The latest finding of the Comptroller and Auditor General that six telecom players understated ₹46,045 crore in gross revenue (GR) comes as no surprise.
Over the last two decades, there have been several instances where telecom operators have been caught taking cover of loopholes in the regulatory system to get around the high tax regime. Between 2002 and 2005, there were several operators who routed international long distance telephone calls as domestic ones to save on paying what was then called Access Deficit Charges — a fee paid to BSNL for running loss-making services in rural areas. There were instances of operators loading up higher revenues on their long distance telephony licences because they had to pay a lower revenue share compared to what they had to pay if they showed it as income from mobile services.
It’s not difficult to see why this practice has continued for so long. Ever since the Centre allowed private operators to take licences for offering mobile services in 1994, the operators have found themselves pandering to various demands by different regulatory agencies.
If the Centre wants to put an end to the malpractice of under reporting revenues it should do two things: reduce overall levies on the sector, and have a powerful regulator which can monitor and take action against errant operators. Instead of the CAG, the operators’ accounts should be audited by the Department of Telecom or the TRAI as they are best placed to decide on sectoral issues. In the immediate case of understating revenues, for example, the matter relates to interpretation of gross revenue for the purpose of calculation of licence fees. The matter is already before various courts including the telecom tribunal, which should help find a quick closure by clarifying the definition of gross revenue. Once that’s done, the sector regulators should crack the whip in enforcing it. Lowering the annual revenue share in the form of licence fee or spectrum charges, given that the operators now pay for airwaves upfront, will also incentivise telcos to come clean on their actual revenues.