Telecom fix: Ravi Shankar Prasad seeks cut in licence fee, refund Rs 30, 000 cr of stuck GST

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Updated: July 4, 2019 9:41:49 AM

In a letter to finance minister Nirmala Sitharaman outlining his Budget proposals for the sector, Prasad has urged for reduction in licence fees by a fourth.

Telecom fix, licence fee, licence fee cut, GST, Ravi Shankar Prasad, Nirmala SitharamanTelecom and IT minister Ravi Shankar Prasad.

Telecom and IT minister Ravi Shankar Prasad has batted for a slew of reforms in the telecom sector which will provide a relief of around Rs 3,000 crore annually to the financially stressed operators by way of revenue share licence fee payment.

In a letter to finance minister Nirmala Sitharaman outlining his Budget proposals for the sector, Prasad has urged for reduction in licence fees by a fourth. Currently, operators pay 8% of their adjusted gross revenue as licence fee. Of this, 5% goes to the universal service obligation fund which is for rural telephony and 3% to the government exchequer. Prasad has proposed that the USOF levy be cut by 2 percentage points to 3% since rural teledensity has increased significantly since 2003 when the fund was set up. If done, operators would pay a licence fee of 6% of their AGR against 8% currently.

The proposal, apart from providing relief to the operators, will also not compromise government revenue.

Prasad has, however, added that the 2 percentage point reduction in USOF levy should be utilised by the operators for carrying out research and development and deployment of indigenous technologies in the country.

As reported last week, Prasad has already constituted a committee under the department of telecom, secretary to examine such measures. Similarly, in another pro-industry measure, Prasad has written to the finance minister for considering a mechanism for fast-track GST refunds, which may require an amendment in the GST Act as well as a special dispensation for the telecom sector. He has written that nearly Rs 30,000 crore telecom funds are locked in GST input refunds. In the present GST regime, regulatory levies and capital expenditure is allowed as an input credit. In the telecom industry while this is paid upfront, the refunds are available over a long period of time. The output GST on revenue is unable to absorb the input GST leading to blockage of working capital, he has said.

Prasad has also sought from the finance ministry a separate budgetary allocation of Rs 1,000 crore for reviving the ailing state-owned firms, BSNL and MTNL. “The department is preparing a comprehensive revival plan for BSNL and MTNL. This is required to ensure the presence of the public sector in order to maintain a balance in the sector. In this regard, a Cabinet note is being moved shortly. Accordingly, in the Budget announcement, a mention may be made that a separate budgetary allocation is being provided for revival of BSNL and MTNL. An amount of Rs 1,000 crore may be provided for the same in Budget accordingly,” Prasad has written to the FM.

Asked about the package, a senior government official declined to elaborate, but added that there could be a voluntary retirement scheme aimed at reducing the number of employees in both the companies. BSNL has around 1.62 lakh employees, whose wage bill comprises more than 55% of its annual revenues. On the other hand the wage bill of MTNL’s close to 26,000 employees comprises around 75-80% of its annual revenue.

Prasad has also urged the finance minister to bring down the GST rate on telecom services in line with the rate on handsets, at 12%. He has written that mobile handsets, which have become a basic necessity, are charged a GST of 12%, while telecom services are charged at 18%.

Apart from the Rs 1,000 crore for revival of the sick PSUs, Prasad has also sought a budgetary allocation of Rs 500 crore for a scheme to promote domestic manufacturing of telecom equipment and start ups. He has also sought an allocation of Rs 100 crore for supporting 5G and other new technologies.

In addition he has written to the finance minister that the department be granted additional funds at a later stage (revised estimates) to enable it in connecting the unconnected villages in the country in the next three years.

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