Debt burden of Indian telecom sector to rise as operators get into bruising tariff war- ASSOCHAM/KPMG study

By September 28th, 2016 AT 2:56 PM

Even as the telecom industry finds itself in a tariff war with entry of a major player, an ASSOCHAM-KPMG paper has pointed towards the operators grappling with a huge debt burden of Rs 3.80 lakh crore, reinforcing a case for rationalisation of taxes and other levies along with spectrum charges. The telecom operators have an accumulated debt of around INR 3.8 lakh crore. An additional customs duty of 10 per cent will lead to an increase in cumulated duty to 29.44 per cent, reveals the joint study.

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Simplification and rationalization of tax regime will provide required financial stability to Indian telecom industry. Presently, multiple charges and taxes are levied on the sector in addition to the charges paid by other industries (such as corporate tax, VAT, etc.). Spectrum Usage Charges (SUC) in India are comparatively higher than other economies, noted ASSOCHAM-KPMG joint study.

“Even though consumers are having a last laugh with competitive offers from the major players , the service providers need to penetrate further into the fast expanding data market and create a volume that would make their cash flow running, ” ASSOCHAM Secretary General Mr D S Rawat said.

Telecom sector is expected to contribute 8.2 per cent or INR 14 lakh crore to the GDP by 2020 and one of the highest contributors to the GDP over the last decade, adds the study. Industry expects that there is a no rationalisation of multiple levies imposed. TRAI has recommended that license fee should be reduced to 6 per cent and Universal Service Obligation Fund to 3 per cent from current levels of 8 per cent and 5 per cent respectively.

Further, as per a study cited by COAI, reduction in Spectrum Usage Charges (SUC) by 1 per cent can increase GDP by INR1.76 lakh crore, highlighted the study. OTT service providers are playing a significant role in driving data consumption and transforming consumer behaviour. A major contributor to the increased data traffic is the growing customer demand for video which is expected to experience a further boost with the advent of 4G services.

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Esmail is our very own in-house spectrum specialist. He is passionate about Telecom, DTH and OTT video streaming apps. When not writing an article, you can find him binge watching shows on Netflix while sipping on a cup of coffee.

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Sudhakar
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