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India: Finance Ministry nixes reduction of universal service fee

Rohan Samarajiva — Thu, 26 Mar 2009 13:03:02 +0000

As those who have followed the discussion on universal service fees on this blog know, universal service fees are usually charged from a company (actually the company collects the money from customers and gives it to the government). The payments go to dedicated fund, from which it is disbursed (or not, for the most part) to connect more people to the network.

India has one of the highest universal service fees in the world–5% of total revenues. We were hopeful, after years of presenting evidence to the government, that this would be reduced (though our preference is for its complete phasing out). The reduction of the rate from 5% to 3% was almost done, but suddenly it has been halted due to Finance Ministry objections.

If it had gone through it would amounted to an INR 2000 crore (roughlly USD 400 million) injection of funds into the industry. And the irony is that the money does go into the consolidated fund of the government to be used for everyday purposes. It will just sit in a dedicated account: poor people’s money, doing nothing for poor people, on a whim. And how much is sitting there now: over USD 4 billion, growing by the day!)

Interestingly, the licence fee cut would not have impacted the exchequer as DoT had planned to reduce telcos’ contribution to the Universal Service Obligation Fund (USOF) for rural telephony, which is paid out of their licence fee, and which is flushed with funds.

India: 3G Auction on Jan 30

Chanuka Wattegama — Sat, 03 Jan 2009 15:29:25 +0000

India’s Department of Telecommunications, or DoT, Friday said the auction of radio bandwidth for third generation, or 3G, mobile phone services will take place as per schedule on Jan. 30 and that there will be no further delay.

Analysts and industry players, however, expect the process not just to be further delayed, but also to attract fewer participants for the bidding process.

Their apprehension follows recent media reports, citing government documents, that the finance ministry has sought to double the auction price for pan-India 3G radio bandwidth, or spectrum, to INR40.40 billion.

“There is no (further) delay. The auction is on schedule,” said Akshay Rout, a spokesman for India’s ministry of communication, told Dow Jones Newswires.

The Indian government had already delayed the auction to Jan. 30 from Jan. 16.

Read the full story in CNNMoney here.

DoT demands Rs 2,000 cr more for universal fund

Payal Malik — Sun, 24 Sep 2006 06:05:35 +0000

Joji Thomas of the Hindu Buisness Line reported this on August 21, 2006. LIRNEasia research by Payal Malik had recommended USO funds should be technology neutral as well as fund infrastructure creation, but the funds from the USF are not being released as mentioned in this report. Read on…

JOJI THOMAS PHILIP NEW DELHI
[ MONDAY, AUGUST 21, 2006 10:27:47 AM]

DEPARTMENT of telecom has demanded that the finance ministry allocate an additional Rs 2,000 crore towards the Universal Service Obligation Fund (USOF), over and above the Rs 1,500 crore that has been allocated in the Union Budget.

It has also said that all telecom companies should pay 5% of their adjusted gross revenue towards the USOF, which is used for building and supporting telecom infrastructure in rural India.

DoT move is likely to cause a showdown with the finance ministry . This is because, DoT has backed its demand by stating that the unutilised amount from this fund stood at Rs 7, 206.12 crore in March 2006, and would swell to Rs 9,194.12 crore by the end of this fiscal.

Besides, the TRAI, in a study, has also estimated that the unutilised USOF would increase to Rs 25, 044.2 crore by 2010.

“The expenditure under USOF till June 2006 is Rs 121.34 crore against the budget provision of Rs 1,500 crore. A sum of Rs 700 crore is expected to be utilised by the end of September 2006. The expected requirement for the current year is Rs 3,358 crores,” DoT said. Providing further details, the department added that ongoing projects (inclusive of liability) would require Rs 1,758 crore while infrastructure projects would cost an additional Rs 1,600 crore in this fiscal.

Under current norms, the USOF can only be used to support fixed line services. Industry watchers share the view that DoT’s demand that this fund be enhanced to Rs 3,500 crore for this fiscal comes in the wake of the department finalising the proposal to extend the support to mobile services of private operators in rural areas through a bidding process.

India’s finance ministry eyes windfall in 3G auction

Divakar Goswami — Sat, 28 May 2005 09:25:59 +0000

May 26, 2005

(Economic Times via NewsEdge) India’s Ministry of Finance has asked the Department of Telecommunications (DoT) to allocate a 3G spectrum to mobile operators through the auction route.

According to the ministry, it is DoT’s responsibility to price spectrum as per international practices, citing the example of Europe and the US, where governments fetched billions of dollars in revenue by auctioning spectrum.

The ministry has also said that pricing of spectrum should not be in TRAI’s domain. The finance ministry has taken the position that pricing of radio spectrum is not a regulatory issue, and hence, should not have been referred to the telecom regulator.

Instead, it has argued that receipts from radio spectrum should accrue to the government as non-tax revenue.

C 2005, The Economic Times