The Indian Government formed a Committee of Secretaries (CoS) recently, led by Rajiv Gauba, the Cabinet Secretary, to devise a rescue package for the beleaguered telecom industry. The panel includes secretaries from the Ministries of Finance, Law, and Telecommunications. This decision is in response to a recent Supreme Court order, designed to alleviate the over 1.4 lakh crore INR payment that telecom companies owe to the exchequer. The Supreme Court agreed with the government’s stance on including non-telecom business revenue in the annual Adjusted Gross Revenue (AGR) calculations of telecom firms, which was contested by the latter. This judgment is anticipated to exacerbate the financial burden of these Telecom Service Providers (TSPs). Given the various challenges faced by the telecom sector, this panel was constituted to serve the broader public interest and improve telecommunication services for customers.
Underlying Issues
Currently, the telecom industry’s debt is approximately 4 lakh crore INR. Intense competition from free voice and cheap data offerings resulted in a decline in the gross revenue between 2017-18 and 2018-19. The average price of data for consumers (around 8 INR per GB) is among the lowest globally. Also, the average revenue per user monthly dropped from 174 INR in 2014-15 to 113 INR in 2018-19. Other hurdles include low fixed-line penetration, high right-of-way costs, current tariff system, and the deployment of 5G.
Sector Demands
The industry has called for a reduction in spectrum usage charges and the Universal Service Obligation Fund (USOF) levy, deferred Spectrum Auction Payment due for 2020-21 and 2021-22, and viable pricing for voice and data. They have called for the Telecom Regulatory Authority of India (TRAI) to set a minimum charge for these services to ensure the sector’s long-term survival and financial stability. The TSPs also wish for the substantial input tax credit in government accounts to be set off against future government levies, easing their immediate distress.
Key Definitions
Adjusted Gross Revenue (AGR) is the licensing fee and usage fee charged to telecom operators by the Department of Telecommunications (DoT). It includes spectrum usage charges and licensing fees, typically between 3-5% and 8% respectively. Spectrum Usage Charge is the fee paid by licensees providing mobile access services, as a percentage of their Adjusted Gross Revenue (AGR). The spectrum rates for the same are periodically set by the Government. The Universal Service Obligation Fund (USOF) ensures quality ICT services access at economically efficient prices to people in rural and remote areas. It is currently set at 5%, although the TSPs request it be reduced to 3%.
| Term | Description |
|---|---|
| Adjusted Gross Revenue (AGR) | Usage and licensing fee charged by DoT |
| Spectrum Usage Charge | Fee paid by mobile access services licensees |
| Universal Service Obligation Fund (USOF) | Fund ensuring quality ICT services access in rural and remote areas |
Way Forward
To stimulate the growth of the telecom sector, improve service quality, and generate resources for TSPs, a new infrastructural policy is urgently needed. To achieve this, the government should provide a conducive environment for telecom operators and establish a long-term vision plan. Enhanced broadband services accessibility will facilitate India’s digital empowerment, hence the government must take adequate measures to reinforce the overall telecom sector.
