The telecom industry has urged the government to consider creation of a financial vehicle that will handle raising of funds at competitive rates as well as subsuming the goods and services tax (GST) under the licence fee (LF) in the new national telecom policy (NTP-2018). Sources said the industry, in its set of demands, has requested for a comprehensive review of the tax structure such as reducing the spectrum usage charge (SUC) to 1% of the adjusted gross revenue (AGR) across all spectrum bands, bring down Universal Service Obligation Fund (USOF) contribution to 3% with an objective of doing away with it in the next 2-3 years and slashing the GST rate to 5%. A senior official said the industry has also urged for a creation of a Telecom Financial Corporation, which was also envisaged in NTP 2012. The entity will have the responsibility of mobilising and channelising funds for telecom projects in order to facilitate investment in the sector and to make available loans at competitive interest rates for companies.
The official added the industry has also requested for a single agency for dealing with issues related to the financial health of the sector, which would aid in faster resolution of problems and clearance of bottlenecks. Besides, it has urged that telecom towers should be exempted from payment of property taxes, which at present is being charged by some states. For fundraising purposes, it wants the sector to be allowed to raise long-term low-cost debt for infrastructure projects to be provided by Infrastructure Debt Funds (IDFs), besides allowing the industry to issue tax-free bonds that will help in reducing the cost of capital and aid in mobilising cheaper funds.
A top executive from a leading telecom operator said the industry also wants the government to review the deferred payment mechanism for spectrum payments.
“We want the payment schedule for spectrum debt to be aligned to the time-period of spectrum usage that is 20 years. It essentially means 5 years of moratorium and another 15 years for the payment. The policy should also consider slashing the interest rate charged on the deferred spectrum payments to 6.5%,” he added. The government-appointed inter-ministerial group (IMG), which was formed to suggest measures to help the cash-strapped sector, had recommended increasing the deferred spectrum payment schedule to 16 years from the current 10. It also suggested replacing PLR + 2% with MCLR + 4%. Both recommendations have been accepted by the Telecom Commission. The industry had made several of these demands such as reducing SUC and contribution to USOF before the IMG, which was not considered by the panel, but the government had assured the sector that it will consider them while framing the NTP 2018.
Another top industry executive said these demands, if accepted, will help the sector raise funds for investing in the eco-system. At present, companies are facing fund crunch and with Trai slashing the IUC by 57% and reduction in mobile tariffs due to the ongoing competition in the market, there are already concerns on raising capital for future investments. The industry’s total debt stands at around Rs 4.60 lakh crore. It has bought spectrum since 2010 worth `3.45 lakh crore for which an upfront payment of `1.90 lakh crore has been made and the balance Rs 3.08 lakh crore needs to be paid up to 2028-29.