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Monday, Sep 02, 2002

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Cell tariffs set to go down further — DoT open to licence fee/spectrum charges cut

G. Rambabu
Vipin. V. Nair

Mr Pramod Mahajan

NEW DELHI, Sept. 1

CELLULAR tariffs which have plummeted by over 75 per cent in the past three years are slated to go down further, with the Department of Telecommunications (DoT) open to the idea of reducing the revenue share licence fee and spectrum charges in line with international benchmarks.

According to the Union Communications Minister, Mr Pramod Mahajan, since the cellular industry has been claiming that it will be able to reduce tariffs further provided the Government reduces these charges, he is likely to meet their demands as it would benefit the subscribers.

"The cellular industry has been complaining about this for sometime now. I agree that they should not be taxed more than the international levels. So efforts will be made to bring the levies down. However, my Ministry can only recommend these decreases to the Finance Ministry, which will have the final say," he told Business Line.

The Minister said he fully agreed with the cellular operators that the regulatory costs that they had to pay were amongst the highest in the world. However, it had to borne in mind that the Government also had social obligations, for which it needed the resources that are thus mopped up. While keeping the interest of the telecom industry in mind he would discuss these issues with the Finance Ministry, he said.

The cellular industry has, in fact, petitioned DoT stating that as per the present structure of levies imposed on it, it has to pass 35-42 per cent of the revenues to the Government - licence fees (8-12 per cent), spectrum usage charges (2.5-4.5 per cent), service tax (five per cent) and interconnect access charges (about 20 per cent of the revenues).

In contrast, cellular operators in other developing countries, including China pay nil licence fees, negligible fixed usage charges for spectrum, no service tax and have very reasonable terms of interconnection with fixed service operators.

The operators also noted that most of their services were running negative in terms of not only profits but also cash flow and there was an urgent need to match international best practices in policy and regulation norms to ensure that existing tariffs and growth rates were not merely sustained, but also surpassed.

For that matter, even the Planning Commission steering committee on communications and IT in its latest report had supported the telecom operators and called for a reduction in the levies.

It had stated: "Mopping up of resources of revenue generation by the Government should not be a determinant of the policy governing the sector. The incidence of licence fee in the form of revenue share and spectrum charges has to be guided by this principle. ``Keeping in line with the policy adopted by most of the progressive administrators in the world, the licence fee needs to be aligned to the cost of regulation."

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