The Hindu Business Line : DoT favours licence fee reduction

THE Department of Telecom is in favour of reducing the licence fee for telecom services providers from an average of 10 per cent to a level that would cover only the administrative and regulatory costs.

The proposal, made to the Finance Ministry, would bring great relief to the operators who pay close to Rs 2,000 crore per annum as licence fee.

Senior government officials told Business Line that the industry had demanded rationalisation of taxes and levies paid by them, which was hindering lowering of tariff and further growth. They, however, said that since the move to reduce licence fee may impact Government's revenue flow, the service tax could be raised from 8 per cent to 12 per cent.

"DoT has made recommendations to the Finance Ministry that would bring down the cost of providing services. But at the same time, a balance has to be made with the income targets of the government," Government sources said.

Sources said that department has also proposed providing incentive for efficient use of radio frequency either through lower spectrum charges or through tax breaks.

The Telecom Regulatory Authority of India has also pushed for reducing the licence fee and spectrum charges to include only the 5 per cent revenue share for Universal Services Obligation and administrative costs.

Currently,the cost of taxes and levies on the operators is as high as 30 per cent-35 per cent. The main constituents of this are 8 per cent service tax, licence fee ranging between 6 per cent-12 per cent, spectrum charges of 2 per cent-4 per cent, 10 per cent Customs duty, 16 per cent excise duty, 4 per cent sales tax and 4 per cent as octroi. In addition, the industry pays other levies such as the access deficit charge, which is a form of a cess imposed by the regulator for subsidising telephones in rural areas.

Basic and cellular operators had met senior DoT officials on June 11 to put forward their demand for lowering the levies. Operators have said that they would be able to lower tariffs further if the demands were met.

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