'Licence fee cut not to hit govt revenue'

Telecom operators have projected that the government's licence fee and service tax revenue from the sector will grow 30 per cent to Rs 8,542 crore during the next fiscal, even if the licence fee was cut by 1 percentage point to 7 per cent.

In a pre-Budget presentation, the operators have said the Centre's revenue will rise to Rs 8,905 crore in the next fiscal from Rs 6,616 crore projected for 2005-06 if the licence fee was cut to 5 per cent.

This was because lower levies on the sector will mean a higher disposable surplus for investment and will also cut service costs and thus enable a widespread expansion of affordable services, the cellular operators said in a joint presentation to the department of telecommunications.

Under a one-percentage-point cut in the licence fee, operators estimate that the sector will witness 57 per cent growth in subscriber base and an increase in total annual revenues to Rs 56,944 crore in the next fiscal, compared with 55 per cent and Rs 36,754 crore, respectively, in 2005-06.

While this reduction will see the government's revenues from licence fee fall by Rs 93 crore to Rs 2,847 crore, the operators said service tax will register a 55 per cent increase to Rs 5,694 crore.

"Higher telecom revenues will translate into higher tax revenues for the government. Besides, there will be much greater direct and indirect benefits from the resultant economic growth," the cellular operators said.

The operators also said a 3 percentage point cut in the licence fee will see the subscriber base swell by 65 per cent to 133 million and the total revenues from the sector touch Rs 59,367 crore. This scenario will see the sector paying a service tax of Rs 5,937 crore in the next fiscal.

The operators' claims are supported by a recent study by the Telecom Regulatory Authority of India (Trai), which said operators in India paid between 17 per cent and 26 per cent of their revenues as levies and taxes to the government, against less than 5 per cent paid by operators in other countries in the sub-continent and China.

"India has a very heavy taxation rate and reducing levies is essential to lower the cost for the customer, to universalise telecom services in real terms and to increase the penetration in new markets, particularly in rural areas," the Trai report had said.