Aiming to boost rural telephony, the government is considering a special incentive regime for mobile phone users. According to official sources, in a letter to the Prime Minister?s Office (PMO), the Planning Commission has proposed that for all rural mobile phone bills below R300, the subscriber could be reimbursed the bulk of the share that goes to the government as taxes and revenue. Besides this, a new mobile phone buyer in rural India will get an upfront subsidy of R250.
The resources for the ambitious scheme will come from the Universal Service Obligation (USO) fund, which is said to be under-utilised. Direct subsidy to the rural people will be a more efficient way of using the fund, the Commission reckons. Also, increased penetration of telephony in rural India will be a key growth driver, besides facilitating inclusive growth.
Taxes and revenue that operators must share with the government account for roughly 30% of mobile phone bills.
According to the Telecom regulatory Authority of India?s (Trai) quarterly performance report, there were 166 mobile phone connections for every 100 people in urban India at the end of the September quarter, compared with little less than 37 connections in rural areas. This means the potential for further growth lies mostly in rural India, but analysts fear telephone companies are not investing enough to tap its full potential. Currently, the revenue earned by the operators from a mobile phone user in rural India is R80 while it is about R200 from an urban user.
Sources said the Commission has proposed a flat 20% subsidy to all rural mobile phone subscribers on a monthly bill less than R300, besides an upfront payment of R250 for every new subscriber.
The news brings cheers to mobile phone operators who have been reporting flagging bottom lines in the last two quarters.
The Planning Commission argues that currently, all consumers pay 30% of monthly bills to the government in the form of taxes and revenue share. Hence, this could be partly reimbursed to rural consumers in order to boost telephony in rural India, which currently has a dismal penetration of less than 30%.
The USO fund holding close to R13,000 crore has been accumulated through the levy of 5% on adjusted gross revenue of the mobile phone operators. The fund was created to finance the development of communications facilities in rural areas which have been considered unattractive business propositions.
A rural mobile phone user talks less than 100 minutes a month while his urban counterpart’s talk time is three times that.
Half of the R1,000 crore increase in the industry’s revenue for the quarter ending September came from rural India says Prashant Singhal of E&Y, a fact which shows the growing share of the rural India in telecom companies’ topline.
