Telecom Licence Fee May Be Set At Flat 9%

[savramesh 37]

Livemint

Jun 25 2009. 12:22 AM IST

India’s primary phone operators’ lobby had asked for a uniform fee of 1% of AGR

New Delhi: A committee set up by the department of telecommunications, or DoT, to replace the graded structure of telecom licence fees with a uniform one for phone service operators is in favour of a flat fee of 9% of revenues, two senior department officials who are members of the panel said.

The committee will make its final recommendations in two weeks. Telecom firms currently pay between 6% and 10% of adjusted gross revenue, or AGR, to the government as licence fees for the right to offer phone and related services.

Services such as Internet access are levied at 6%, while mobile phone services entail payment of up to 10% of AGR. The rates vary according to circles or licence areas as well.

This levy includes a payout worth 5% of AGR made to the universal service obligation, or USO, fund, which is used to subsidize the roll-out of phone services in rural areas. AGR stands for gross revenues minus service tax and payments made to enable phone services such as charges for interconnection between two networks.

The move to a flat fee structure will cover not just mobile and fixed-line phone firms but also those with licences for national and international long-distance phone services and Internet access services. Phone firms have been charged with misreporting their revenues under various service heads in an attempt to lower this payout, and DoT is conducting audits on operators such as Reliance Communications Ltd, Bharti Airtel Ltd, Vodafone Essar Ltd and Idea Cellular Ltd to check on this.

Latest DoT data show the government received Rs4,200 crore as telecom licence fees for the first two quarters of fiscal 2009; it was Rs8,100 crore in the previous fiscal. Mint had reported in April that DoT was looking to implement a flat licence fee structure to simplify the revenue sharing model between phone firms and the government.

On 5 May, DoT formed a four-member committee to look into the merits of implementing a uniform licence fee and to work out a rate for the uniform fee.

“The weighted average of the fees that have been given so far comes to around 9%. The committee feels that this would have a minimal impact on the revenues of the operators as there would only be a slight deviation from what they are already paying,” one member said. “The report should be ready in another 15 days.”

Still, the 9% levy will fall short of industry expectations.

In its recommendations for the budget for fiscal 2010, India’s primary phone operators’ lobby, Cellular Operators Association of India had sought a uniform licence fee of 1% of AGR, excluding the 5% USO charge.

“This is not possible at present as this would reduce the revenue to the government,” said the DoT official quoted earlier, adding an earlier proposal to reduce the USO fee from 5% of AGR had been shot down by the government.

The official also said the department has not asked for any change in the licence fee structure in this year’s budget proposals.

An industry representative was critical of the move to a flat 9% of AGR as licence fee. In a rural area where it is more expensive to provide phone services, argued S.C. Khanna, secretary general, Association of Unified Telecom Service Providers of India, “if operators have to pay 9% as opposed to the 6% they are already paying, then it is unfair”.

The association represents fixed-line phone operators and firms running wireless networks on CDMA (short for code division multiple access) technology.