Telecom firms ask govt to do away with fees on AGR

Indian telecom service providers have asked the government to do away with license fee, inclusive of Universal Service Obligation fee, as a share of adjusted gross revenue (AGR) prospectively, or bring it down from a total of 8% to 0.5-1% of AGR.

The reform measure has been suggested following the Supreme Court's dismissal of the review petition of telecom companies seeking corrections in the AGR calculations, industry body Cellular Operators Association of India (COAI) said in a statement Thursday. AGR is the revenue earned by telecom operators from their core services, such as mobile and internet services.

The industry body representing private telcos Reliance Jio, Bharti Airtel and Vodafone Idea said that the move would facilitate operators to plough the revenues back to the network for its continuous upgradation and expansion to be able to provide state-of-the-art services, noting that the growth of the telecom sector had a multiplier effect on the economy, by contributing to GDP growth.

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“It would further enable faster digital inclusion, especially in the remote areas, and help ease the life of the common man…we urge the government to consider our request on abolition/reduction of the AGR related fees at the earliest,” it added.

Double whammy

Explaining the rationale behind its demand, COAI said that telecom companies were facing a ‘double whammy’ as they were not only paying up ‘substantial amounts’ for buying spectrum through competitive bidding in auctions organised by the government, they were also ending up being charged for the revenues they make from the spectrum used by them, even as the carriers made their own investments in creating the networks.

“In telecom, the TSPs buy the spectrum at huge prices, and thereafter, also make substantial AGR related payments for the same. This would amount to buying a house and paying the tenant’s rent for the same as well,” the industry body said. It further added that having license fee was appropriate when licenses were bundled with the spectrum at the time of introduction of the National Telecom Policy 1994. However, thereafter, spectrum was delinked from the license in 2012 and is currently assigned after being bought through transparent and open auction procedure, the logic of separately charging license fee does not stand.

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Telecom companies have spent about $4.8 trillion in the past decade towards buying airwaves, as per government data. They have spent more than $3 trillion in setting up 5G networks since October 2022 when 5G spectrum was auctioned. At present, telcos pay 3% of AGR in license fee and 5% of AGR as USO fee, which goes towards the USO Fund used for ensuring connectivity across unconnected regions of the country.

Licence fees collections

AGR for the telecom sector in India rose by 8.24% reaching ₹2.7 trillion in FY24, up from ₹2.49 trillion in FY23, data from the Telecom Regulatory Authority of India (Trai) released in August this year showed. The government collected licence fee of ₹21,642 crore in FY24 which was 8.45% higher than ₹19,954 crore the year before.

“With the separation of spectrum from the license and assigning it at market price, the justification for imposing licence fee as well ceased to exist, long back. The license fee, at best, should cover the cost of administration of the license only, which is to the order of 0.5% to 1% of the gross revenues, instead of the 8% paid currently,” COAI said.

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As a reform measure announced last year, the government has stopped collecting spectrum usage charge (SUC) from October 2022. Collections from SUC therefore declined by 32.3%, to ₹3,369 crore from ₹4,968 crore, the year before.

“It is pertinent to note here that telecom companies in India, in addition to paying the telecom-specific AGR related amount, also pay GST (goods and services tax) and corporate tax, just like any other company in the country. This puts companies engaged in the telecom business at a significant disadvantage vis-à-vis other businesses, severely limiting their surplus for investment in regular technological upgrades,” the industry body argued.