)
The Telecom Commission (TC) will meet again within a week to discuss the issue of spectrum usage charge (SUC), a percentage of the adjusted gross revenue (AGR) that telecom operators pay to the government, as it failed to take a final call on the levy on Tuesday.
“The issue needs more discussions. We are discussing a number of options and there could be more hybrids that we might consider. We will meet again in the next few days,” M F Farooqui, the TC chairman, who is also the secretary of the department of telecommunications (DoT), said.
While the TC, which is the highest decision-making authority at the DoT, has agreed that modification of the current slab-based SUC is “necessary”, modalities need to be worked out, said Farooqui. “A decision will surely be taken before the forthcoming auction. The auction would not be delayed further.” The next auction will start on February 3.
One of the key parameters for deciding the new rate of SUC would be maintaining the government’s annual earning from the SUC. In fiscal year 2012-13, the government earned a total of Rs 5,689.88 crore from spectrum levy, an increase of about 10.5 per cent from the Rs 5,148.05 crore earned during the previous fiscal year.
At present, telecom operators pay between 1-8 per cent of AGR depending on their spectrum holding.
The issue came under discussion after the Telecom Regulatory Authority of India (Trai) had, in September last year, suggested the adoption of a flat SUC at 3 per cent of AGR of telcos, irrespective of their spectrum holding. However, an internal committee of the DoT has opposed the move, while the TC wanted to take a decision in consultation with the Department of Economic Affairs.
Companies like Reliance Jio, which holds only broadband wireless access (BWA) spectrum, opposed the recommendation as it would require paying only 1 per cent of AGR as SUC. Incumbent GSM operators like Bharti Airtel, Vodafone India, Idea Cellular and Uninor have spoken in favour of the move.
ALSO READ: Cellular operators call for flat SUC
According to a recent communication of the TC, it has considered three options to determine the SUC. The first option was based on the views from Trai, which suggested a flat SUC at 3 per cent of AGR, while the maximum slab would be capped at 5 per cent. Trai has also suggested that there should not be any change in slab rate for incremental spectrum, while SUC for BWA spectrum holders would increase from 1 per cent to 3 per cent.
Further, it has suggested that the 3 per cent flat rate should apply for spectrum acquired in the auction held in November 2012 and March 203. The estimated loss for the government would be about Rs 2,893 crore in absolute terms for the next 10 years, the communication noted.
In the second option, the SUC was suggested at 5 per cent of AGR, with an average rate for incremental spectrum, and existing spectrum holders would continue with the existing slab-based rates. BWA spectrum holders would also continue with the 1 per cent SUC slab. The government’s loss in this would be about Rs 917 crore over the next 10 years.
The third option was based on the views of the Department of Economic Affairs. It has suggested that SUC for right to use spectrum in the forthcoming auction would be at 3 per cent of AGR and incremental spectrum to be at 3 per cent, combining with existing spectrum to be at weighted average existing and acquired. However, it added, it would not be less than the present charge. In this option, existing spectrum holders who would not buy airwaves from the forthcoming auction will continue with existing slab-based SUC regime.
If TC goes ahead with this option, companies participating in the forthcoming auction will have to move to the 3 per cent SUC rate regime, while BWA spectrum holders will continue paying SUC at 1 per cent of AGR. If any BWA spectrum holder acquires any spectrum in the forthcoming auction, it will have to pay 3 per cent SUC for the freshly acquired spectrum. It noted that in the third option, the government would incur a loss of about Rs 2,893 crore over the next 10 years in absolute terms.
Implementation of the Trai recommendations on SUC could have legal implications as it would violate the terms in the Notice Inviting Applications issued in 2010 before the auction for BWA spectrum, according to the communication. The other two options are unlikely to have any legal challenges from BWA spectrum holders. The second option may face some challenges as it proposes to raise lower slab rates of SUC.
