Finally, India universal service contribution comes down from 5% to 3%

Posted on May 2, 2015  /  0 Comments

It has been a long time coming, but finally the universal service contribution as a percentage of adjusted gross revenue (AGR) looks certain to be reduced from five percent to three percent. The last time we wrote about this was in 2009, when the Finance Ministry stopped it.

But, of course, nothing is ever so simple. At the same time TDSAT has brought a whole lot of new revenue elements within the definition of AGR. That will get appealed and so on. Looks like former telecom minister Arun Shouri is right.

Mobile operators pay 8% of their adjusted gross revenue as licence fee to the government and since 2005-06 what constitutes telecom and non-telecom revenue has been a bone of contention between the industry and the government. The amount raised by the government has been disputed by the industry and stay order against the disputed amount has been obtained either by certain high courts or TDSAT in the past. Around three years ago even the Supreme Court had ruled that ideally any revenue generated through a company formed for the purpose of providing telecom services should be counted as revenue on which licence fee should be paid. However, the SC had said that since each component would require interpretation, the operators were free to approach the TDSAT. Thursday’s ruling is a result of this process.

This also means the government may not accept Trai’s January recommendations that were seen as liberal and pragmatic. For instance, on the computation of AGR for payment of licence fee, Trai had clearly delineated the non-telecom earnings, which would not be included in the definition. For the purposes it had brought in the concept of applicable gross revenue, which would be deducted from the gross revenue to arrive at AGR. For instance, income from dividend, interest, forex, capital gains, etc, would not be counted towards AGR.

Further, it had also recommended lowering the revenue share licence fee to 6% from the current 8%. The regulator had also said that the levy on the operators for the Universal Service Obligation Fund (USOF) should be brought down to 3% of their AGR against the current 5%.


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