The Hindu Business Line : No cheer for telecom users, service providers

While the telecom industry was expecting a reduction in the licence fee paid as a percentage of the annual revenue, the Finance Ministry's proposal to increase the service tax by 2 per cent will result in higher telephone bills every month. Consumers will also have to pay service tax on Internet telephony services, which was exempted till now. The decision is likely to make an already ailing Internet telephony business, increasingly unviable.

The Finance Minister, Mr P. Chidambaram, in his Budget speech announced a support of Rs 1,500 crore from the Universal Services Obligation for rolling out telecom network in rural areas. Interestingly, that is lower than the Rs 1,750 crore (Revised Estimates) that was disbursed in 2005-06. Though the amount for 2005-06 is higher than previous years' Budgetary Estimates of Rs 1,200 crore, more than 60 per cent of the money collected towards USO Fund has not been ploughed back into the sector. Mr Chidambaram said that in order to extend support from USO fund for creating cellular infrastructure in the rural areas, the communications ministry will bring a Bill in the ongoing Budget Session to amend the Indian Telegraph Act. At present, only fixed line connections are allowed support from the USO fund.

Set-top boxes dearer

The finance ministry has removed the customs duty on set-top boxes, which is used for accessing cable-based broadband services. However, the decision to impose a 16 per cent excise duty and a 4 per cent special additional duty on the set-top box is expected to make locally manufactured set-top boxes dearer by 10 per cent.

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