As Telecom sector reels below a debt burden of round Rs 7.70 lakh crore, which together with the hyper competitors has impacted the operators’ capability to service curiosity obligations, business physique COAI has urged Telecom ministry to scale back licence charge (LF), spectrum utilization cost (SUC) and USOF contributions.
In a letter to Telecom secretary, Aruna Sundararjan final month, COAI director basic Rajan S Mathews has mentioned that the rising monetary stress within the sector is on account of excessive spectrum costs paid in auctions, rising burden of duties and levies and an intense value competitors.
The rising monetary stress on the sector has been echoed by Economic Survey evaluation, Reserve Bank and numerous different banks. The elevated competitors in previous few years has prompted a significant spherical of price-cutting by the Telecom operators. The identical has deteriorated their curiosity protection ratio, or telcos capability to pay excellent curiosity on the debt, Mathews has mentioned.
The home Telecom business is said to be probably the most taxed when put next to taxes, levies and surcharges which can be levied on Telecom service suppliers in South Asia and ASEAN international locations. The estimated levy on the sector ranges from 29% to 32%, the place Telecom particular levy contributes to 11-14%, Rajan added.
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Urging the government to come to assistance from cash-strapped telcos, Rajan prompt that contributions to the Universal Service Obligation Fund (USOF) be instantly introduced down to 3%, with an final goal of eliminating the levy in subsequent 2-Three years in step with suggestions made by the sectoral regulator, Trai.
Sharing USOF information, Mathews mentioned that out of the `92,765.36 crore collected between 2002-03 to 2018-19, round `48,393.03 crore is unutilised, which represents 52% of the full USO levy collected. “Thus, we suggest that department of Telecommunications (DoT) may keep USOF contribution in abeyance till the entire amount of this corpus gets fully disbursed,” he added.
“Further, considering the financial health of operators, we earnestly request DoT to also reduce the remaining licence fee rate from 3% to 1% of the adjusted gross revenue (AGR),” he added.
At current, Telecom operators pay 8% of their AGR as licence charge, of which USOF levy is 5% and LF is 3%, and round 5-6% as SUC. “There should not be any SUC for the spectrum acquired through auctions over the long run. At most a nominal fixed fee may be charged for SUC, to recover administrative costs. In the short term, the SUC charge should be reduced to a uniform 1% of AGR across all spectrum bands,” Mathews mentioned.
COAI isn’t the one entity which has raised the problem of excessive taxes and levies within the sector. Kumar Mangalam Birla, chairman of Vodafone Idea has already met Telecom ministry officers twice this month flagging the liquidity crunch being confronted by the business.
Birla is believed to have sought government’s assist in type of some leisure within the taxes and dues which business pays on a quarterly foundation to the DoT.