While the Indian government announced relief measures for the telcos in FY22, it also benefited from the free cash flow that Bharti Airtel and Reliance Jio were generating. The government’s revenue from the telecom sector jumped 89% to Rs 85,640 crore in FY22. This largely happened because of the pre-payments of deferred spectrum liabilities from Jio and Airtel. Compared to this, in FY21, the government’s revenue receipts showed an income of Rs 45,401 crore.
Government of India (GoI) Was Able to Go Past Its Target Revenues
It is worth noting that the government had set a revenue target of Rs 54,886 crore from the Indian telecom sector. However, according to a Financial Express report, the actual amount that GoI earned was 56% more than the target. This happened despite no auction in FY22. The previously held 4G spectrum auctions took place in March 2021, which meant it was in FY21.
As mentioned above, a big reason for the extra revenues is the pre-payment of deferred spectrum liabilities by Reliance Jio and Bharti Airtel. Reliance Jio had cleared Rs 30,791 crore to the government, while Airtel had cleared Rs 24,334 crore. Apart from that, the GoI received Rs 30,515 crore towards the spectrum usage charge (SUC) and the license fee (LF).
The telecom operators have to pay 8% of their adjusted gross revenue (AGR) as license fee, while the SUC ranges between 3% to 5%. It is worth noting that there’s a spectrum auction scheduled for FY23, which is expected to take place in two months. It will again help the Indian government in earning money from the telecom sector.
Then there will be LF and SUC payments as well. The telecom operators had asked the government to reduce LF to 1% and remove all the USOF (Universal Service Obligation Fund) liabilities. For the unaware, out of the 8% LF that telcos pay to the government, 5% is USOF, while the remaining 3% is LF. The high percentage of LF is taking away from the cash flow of the telecom operators.
