Govt expects Rs 55k cr from telecom spectrum bid

The government has budgetedRs 55,000 crore for telecom spectrum auction in 2016-17, while the total revenue from communication services has been pegged at Rs 98,995 crore.

About Rs 22,000 crore would come from license and spectrum fees levied by the department of telecommunications (DoT) and around Rs 21,000 crore from one-time spectrum fees and arrears from the earlier auction in March 2015, said a senior government official.

The government had earlier estimated revenue of Rs 42,866 crore in 2015-16, while the revised estimates are Rs 57,384 crore. Though, the ministry of communications could not conduct a spectrum auction in 2015-16, it was able to meet the revenue targets.

Brokerage firm Credit Suisse has estimated that the government may get Rs 50,000 crore in next spectrum auction planned to be held in 2016-17.

“The arrears of the previous years and receipts from fresh auction are also included in the Budget Estimates 2016-17,” the Budget document said.

In 2014-15, the government had earned revenue of Rs 1.1 lakh crore from spectrum auction. According to experts, the government could rake in Rs 5.5-6 lakh crore this year from the sale of spectrum.

The Telecom Regulatory of India gave its recommendation in January this year on auction for spectrum in various bands --including the premium 700 MHz for the first time, at a reserve price of Rs 11,485 crore per MHz. This is the highest reserve price fixed for a band since the process for spectrum auction started nearly five years earlier. The 700 MHz band is considered a good one for mobile broadband and fourth-generation (4G) technology services. It is much sought for long-term evolution deployment around the world, due to its efficiency and higher penetration inside buildings. Existing operators had opposed the auction of 700 MHz

DoT is considering the proposals, a decision on which would be taken by the Telecom Commission, the policy making body of the department. Subsequently, it will be given final approval by the Cabinet. DoT plans to commence the spectrum auction by June-July.

Implications of Budget clarification

The government has clarified that a service tax on spectrum trading deals will be levied, which can be credited back, providing some needed clarity.

Finance Minister Arun Jaitley had said while presenting the Union Budget that assignment of the right to use radio frequency spectrum will not be taken as a sale of intangible goods and, therefore, will be liable to service tax.

The Cellular Operators Association of India (COAI) welcomed the government's clarification. Spectrum Trading Tax being categorised as a service tax allows telecom companies to claim CENVAT credit.

Also, assignment by the government of the right to use the radio frequency spectrum and subsequent transfers has been included under the definition of 'declared service'. Thus, assignment by the government of the right to use the spectrum, as well as subsequent transfers of this right, would now be construed as 'service' and liable to service tax. Such a liability will not only increase the cost of service but result in huge cash flow issue for operators, COAI stated.