Going by actual earnings, the government will be able to collect around 26% less from the telecom sector than the Budget target of Rs 52,806 crore in the current fiscal because of its decision not to charge a fixed upfront payment from the operators for spectrum bought in the recently concluded 5G auctions.
However, by allocating 4G spectrum to state-owned BSNL, the department of telecommunications will show an additional receipt of Rs 30,000 crore in its books thereby exceeding the budgetary target by 29% by showing a total collection of around Rs 68,000 crore.
In actual, the loss-making BSNL will not pay anything to the government for spectrum, which is worth Rs 30,000 crore as per the price determined in the auctions held in July, 2022. The company will instead offer equity to the government in lieu of it. But since it will pay the GST on the Rs 30,000-crore amount, the DoT will show the entire amount as earnings from spectrum allocation in its books.
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The actual earnings – without adding the BSNL adjustment — by DoT during the current fiscal will be Rs 39,000 crore against the budgetary target of Rs 52,806 crore. Of this, Rs 21,000 crore will be come through annual licence fee and spectrum usage charge collected from private sector telecom operators. An additional Rs 18,000 crore will come through the first instalment paid by operators like Reliance Jio, Bharti Airtel, and Vodafone Idea for spectrum bought by them in the July, 2022 auctions.
In the past auctions, operators had to pay 33%-50% (depending on spectrum bands) of their total commitment as upfront payment. The balance was paid by them over a twenty-year period in equal instalments with net present value intact.
However, in the auctions held in July 2022, operators were not required to pay any upfront amount and instead had the option to pay their total dues in twenty equal instalments. As a result of the total commitment of Rs 1.5 trillion by the operators in the 5G auctions, the total payment which has come to the government as first year’s instalment is Rs 18,000 crore.
Another factor, which restricted government’s actual revenues from the telecom sector was its decision not to charge any spectrum usage charge from operators for airwaves bought in the July 2022, auctions. This will lead to a shortfall of around Rs 5,000 crore.
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The SUC regime has changed over the past decade. For instance, on spectrum acquired till 2013, SUC ranged between 3-8% of operators’ adjusted gross revenue depending on
the spectrum band and amount of spectrum held. From 2014, the government moved to
a uniform SUC regime independent of bands and amount of spectrum held. While this was set at 5% for spectrum acquired in 2014 and 2015 auctions, it was lowered to 3% for spectrum acquired in 2016 and 2021 auctions. This was brought down further to 0% from 2022.
The Rs 52,806.36 crore Budget target for FY23 was 38% lower than what the government collected in FY22, which stood at Rs 85,640 crore. In FY22, the government exceeded the Budget estimate of Rs 53,986.72 crore mainly because of pre-payment of spectrum instalments by Bharti Airtel and Reliance Jio. Jio had pre-paid Rs 30,791 crore clearing all dues towards spectrum bought in auctions before March 2021. Similarly, Bharti had paid Rs 24,334 crore to clear deferred liabilities of earlier auctions.
In the last seven-eight years, the government has been able to achieve the Budget estimate from telecom receipts only twice.