| | By Subhankar Kundu @ Monday, March 23, 2009 6:35 AM
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| | The Communications Ministry has decided to scrap its earlier decision to slash the licence fee by two per cent for operators who have more than 95 per cent coverage across telecom circles.
 Telecom operators pay a licence fee based on the annual gross revenue (AGR) generated. The licence fee varies from six to ten per cent of the AGR, depending on the category of circles a telco comes under. The Department of Telecommunications (DoT) earlier decided to bring it down by two per cent.
Telcos operating in category 'A' circles pay ten per cent of their AGR as a licence fee, while it is only eight per cent for category 'B' circles like Punjab and Haryana. Category 'C' circles pay the lowest licence fee, only six per cent on their AGR.
But the ministry had to withdraw its earlier decision owing to unbending opposition from the finance ministry and some private operators. It was scheduled to be effective from 1 April.
The DoT is likely to communicate on the new development to telecom operators.
Had the DoT been allowed to go ahead with the original plan, telcos could have saved as much as $396 million (Rs 2,000 crore) in the next fiscal year.
The companies that would be most affected by the change in plan are Bharti Airtel, Reliance Communications (Rcom), Bharat Sanchar Nigam Limited (BSNL) and Vodafone Essar, as these players have a wide presence covering almost every nook and corner of India.
Now, the telcos will have to wait for the new government’s decision, which will be taken only after the April-May 2009 general elections.
But the Telecom Regulatory AUthority of India (TRAI) has raised the question of what the government would do with the excess money, as the major chunk of the Universal Service Obligation Fund (USOF) still lies under-utilised in the development of rural telephony. Telcos pay a flat rate of five per cent of their AGR as a contribution to USOF.
At present, the estimated funds lying in the USOF reportedly have crossed $5 billion (Rs 25,000 crore), which is double the money needed to set up the infrastructure to roll out services in the whole of rural India. X
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