DoT defers cut in licence fee

The government is understood to have held back its decision to lower the licence fee by about 33 per cent with effect from April 1, for those telecom operators who have 95 per cent or more coverage in a circle, a move that would affect state-run Bharat Sanchar Nigam Ltd (BSNL), as it has maximum penetration in rural and other cities.

In October last year, the Department of Telecommunications (DoT) had announced a cut in the fee contributed towards the Universal Service Obligation Fund (USOF), a subsidy given to telcos to offer services in rural areas, to 3 per cent from 5 per cent now. However, the move has been kept in abeyance till further orders.

Asked about the reason to reverse the decision, sources in the know said the existing GSM operators had opposed the move saying that the decision would benefit only one operator — BSNL — and had demanded removal of a clause that this would be applicable only on coverage of 95 per cent of the development blocks in a circle.

One of the telecom operators said that since the unutilised sum in the USOF kitty had already crossed Rs 20,000 crore, any reduction in this levy should be applicable to all players. The telecom operators said that by inserting a rider of 95 per cent coverage, the DoT was favouring BSNL.

India’s telecom sector has been demanding a lower tax burden for several years as the cellular industry in India is confronted with one of the highest taxes in the world. The cut in USOF levy would not help any of the private telecom operators as none of them has covered 95 per cent of the area in a circle.

The data compiled by the Telecom Regulatory Authority of India (Trai) show that telecom operators pay up to 30 per cent of their gross revenues towards different levies, compared with 5-7 per cent paid by the counterparts in other Asian countries. Sources said that the Cellular Operators Association of India (COAI), the body representing all GSM players, had asked the DoT to rework the coverage clause.

Asked whether the finance ministry had also objected to reduction in the fee, sources declined to comment. At present, all operators pay 5 per cent of revenues in all circles towards the USOF. The DoT had announced that the USOF contribution had been reduced to a flat 3 per cent for those players whose services were available in over 95 per cent of the residential areas from April 2009.