“This is under consideration, but is unlikely to be accepted,” one of the officials said on condition of anonymity. “There is the problem of the impact on Treasury revenue.”

Telecom operators had requested the government to prospectively remove license fees, including Universal Service Obligation (USO) fees, as part of the AGR, or reduce them from 8% to 0, 5-1% of the AGR. The move was suggested after the Supreme Court in September rejected the telecom companies’ review petition seeking corrections in the AGR calculations.

AGR is the revenue that telecom operators earn from their core services, such as mobile and internet services, on which license and USO fees are charged. Telecom operators currently pay 3% of AGR as license fee and 5% of AGR as USO fee once in a quarter. USO fees are donated to the USO Fund which is used to provide connectivity in unconnected areas of the country.

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In response to Mint questions, SP Kochhar, director general of COAI, said: “We understand the concerns the government may have regarding revenue, but we still hope that they can consider our request in the context of the continued and significant investments that carriers have made in the country to ensure data connectivity for all.

Telecom operators currently pay 3% of AGR as license fee and 5% of AGR as USO fee once in a quarter.

COAI (Cellular Operators Association of India) represents private telecom operators Reliance Jio Infocomm Ltd, Bharti Airtel Ltd and Vodafone Idea Ltd.

“I’m not surprised. Bureaucrats are very reluctant to approve such decisions as they fear being accused of harming exchequer revenues,” said Mahesh Uppal, director of Delhi-based consultancy ComFirst India.

Uppal said this development is worrying because licensing fees are meaningless when the license is neither exclusive nor bundled with resources such as spectrum.

“The USO Fund is not illogical but because it was poorly deployed,” Uppal said. “Unfortunately, bureaucrats lack incentives to resolve these problems that continue to distort the telecommunications market.”

Inadequacy of customs duties and levies

According to industry observers, while tariffs and revenues for telecom services in the Indian market were among the lowest in the world, taxes were among the highest.

“For the growth and development of the sector, especially to ensure broadband for all, streamlining taxes would be an important step,” said Prashant Singhal, global head of telecom, media and technology for emerging markets at EY, adding that the government should first deploy the unused balance of the USO Fund and then seek to raise more.

The AGR of the Indian telecom sector increased by 8.24%, reaching ₹2.7 billion, in 2023-24, against ₹2,490 billion in 2022-23, according to Telecom Regulatory Authority of India (Trai) data released in August.

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The government collected license fees from ₹21,642 crore in 2023-24, which is 8.45% more than ₹19,954 crores than a year ago.

According to data from Digital Bharat Nidhi, the new name of the USOF created earlier this year, in FY24, ₹18,187 crore USO fees were collected, of which ₹7,676 crores have been disbursed. During FY23, ₹12,693 crores were collected and ₹3,500 crores disbursed. At the end of FY24, the total amount of the USO Fund was ₹79,638 million.

As part of a reform measure announced in 2023, the Center stopped collecting spectrum usage charges (SUC) from October 2022. SUC collections therefore fell by 32.3% to ₹3,369 crore in 2023-24 from ₹4,968 crores a year ago.

The context

In October, COAI wrote to the government seeking relaxation on the grounds that the move would allow operators to reinvest revenues into the network for continued upgrade and expansion.

The request often made by telecommunications operators has been that the USO tax be suspended until the ₹The USO fund of 79,638 crores is fully utilized. License fees should be waived as telecom operators pay Goods and Services Tax (GST) when acquiring spectrum and then license fees when using spectrum, in addition to tax on companies, as is the case for all businesses.

COAI said in its submission to the government that telecommunications companies were facing a “double whammy” because not only were they paying “substantial amounts” for the purchase of spectrum, but they were also being charged for the revenue they they were drawing from this spectrum – all on the basis of their investments in the creation of the networks.

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“TSPs (telecom service providers) buy spectrum at huge prices and also make substantial AGR-linked payments for the same. This would be like buying a house and paying rent,” the industry body wrote.

He added that a license fee was appropriate when licenses were bundled with spectrum at the time of the introduction of the National Telecommunications Policy 1994. However, subsequently spectrum was delinked from license in 2012 and is currently allocated after being purchased via a transparent agreement. and open auction procedure; the logic of charging license fees separately does not hold.