Govt may settle for 6% telecom revenue share

RUN UP TO BUDGET 2006

Calls likely to be cheaper post-budget.

Telephone calls might become cheaper after the Budget because the finance ministry favours a cut in the revenue telecom companies have to share with the government to a flat 6 per cent.

The companies now pay the government 10, 8 and 6 per cent, depending on the markets they operate in.

This will be in line with the licence fees paid for long-distance telecom services, which were slashed this month from 15 per cent of revenue to 6 per cent.

The Budget is also likely to redefine the revenue of telecom companies to weed out income streams not related to telecom services, like offering free handsets, a common practice in the West. Telecom companies in India are now taxed on handset sales.

According to government sources, the finance ministry might also exclude from shared revenue interest and dividends from non-telecom investments, sale of assets and capital goods, and income from shared infrastructure leased from a third party.

"These exemptions will lower licence fees and benefit customers," said an official with the department of telecommunications.

Sharing less revenue with the government is an old demand of the industry, the telecom ministry as well as the sector's regulator. The finance ministry has, in an internal paper identifying telecommunications among six big revenue-generating sectors, also favoured the move.

The telecom industry projects the government's fee and service tax revenue from the sector will grow 30 per cent to Rs 8,542 crore in 2006-07 if the licence fee is cut by 1 percentage point.