Two-pronged strategy to avert telecom disaster: Centre may offer relief on taxes, input costs

Two major telcos including Bharti Airtel and Vodafone idea are facing statutory dues of over crore Rs 35,500 and Rs 53,000 crore, respectively.

The central government is mulling a two-pronged strategy to bail out the debt-ridden telecom industry by rationalising tax and levies for long-term along with an immediate bailout package to avert a potential disaster. The telecom sector in the country is facing a double whammy of lower revenue generation due to a data war initiated by Reliance Jio and the payment of more than 1.47 lakh crore adjusted gross revenue (AGR) dues before March 17.

Govt considering multiple options to redeem telecom sector

Telecom India — A rickshaw puller speaks on his mobile phone in front of advertisement billboards belonging to telecom companies in Kolkata, India,Reuters

As per a report in Hindustan Times, the government is considering several proposals including a reduction. In order to boost the sector in the long run, the government is considering proposals such as reduction in the Goods and Services Tax (GST) on telecom equipment and services from existing 18 percent to 12 percent, cutting down on the levy on the Universal Service Obligation (USO) from present levels of 5 percent to a lower 3 percent. The Centre is also mooting to expeditiously refund input tax credits worth around 36,000 crores.

If the government goes ahead with any of these proposals, it would be a major relief for the telecom companies which are incurring major losses in recent times. Two major telcos including Bharti Airtel and Vodafone idea are facing statutory dues of over crore Rs 35,500 and Rs 53,000 crore, respectively. With a ballooning debt of more than Rs. 99,000 crore, Vodafone idea has been registering major losses in the running fiscal year. Moreover, the company also registered the highest ever loss in the history of India Inc. with around Rs. 51,000 crore loss in the quarter ending in September.

Last week in some news reports suggested that the government was mooting an immediate bailout package to salvage stressed telcos, especially for particularly two private telecom operators, Airtel and Vodafone Idea. Allowing them to pay part of the AGR revenue in installments is also one of the major proposals the government is considering. Notably, Reliance Jio has already cleared it AGR dues till 31^st January.