News Synopsis
Due to the government's decision to forgo requiring the operators to make a fixed upfront payment for the spectrum they acquired in the recently finished 5G auctions, they will be able to collect almost 27% less money from the telecom sector than the budget's objective of Rs 52,806,36 in the current fiscal. The decision not to impose a spectrum use tax (SUC) on the spectrum purchased through the auctions and the four-year suspension on the payment of delayed instalments on spectrum purchased through earlier auctions will be the other two reasons for lesser collection. In view of these considerations, instead of collecting the budgeted amount of Rs 52,806.36 crore from the sector, the government will only be able to collect Rs 38,385 crore.
In previous auctions, operators were required to make an advance payment equal to 33 percent to 50 percent (depending on the spectrum bands) of their overall commitment. They paid the rest with the net present value intact over a twenty-year period in equal instalments. However, this time, there is no upfront payment required, and operators are able to pay their entire balance in 20 equal instalments. The entire payment that would be made to the government as the first year's instalment will be Rs 13,385 crore due to the operators' promise of Rs 1.5 trillion in the 5G auctions. In addition to receiving spectrum payments, the government receives about Rs 30,000 crore per year in licence fees and SUC from the operators.
However, the entire collection will decrease by about Rs 5,000 crore because there won't be any SUC on airwaves purchased in the auctions from this year on. Over the past ten years, the SUC regime has altered. For instance, depending on the frequency band and amount of spectrum possessed, SUC on spectrum acquired up to 2013 varied between 3 and 8 percent of operators' adjusted gross income. The government switched to a consistent SUC regime starting in 2014, regardless of the bands or amount of spectrum held. This was set at 5% for spectrum purchased in the 2014 and 2015 auctions, however, it was decreased to 3% for spectrum purchased in the 2016 and 2021 auctions. Since 2022, this has been further decreased to zero.
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