Industry association the Cellular Operators Association of India (COAI), which includes Reliance Jio, Bharti Airtel and Vodafone Idea among its members, has questioned the continuation of licence fees in their present form.
At the moment operators pay an 8% licence fee to the government, which includes a 5% universal service obligation (USO) levy. The COAI has suggested that the licence fee paid by them to the government should be reduced to 0.5% to 1% of the gross revenues.
COAI states that “the payments made on the basis of the AGR (adjusted gross revenue) [i.e. licence fees, inclusive of USOF] by telecom service providers to the government, need to be reconsidered under the changed regime and circumstances, as has evolved in the sector”.
It points out that it may have been appropriate to have a license fee when licences were bundled with the spectrum. But spectrum was delinked from the licence in 2012 and is currently assigned using a transparent and open auction procedure.
Service providers pay a substantial amount for the right to use spectrum. At the same time, however, payments are also charged on the basis of the AGR on service providers, which, says the COAI “is a double whammy for them, given the huge investments made towards procuring the spectrum”.
The COAI, via its director general SP Kochhar, said in a statement: “The licence fee, at best, should cover the cost of administration of the licence only, which is to the order of 0.5% to 1% of the gross revenues, instead of the 8% paid currently.”
As well as AGR-related payments, the operators also pay CSR, GST and corporate tax.
The industry feels that abolition or reduction of the licence fee-related payments would allow the operators to put revenues back into networks for upgrades and expansion and would further enable faster digital inclusion, especially in the remote areas.
Will this argument sway the government? That may depend on whether it agrees that the social and economic benefits of alleviating financial pressures on operators – especially debt-troubled Vodafone Idea – outweigh the loss of a significant revenue stream.
