Telecom relief package likely to cost Rs 14,000 crore to govt in FY22

The government’s telecom package, announced on Wednesday and comprising a moratorium on spectrum charges and adjusted gross revenue (AGR) dues for four years, is likely to reduce non-tax revenues from the sector by around Rs 14,000 crore this fiscal year if companies opt for the offer.

Aditi Nayar, chief economist at ICRA, has assessed non-tax revenues of Rs 46,000 crore from the sector will be deferred per year for four years, starting from FY23. This comprises Rs 14,000 crore related to the moratorium on AGR and Rs 32,000 crore from the halt on spectrum dues, she said. The package comes into effect on October 1 this financial year.

FY22 was under a moratorium for past spectrum dues. AGR dues, which were to come by March this fiscal year, will be deferred now. So, the net impact for this year is limited to Rs 14,000 crore, said Nayar.

However, many other assumptions made while estimating the Budget numbers like spectrum proceeds from fresh auctions might also not come this fiscal year, which would lower revenues by Rs 26,000 crore, said Aditi Nayar.

She said: “We now assess the inflows from telecom to the Centre’s FY22 non-tax revenues to be limited to Rs 28,000 crore, trailing the budgeted Rs 54,000 core.”

This will modestly widen the Centre’s fiscal deficit, Nayar said.

Madan Sabnavis, chief economist at CARE Ratings, said there could be a gap of up to Rs 10,000 crore between the budget estimates (BE) and realisation from non-tax revenues from the telecom sector for this financial year. He said the shortfall might constitute up to 5-10 per cent of the BE.

The government budgeted Rs 1.33 trillion as non-tax revenues from the telecom sector in 2020-21, but only Rs 34,000 crore could be realised. It was conservative this financial year and estimated the realisation at Rs 54,000 crore, which looks difficult now.

Jaideep Ghosh, chief operating officer, Shardul Amarchand Mangaldas & Co, said operators paid around 8 per cent of AGR as licence fees and 3-5 per cent of AGR as spectrum usage charges (SUC) annually to the government.

With non-telecom revenues excluded from AGR and SUC scrapped for spectrum acquired in the future, the government revenue is likely to reduce.

“This could be compensated by increased revenues of the telecom operators to some extent,” he said.

Sandeep Jhunjhunwala, partner at Nangia Andersen LLP, said while the telecom service providers were relieved, this might have queered the pitch for the government’s budgetary allocations from the expected revenues from the telecom sector.

With the four-year deferment in annual payment of dues, including dues for spectrum purchased in past auctions, the government spend on its proposed projects may also see a deferment, he said. The decision on spectrum auctions to the end of the financial year may further aggravate the delay, requiring the government to redefine its plans, Jhunjhunwala said.