The Hindu Business Line : Telecom sector changes rub off on non-tax revenue collections

THE telecom sector, which has been growing at a tremendous pace in the last couple of months, has an important role to play in the better-than-anticipated non-tax revenue collections of the Government during the current fiscal.

The revised estimates for 2002-03 have been pegged at Rs 75,488 crore, an increase of Rs 5,722 crore over the Budget target of Rs 69,766 crore. Of this, non-tax revenue collections from communications has been estimated at Rs 5,924 crore as against the budget target of Rs 3,231.32 crore.

It excludes Rs 2,300 crore that was reimbursed to Bharat Sanchar Nigam Ltd as compensation for its rural obligations across the country.

This performance could be on account of the sudden surge in the subscriber base of telecom companies, which also led to a corresponding increase in their licence fees and royalties.

While the existing licence fee structure for basic as well as cellular operators has been fixed at 12 per cent of their adjusted gross revenue for metro service areas and category A circles, 10 per cent for category B circles and 8 per cent for category C circles, the royalty and spectrum charges too are based on their revenues.

But more importantly, it is the erstwhile limited mobility operators such as Reliance Infocomm, Tata Teleservcies, Shyam Telecom and HFCL Infotel which have contributed to this increase, by shelling out close to Rs 2,200 crore to convert their basic service licence to the unified access service licence.

Further, companies such as Bharti and Tata Teleservices have also applied for new licences and shelled out the required licence fees.

While the Government has announced a decrease in the existing licence fee structure starting fiscal 2004-05, the non-tax revenue collections from this sector have been budgeted at Rs 6,044.64 crore (close to double of last year's estimates).

The licence agreements of basic and cellular operators have been amended to bring down their licence fees by two percentage points across the board. In addition, the first and second GSM cellular licensees in all circles, except the metros, would get an additional two-percentage point reduction in the licence fees for four years. This only goes to show that the Centre expects a huge surge in the subscriber base, which will more than compensate for the decline in the licence fees.

On the service tax collection front, the telecom sector as usual again accounts for the highest share, now placed at 60 per cent. The total collections from the 8 per cent service tax that is levied aggregates Rs 8.300 crore in the revised budget estimates for the current year, of which Rs 3,024 crore come from the telephone services.

For the next fiscal (2004-05), the Government has budgeted total collections at Rs 13,500 crore, of which Rs 4,968 crore accrue from the telephone services - an increase in its share to 63 per cent, once again demonstrating the confidence that the Government has in the growth of this sector.

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