The upcoming Budget will likely skip the telecom industry’s key demand on reduction in licence fee by way of a cut in universal services obligation levy, removal of Goods and Services Tax (GST) on licence fee, spectrum usage charges, and spectrum payments, among others, according to officials.The announcements related to the telecom sector in the Budget will largely be around fund allocation from the Universal Service Obligation Fund (USOF) for last-mile connectivity and different R&D projects, BharatNet project for broadband connectivity in rural areas and the allocation of funds for state-owned BSNL from the already approved package.
Out of the Rs 1.64 trillion revival package for BSNL announced last year, the cash component was Rs 43,964 which included support for capital expenditure as well as viability gap funding for services in rural areas. The allocation for BSNL will be out of this package itself.Among key demands, the telecom companies have been asking for a reduction in license fee to 6% of their AGR (adjusted gross revenue) from the current 8%. However, sources in the know said the same is not expected to be taken up by the finance ministry for the upcoming Budget.
“The matter for the reduction in licence fee would not be taken anytime soon as the government has already given a huge relief to the industry with the telecom reforms in September 2021,” a senior government official said.Apart from the reduction in licence fee, the Cellular Operators Association of India (COAI) has pushed for a reduction in USOF contribution by telecom operators, refund of accumulated input tax credit of Rs 32,000 crore on GST, reductions in customs duties on key network equipments etc.
Besides, Delhi-based Digital Infrastructure Providers Association, which represents various tower companies, has also sought a refund of Rs 18,000 crore towards input tax credit on equipments at telecom towers.”This (reduction in levies) will leave more funds with TSPs (telecom service providers) for expansion, increase liquidity, facilitate investments required to complete the Digital India Vision and 5G rollouts, and also keep tariffs at affordable levels,” COAI said.
The Budget in 2022 also did not mention any major announcements on the telecom sector largely due to mega reforms for the sector announced in September 2021 that had simplified a number of structural and procedural reforms to promote healthy competition, protect consumers’ interest, infuse liquidity, encourage investment, and reduce the regulatory burden on telecom service providers.
The reforms also included moratorium on regulatory dues of telecom operators, rationalisation of adjusted gross revenues and bank guarantees, and allowing 100% foreign direct investment through the automatic route. “The Budget is likely to continue to emphasise on the importance of creating a robust digital infrastructure, including e-learning, digital health, digital services to farmers, etc. Proliferation of these services to under-penetrated markets augurs well for the Digital India programme of the government of India,” said Ankit Jain, vice president and sector head of corporate ratings at Icra. According to industry experts, major announcements for the telecom sector in terms of restructuring of the licensing regime, will come after the finalisation and passage of the new telecom Bill.