ET View: Promptly review levies, charges and the high extent of revenue share in Indian telecom

There is crying need for proactive policy action to bring down charges, levies and revenue-share norms in the domestic telecom industry now frantically making provisions for adjusted gross revenue (AGR) dues following the recent Supreme Court ruling.

Telecom major Bharti Airtel has announced an unprecedented net loss of Rs 23,045 crore for the quarter ended September 30, on the basis of massive provisions for Rs 28,450 crore in AGR to the Centre.

The figure includes the principal plus interest, and penalty plus interest, with the interest component nearly double for both the principal and penalty amounts, in respect of licence fees and spectrum usage charges that are now mandated to be levied on telecom service providers.

The levies, charges and mounting dues would essentially financially cripple and may even bankrupt the leading service providers, and have wholly-avoidable negative effects and signals much beyond the telecom sector itself.

The Union Cabinet needs to purposefully rationalise central levies and charges on telecom operators for the greater national good.

Vodafone Idea has reportedly announced an even more massive loss provision of Rs 50,921 crore, taking its AGR dues into account.

The government needs to announce forward-looking measures designed specifically to tackle myriad policy rigidities in telecom. Back in the path-breaking 1990s, telecom operators did bid aggressively and promise upfront revenue share, which their revenue-base did not warrant. So to ease the operators’ owes in circa 1999, there was path-breaking reform and policy action in telecom, and change-over to the present system of revenue share.

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For several years, licence fees and spectrum usage charges were administratively levied and spectrum handed out as part of the licence entitlement. But for a decade now, there’s been aggressive bidding for the telecom spectrum, and in such a backdrop, the continuing levy of licence fees and spectrum usage charges as a high share of telecom revenue is entirely questionable.

In telecom jurisdictions abroad, the charges and levies are much more moderate, with good reasons. There’s a nominal licence fee on operators simply to have in place an independent regulator, and service providers pay taxes like other companies. We surely need such a system here.

The whole idea of telecom licence fees and spectrum usage charges as high shares of telecom operators’ annual revenue need to be done away with. It is not as per international practice. Also, now that the Universal Service Obligation Fund (USO), which is yet another levy on service providers, has nearly Rs 60,000 crore lying idle in its corpus, further accruals can be gainfully suspended.

It is time to revisit both the range and extent of the government’s rightful revenue share in telecom. High usurious levies would quite needlessly affect the digital economy and the payments system and well beyond. It is entirely avoidable.



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