Cellular operators seek abolition of regulatory levies to boost sector's financial health

Cellular operators in India have called on the government to abolish regulatory levies such as the universal service obligation fund and have also sought a reduction in license fees, which they say would enhance "the financial well-being of the sector."

The Indian telecom sector, once a thriving market with over ten players, has consolidated to just three private companies and one public sector company due to intense price competition and regulatory challenges over the past decade. Investments in 5G technology will also need the companies to raise their capex.

Industry body Cellular Operators Association of India (COAI) advocates for the abolition of the Universal Service Obligation Fund (USOF) levy or at least suspending the USO contribution of 5 per cent of Adjusted Gross Revenue (AGR) until the existing USO corpus of approximately Rs 80,000 crore is exhausted.

Additionally, it has called for reducing the license fee from 3 per cent to 1 per cent, which would relieve telecom service providers from the heavy financial burden and ensure the fee only covers administrative costs by the Department of Telecommunications.

“Reducing the TSPs’ levy burden and facilitating investment opportunities are not just economic necessities but strategic investments for the country’s future," said SP Kochhar, director general of COAI.

Moreover, COAI calls for a precise definition of Gross Revenue (GR) to eliminate ambiguities that currently result in revenue from non-telecom activities being included in the AGR calculation.

"COAI recommends that the definition of GR be made precise, stipulating that the revenue from activities for which no license is required should not be a part of GR," it said.

Given the significant financial impacts from the Supreme Court's 2019 ruling (inclusion of non-core/non-telecom activity revenues in AGR calculation) on AGR, COAI has also urged the government to extend the carry forward period for business losses from eight years to sixteen years.

"Teleccom sector requires periodical sizable capital investment due to technological advancement, which further adds stress to the sector. Existing provisions provided 8 years limitation to business losses, which may result in lapse of losses for those companies who have longer recovery journey," said the industry body.

To support the rollout of 5G services, COAI also recommended reducing customs duties on telecom equipment, which have been gradually increased to 20 per cent over the past several years.

"COAI has requested exemptions on customs duties for certain telecom equipment to alleviate the cost challenges associated with deploying this critical infrastructure," it said.