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Licence fee waiver for rural fixed lines likely
The department of telecom (DoT) will soon seek the approval of the Union Cabinet to waive of licence fees for fixed line services in rural India, as it attempts to bypass the finance ministry’s objections to this policy change.

The Telecom Commission, the highest decision making body of the DoT had approved the proposal to waive off licence fee on wireline services in rural areas in August 2008, following which the communications ministry had announced that this licence fee exemption would come into effect from January 1, 2009. But, the finance ministry’s objections resulted in the DoT failing to implement its decision from the beginning of this calendar year.

The finmin was of the view that any such concession to telcos would result in revenue losses to the exchequer.

Prior to that, both the communications and the finance ministries were involved in a bitter tussle over this issue — the finmin prevailed after it complained to the cabinet secretariat and the PMO that the DoT had failed to follow requisite procedure while announcing this policy change. Had this proposal been implemented, BSNL would have been the largest beneficiary as the PSU would have saved up to Rs 1,200 crore annually. All telecom companies pay 6-10% of their annual revenues towards licence fees.

Private operators such as Reliance Communications, Bharti Airtel, HFCL and Tata Teleservices who offer limited landline services in rural areas would also have benefited marginally.

The DoT has now decided to take the finmin head on and seek cabinet clearance on the issue.

“It is important from investment made, broadband penetration and also to provide stimulus to wirelines and arrest its declining trend, we need to provide incentives. Telecom sector is providing huge revenues to the exchequer. In turn, a waiver for licence fee for wireline is a trade off to keep the wireline sector alive and growing. A Cabinet mode may be prepared accordingly,” said a internal DoT note (dated December 22) on this issue.

The DoT has also decided to present facts before the Cabinet to support its case. It will therefore include details regarding the positive impact the waiver can have on rural wire-line and broadband services, as well as the extent of the unviability of the wireline services in the Cabinet note, DoT officials directly tracking the development told ET. Besides, the DoT will also point out that in the interest of promoting rural telephony, the national e-governance programme through one-lakh common service centres and bridging the digital divide between rural and urban areas, it is important that rural wireline networks be supported, the DoT officials added. In addition, the DoT will also seek to impress upon the Cabinet that this waiver would only be a small step towards supporting the PSU, which required financial assistance to the tune of Rs 8,774 crore just to support its rural wireline operations, apart from being compensated for the capital invested.

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