No more cuts in telecom fees

Finance ministry nixes Trai plan citing loss to exchequer.

In a move that could cramp the ability of telecom operators to cut tariffs further, the finance ministry has turned down a Telecom Regulatory Authority of India proposal for a cut in the revenue share licence fee and spectrum charges.

"The government can't go on reducing the licence fee forever. It is important for us to increase the non-tax revenue and telecom is a growing source," said an official.

The government had budgeted for non-tax revenue of Rs 6,500 crore from the telecom sector during the current financial year. A reduction in the licence fee and entry fee for international and domestic long- distance operators from January 1 is expected to result in a Rs 400 crore loss to the exchequer.

The finance ministry had sought the department of telecommunications' comments on the long-distance fee cut as North Block was not consulted before the announcement.

In its recommendations on "unified licensing" in January 2005, Trai had recommended that the ceiling for the revenue share licence fee be brought down to 6 per cent from the existing 8 per cent. In May 2005, Trai proposed that the ceiling on annual spectrum charges be reduced to 4 per cent of the adjusted gross revenue from the existing 6 per cent.

The regulator had made a case for imposing licence fees and spectrum charges only for the universal service obligation and to cover administrative costs.

When contacted, a senior Trai official said, "India has very heavy taxation structure and reducing levies is essential to lower the cost to the customer, to universalise telecom services in real terms and increase the penetration in new markets, particularly rural areas."

The finance ministry's reluctance to reduce the licence and spectrum fee would mean that Indian operators will continue to pay between 17 per cent and 26 per cent of their revenues as levies and taxes to the government, as against 5 per cent paid by operators in other countries in the sub-continent and China.

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 is cut by 1 percentage point to 7 per cent.

In a pre-Budget presentation, the operators added that the Centre's revenue would 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.

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CALL FAILED

Finance ministry says no to cut in spectrum charges

Trai sought to reduce the ceiling for revenue share licence fee from 8% to 6%

The ceiling on annual spectrum charges was sought to be reduced to 4% of the adjusted gross revenue from the existing 6%

Indian operators will continue to pay 17-26% of their revenues as levies and taxes to the government, compared with the 5% paid by operators in neighbouring countries and China