Telecom Budget Crucial This Year Because Of 5G Deployment: COAI DG

It’s no secret that the Indian Telecom Sector is currently in financial dire straits and a lot of impetus needs to come directly from the Centre to support its endeavours. This can, of course, happen via the upcoming Union Budget for FY24, due to be presented on 1 February, 2023. With the massive rollout of 5G picking up steam in CY2023, the Union Budget FY24 could be the most important budget for the Prime Minister Narendra Modi-led government as it prepares for Lok Sabha elections next summer.  

The Cellular Operators Association of India (COAI), an Indian non-governmental trade association and advocacy group focused mainly on telecommunications industry, has been one of the foremost bodies to have presented frank views on what needs to be done for the betterment of telecom industry in India. As we approach Budget Day, COAI has made some crucial recommendations to the government to help elevate the telecom sector. Some of its recommendations include:

• Suspension of USO contribution of 5 per cent of AGR till the existing USO corpus is exhausted and License Fee be brought down from 3per cent to 1per cent at the earliest to cover only administrative costs by the DoT/Government
• Introduction of a special regime for the telecom operators under Section 72 of the Income Tax Act, 1961, wherein the business losses can be carried forward and set-off till Sixteen (16) assessment years from the existing 8 years.
• Exemption from the Basic Customs Duty (BCD) charges as it will be beneficial towards importing essential equipment, which will further help in the deployment and smooth roll-out of 5G in India.
• For facilitating Ease of Doing Business, a centralised registration process for the industries having spread in all 36 States/UT
• Facilitation of Centralised Assessment, Audit Procedure for large taxpayer units with turnover of over Rs 500 crore and presence in over 12 States/UTs

For a more comprehensive view on the requirements of the Telecom sector from the Union Budget, BW Businessworld’s Rohit Chintapali got in touch with Lt. Gen. Dr S.P. Kochhar, Director General, COAI. Read on for excerpts from the interview.

Give us the context, why is the Union Budget FY24 is crucial for telecom industry more than any other?

The Telecom Budget is crucial this year because the industry is in the process of deploying 5G networks, which comprises of huge investments being made to set-up infrastructure, while enhancing broadband connectivity across India. The industry is committed to, and striving to help make our country globally competitive and gain a leadership position among other developed countries in digitisation. As it is well known, the Indian telecom sector is already under immense financial stress, given the huge burden of taxes and regulatory levies on telcos. COAI has submitted detailed recommendations to the Ministry of Finance in this regard, which would help provide relief to the sector and revitalise it at this vital juncture. ` 

How big was the budget last year for telecom? What was lacking that must addressed in the Union Budget FY23-24?

The Union Budget of the year 2022-23 was pro-growth with emphasis on providing further impetus to the Digital India initiative. We were pleased to note the focus on enhancement of digital connectivity and the announcement for the required spectrum auction in 2022 for the rollout of 5G mobile services. The proposal for facilitating PLI scheme for 5G equipment, laying optical fiber cables through PPP model under BharatNet project were also welcome steps.

While the industry is committed to fulfilling the Digital India Vision of our Hon’ble PM, we were however, a bit disappointed that some of our long-standing demands related to relief on the heavy taxes and levies were not fully addressed, in addition to clarifications requested on some vital aspects impacting the sector. We look forward to the Government’s consideration and requisite measures on the same in the upcoming Union Budget 2023-24.

How important will CapEx Incentives be for the industry this time around?

The telecom industry is a highly capital-intensive one. The required ecosystem to meet the rapidly growing demand for the requisite equipment for network expansion/rollout is not presently available in India. Since equipment is not manufactured here, telcos are dependent on imports - resulting in increased capex cost by 20 per cent. This further aggravates the stress that the telecom companies are going through.

Removal of BCD on Telecom equipment will not only help the Telecom companies in this difficult phase but will also expedite faster roll out of network and better quality of services.

Your expectations from the budget for the rural areas? 

The future of telecommunications is 5G. However, a large number of people in India live in rural and remote areas, lacking wireless coverage and connectivity. To enable India’s transition into a digital economy and knowledge society, large investments in infrastructure, both in optical-fiber cables and towers, for wireless transmission are required. Therefore, in line with the National Broadband Mission, we aim to have robust connectivity in every corner of the country. But for that, telcos have to make huge investments in infrastructure. Budget plays a vital role in easing the financial stress on the sector.  If a few of the financial roadblocks are eased down, Telcos will be able to enhance coverage and connectivity at a faster pace. 

Can the budget do something to keep tariffs at affordable levels?

Tariffs are a matter of individual business decisions of the telcos and are overseen by the regulatory authority TRAI. It is worth mentioning though that Indian consumers enjoy one of the lowest telecom tariffs across the entire world.

Some reports suggest that the budget will skip telecom industry’s demand on reduction in license fee by way of a cut in universal services obligation levy, removal of Goods and Services Tax (GST) on license fee, spectrum usage charges, and spectrum payments. Your comments?

While we cannot comment on any speculation, we are optimistic that the government will look into our demands for reduction in regulatory levies such as License Fees, Spectrum usage charge, USOF contribution, etc. as the telecom sector is burdened with huge debt and high debt servicing costs, and also provide clarification on some vital aspects impacting the sector.