express Newspapers (Bombay) Ltd.
