The Committee of Secretaries, headed by Cabinet Secretary Rajiv Gauba, has been asked to examine "all aspects" of "financial stress" faced by service providers such as Bharti Airtel and Vodafone-Idea and suggest measures to mitigate them.
The government has constituted a committee of secretaries to explore a financial bailout package for the telecom sector by lowering spectrum charges as well as ending the era of free mobile phone calls and dirt cheap data as companies look at the government for avoiding payment of thousands of crores of rupees in overdue statutory levies. The Committee of Secretaries, headed by Cabinet Secretary Rajiv Gauba, has been asked to examine “all aspects” of “financial stress” faced by service providers such as Bharti Airtel and Vodafone-Idea and suggest measures to mitigate them, sources in the Department of Telecommunications (DoT) said.
The panel, which will comprise secretaries to the ministries of finance, law, and telecom, has been asked to look at the demands of telecom service providers (TSPs) for deferment of payments they had promised for the spectrum won through auction as well as consider lowering airwave usage charge. It has also been asked to consider lowering the obligation of TSPs for providing 5 per cent of their annual revenues for the Universal Service Obligation Fund (USOF), they said.
In parallel, sector regulator Trai is expected to examine prescribing minimum charge for voice and data services, which according to old telecom operators will ensure long-term viability and robust financial health of the sector, they said.
The panel was set up a day after an unsigned paper seeking a waiver of interest and penalties on the unpaid amount, as well as staggering payment of principal licence fee over 10 years was submitted to the DoT. Bharti Airtel Chairman Sunil Bharti Mittal and his brother Rajan Mittal had also met Telecom Minister Ravi Shankar Prasad and Telecom Secretary Anshu Prakash on Monday.
Citing the recent Supreme Court ruling that had upheld the government’s position on including revenue from non-telecommunication businesses in calculating the annual gross revenue of telecom companies, a share of which is paid as licence and spectrum fee to the exchequer, the note sought a two-year moratorium on spectrum payments beyond April 2020 till March 2022, reduction in licence fee from 8 per cent to 3 per cent, and cutting USOF to 1 per cent. Industry body COAI immediately welcomed the constitution of the CoS, saying the panel must work out a relief package within 60 days.
The CoS, which is expected to meet shortly and submit recommendations in a time-bound manner, will consider the demand of TSPs to defer spectrum auction payment for 2020-21 and 2021-22 in order to ease cash flow and lowering USOF charge to 3 per cent, sources said.
While older TSPs such as Bharti Airtel and Vodafone-Idea have been talking of financial stress ever since they faced intense competition from free voice and dirt-cheap data from newcomer Reliance Jio, the matter has assumed greater importance after the October 24 judgement of the Supreme Court. The top court had upheld the government’s position on including revenue from non-telecommunication businesses in calculation of annual adjusted gross revenue (AGR) of telecom companies.
Following the order, Airtel, Vodafone-Idea and other telecom operators may have to pay the government a whopping Rs 1.42 lakh crore within three months. According to the DoT’s calculations, Bharti Airtel faces a liability of around Rs 42,000 crore after including licence fees and spectrum usage charges, while Vodafone-Idea may have to pay about Rs 40,000 crore. Jio may have to pay around Rs 14 crore. The remaining liability is with state-owned BSNL/MTNL and some of the shut/bankrupt companies.
Though the matter had been in courts for over a decade, the companies had not made any provisions for potential liability in their books of accounts and in absence of which it is now knocking on government doors for relief. DoT sources said representations have been received from major TSPs over the financial stress being faced by them. Future commitments for payments of spectrum purchased by TSPs and the licence fee, including the contribution to Universal Service Obligation Fund (USOF), have been cited as issues that require to be looked into.
The TSPs, they said, claim that a large amount of input tax credit is available to their credit in the government account, which they request should be adjusted against future government levies.
Further, the recent Supreme Court order on the definition of gross revenue is expected to further enhance the financial stress of these TSPs. A case is also being made for viable pricing for voice and data, which falls in the realm of Trai (Telecom Regulatory Authority of India), they said.
The sources said the government is seized with the matter and is keen on facilitating an environment that continues to herald growth of the telecom sector, improves quality of service, generates resources for TSPs for the expansion and renewal of telecom infrastructure and enables empowerment of people of India by access to broadband. The government intends to take a holistic view of the entire situation, they said.
India perhaps has the cheapest data cost in the world with Rs 8 per GB charge. Intense competition has meant that the average revenue per user (ARPU) per month has declined from Rs 174 in the year 2014-15 to Rs 113 in 2018-19. It is also estimated that a subscriber on an average uses 10GB of data and 700 minutes mobile talk time per month.