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With competing claims for funds, DoT not in favour of tariff subsidy

All the three private telecom players as well as industry body Cellular Operators Association of India (COAI) have repeatedly raised the demand for a floor price on telecom tariff which would help them improve their average revenue per user.

Even state-run telecom company Mahanagar Telephone Nigam Limited had in its response to the Trai consultations, had said given the health of the sector, there was an urgent need of “regulatory intervention” for “tariff fixation”.

Multiple requests and letters from private telecom companies and industry bodies notwithstanding, the Department of Telecommunications (DoT) is unlikely to provide any support in the form of floor price for tariff or subsidy for the same in the near future, senior government officials said.

“There are multiple and competing claims on the total funds that we have. And the priorities of the government must be on food, fertiliser and farmer subsidies. So a subsidy on tariff for telcos is not likely in the near future,” an official said. Sources said that the demand for a floor price on tariff had been raised once again after the Telecom Regulatory Authority of India’s (Trai) recommendations on base price of 5G spectrum were released. The top executive decision making body of the DoT, the Digital Communications Commission, too has accepted the recommendations of the Trai.

“Multiple suggestions were floated. One was to provide some support from the USOF (universal service obligation fund) while other was to provide some subsidy to telcos whose ARPU (average revenue per user) has remained between $2-3 range for quite some time now,” an official said.

All the three private telecom players as well as industry body Cellular Operators Association of India (COAI) have repeatedly raised the demand for a floor price on telecom tariff which would help them improve their average revenue per user. The latest such demand was made after the telecom package of September 2021, when the industry players urged the government to think about introducing a floor price in the second leg of the reforms. In a recent letter to the DoT, COAI had said that the demand for a floor price on both data and voice services was “a legitimate demand” given the financial health of the telecom players.

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“Given the financial pressure on the sector and the fact that ARPU (average revenue per user) and tariffs of the Indian telecom sector are the lowest in the world, floor pricing is imperative to ensure that the sector is sustainable,” COAI had said in its letter.

Even state-run telecom company Mahanagar Telephone Nigam Limited had in its response to the Trai consultations, had said given the health of the sector, there was an urgent need of “regulatory intervention” for “tariff fixation”.

First published on: 04-05-2022 at 02:42:33 am
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