Telecom service providers owe approximately Rs 3.08 lakh crore to the government.
They include pending spectrum dues from past auctions, the communications ministry has informed regulator Trai, which is currently in the process of deciding on the next round of spectrum auction as part of its recommendations.
The department of telecom (DoT) has provided this information to Trai in a letter where it has sought the regulator’s views on the time, price and quantity of spectrum to be sold in the next round of auctions to enable Trai to take an informed decision while framing recommendations.
The other reason is the DoT can’t issue instructions to Trai on the contours of any upcoming recommendations since the regulator might see it as interference on its turf, leading potentially to a clash. Trai is a constitutionally set up autonomous quasi-judicial body.
“DoT, in its reference has mentioned that the government is planning to auction right to use of spectrum in various spectrum bands in the next auction likely to be held in 2017. DoT in one of its communications has indicated that about Rs 3.08 lakh crore is due over the next 11 years on account of deferred payment plans opted by telecom service providers for the purchase of spectrum rights in the recent auctions. It is also indicated in the letter that the telecom industry also owes about Rs 4.60 lakh crore to various financial institutions and banks”, Trai stated on the licensor’s communication with it.
At present, a portion of spectrum auction amount is taken as upfront payment by DoT and the rest after a two-year moratorium is paid out every year in 10 installments. The government is considering relaxing the period of deferred spectrum payment to 16 years, as part of the package to the industry under the IMG.
Trai is working on the next round of spectrum auction recommendations and is going through industry references to see the viability and necessity of holding an auction this year though, according to sources, DoT wants to sell radio waves through the bidding route this year.
As the finance ministry is facing the heat in a slowing economy resulting in resources drying up for further public investment, a DoT official said telecom ministry should not be seen as a fund-generating ministry to bridge revenue shortfalls.
Due to the intense competition in the sector unleashed by Jio’s free voice and unlimited data at cheaper rates, the government’s revenues from license fees and spectrum charges have already fallen.
In the last spectrum auction in 2016, the government earned only Rs 65,789 crore, missing the estimated target of Rs 5.63 lakh crore by a big margin mainly due to the high reserve price of 700 Mhz band and 900 Mhz, both of which saw no bids.
The total spectrum put up for sale in the auction was 2,354.55 Mhz and only 41 per cent or around 965MHz could be sold.
The government received Rs 32,000 crore upfront (excluding service tax) in line with new norms that require telcos to pay 25 per cent of the price upfront for spectrum in the 700, 800 and 900 MHz bands and 50 per cent for higher frequencies. Recently, a senior executive of Idea Cellular, which has been at the receiving end of the severe competition in the sector, said 80 per cent debt on telcos was because of the spectrum buyout.
“Over 80 per cent debt is due to spectrum purchases. More spectrum is needed at right prices, with a light-touch regulation to allow players to expand their networks,” Idea Cellular’s corporate affairs head Rajat Mukherji had recently said.