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The Department of Telecommunications (DoT) has finalised a list of priorities for its new minister that included a suggestion for lighter regulation of the sector.
In a presentation to Cabinet Secretary Ajit Seth, the DoT has suggested the new government ensure better spectrum management through a policy for trading. This will pave the path for a liberal mergers and acquisitions policy, a long-standing demand of the sector.
The DoT has suggested licensing rules be changed to separate telecom networks from services. This will lower barriers to entry and exit. The DoT highlighted the need to promote local manufacturing, research and entrepreneurship through government funding.
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Among other issues the outgoing United Progressive Alliance government could not address were rationalisation of spectrum charges, rules for computing the government's share of telecom operators' revenues, a national fibre optic network and nationwide mobile number portability.
The DoT has borrowed from Bharatiya Janata Party's manifesto suggestions for a robust telecom network for spread of e-governance and public services, provision of Wi-fi facilities in urban centres and the creation of digital highways.
But the new minister may not find it easy to meet the expectations of the sector. The new government must look at the taxation and penalty structure for the sector, with a cumulative debt of Rs 2.5 lakh crore, analysts said. Marten Pieters, managing director and chief executive of Vodafone India, said on the day the DoT gave its presentation to the secretary, "Telecom as a sector is heavily taxed, and operators end up paying 28-29 per cent of revenue in different kinds of taxes. This needs to be rationalised. This is not justified and brings down the confidence of investors. If the new government provides a rational tax collection system, it would be the best thing. We believe power supply is the best thing Modi could ensure soon. This would be a great help."
Rajan Mathews, director-general of the Cellular Operators Association of India, had said the new government should work towards enhancing the profitability of mobile services operators. One way is to cut levies and penalties. Clear rules on trading and sharing of spectrum would help the sector to manage its debt.
Sunil Mittal, chairman of Bharti, which runs India's largest telecom carrier Bharti Airtel, said the government was expected to undertake "some bold reforms" to inject fresh momentum into the economy. "The long-term India growth story is intact, and the need is to bring back business confidence and revive the investment cycle through swift and decisive policy-making with a focus on jobs-led inclusive growth."
Jaideep Ghosh, partner of audit and tax consultancy KPMG in India, said the government should adopt progressive practices, including a forward-looking spectrum road map. "A reasonable balance is needed among revenue generation for the government, the sector's health, information and communications technology penetration and the customer's interest."
