Context

The Telecom Regulatory Authority of India has pitched for a reduction in the GST rate for telecom services.

Details

  • TRAI has asked the Department of Telecom (DoT) to approach the Finance Ministry with two issues:
  • Reduction in GST rate to 5%cent from the current 18%
  • Treating telecom as core infrastructure sector and economy enabler in India

Telecom Regulatory Authority of India (TRAI)

  • The Telecom Regulatory Authority of India (TRAI) is the regulator of the telecommunications sector in India.
  • It was established on 20 February 1997 by an Act of Parliament to regulate telecom services and tariffs in India.

Mission:

  • To create and nurture conditions for growth of telecommunications in India and thus enabling the country to have a leading role in the emerging global information society.

Objective:

To provide a fair and transparent environment that promotes a level playing field and facilitates fair competition in the market.

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Universal Service Obligation Fund (USO Fund) levies:

  • TRAI has repeated its suggestion to reduce the USO fund levies to 3% of the adjusted gross revenue from the current 5%.
  • Post reduction, the applicable uniform rate of licence fee would become 6% from the present 8% of the adjusted gross revenue.

Universal Service Obligation Fund (USOF)

  • Established in 2002, the USOF is headed by the USOF Administrator who reports to the Secretary, Department of Telecommunications (DoT).
  • The Indian Telegraph (Amendment) Act, 2003 gave statutory status to the Universal Service Obligation Fund (USOF)
  • The USOF’s main aim is to provide universal telecom services and ensure that even the unconnected areas in the country reap the benefits of inclusive development.

The main functions of the USOF are:

  • To provide widespread and non-discriminatory access to quality ICT services at affordable prices to people in rural and remote areas.
  • To provide an effective and powerful linkage to the hinterland thereby mainstreaming the population of rural and remote parts of the country.

How does it work?

  • The funds come from Universal Service Levy (USL).
  • The USL is charged from all the telecom operators on their Adjusted Gross Revenue (AGR).
  • These are then deposited into the Consolidated Fund of India, and prior parliamentary approval is required for dispatching.
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Spectrum Charges:

  • In a meeting between the regulator and telecom operators on June 15, the operators had raised concerns over differential spectrum usage charges (SUC) as there was no uniformity in the SUC for different telecom operators.
  • TRAI has also asked the DoT to relax payment period for auctioned spectrum.
  • At present, operators pay 25% or 33% as upfront charges of total spectrum price and the remaining is paid over a ten-year period after a moratorium of 2 years.
  • TRAI has suggested 10% of the bid amount as initial payment with the remaining payment spread over 18 years for spectrum payments in the 700/800/900/2100/2300/2500 MHz bands

What are Spectrum Usage Charges?

A spectrum usage charge (SUC) is payable by the licensees providing mobile access services, as a percentage of their Adjusted Gross Revenue (AGR).

SUC is payable as per the spectrum slabs/ rates notified by the Government from time to time.

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Significance

  • The telecom industry is currently sitting on a debt of Rs 4.6 lakh crore.
  • It would be a sigh of relief for the telecom industry if the Department of Telecom accepts the recommendations of TRAI.
  • The recommendations if accepted are expected to ease the financial burden of telecommunication companies and keep services affordable.

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