DoT may cancel rural licence fee waiver

A bitter battle between the finance ministry and the Department of Telecommunications (DoT) over their jurisdiction might force the latter to withdraw its decision to waive licence fees for fixed-line service operators in rural areas.

DoT had amended the terms of the basic services and universal access service licence to accommodate this waiver in September 2008 to address issues of viability in rolling out rural networks. The move would have benefited state-owned Bharat Sanchar Nigam Ltd, Reliance Communications, Bharti Airtel, HFCL and Tata Teleservices.

The finance ministry at the end of last year complained to the cabinet secretariat and the Prime Minister’s Office, saying DoT had not followed Rule 4 of the Government of India (Transaction of Business) Rules and clause 1 of the second schedule of the same rules, under which the department should have moved a note for Cabinet consideration, since the finance minister’s concurrence to the proposal was not obtained.

In a note prepared by DoT a few days ago, officials in the ministry have suggested that the best option would be to rescind the waiver (which has been held in abeyance after the finance ministry’s complaint), since it was unlikely to to get Cabinet approval.

The alternative is for DoT to approach the Cabinet to endorse the waiver of licence fee for wireline services for operating in rural India. A final decision will be taken by the Telecom Commission.

The Commission had last year decided that to arrest the decline in fixed line network expansion in rural India and to encourage quicker penetration of broadband, it was essential that fixed-line operators got a waiver in the licence fee they payed for the services in rural areas. This, it had explained, would provide an incentive to rural land-line operators, who were finding the business in these areas unviable. Under the guidelines, the operators had to pay between 6 and 10 per cent of their revenue as licence fee per year, depending on the circle.

Rural wirelines subscriptions fell to 10.58 million in March 2009 from 10.68 million in the quarter ending December 2008.

Rural telecom density as in December was 12.59 per cent compared to an all-India average of 33.33 per cent. The government has, however, fixed an ambitious target of 25 per cent penetration in rural India by 2012.