Top government officials urge Trai to fix floor tariffs soon

NEW DELHI: Officials at the highest levels of the government have nudged the Telecom Regulatory Authority of India (Trai) to expedite fixing of a floor for tariffs, a move considered crucial by all operators for restoring the long-term viability of the telecom sector.

“The regulator is being pushed to soon come out with a floor price, once the consultation completes this month,” a senior government official told ET.

Prodded by the sector and the government to come up with a floor price, a reluctant Trai in December floated a consultation paper to fix a floor price for voice and data services on telecom networks. It, however, warned that such an exercise has historically been termed ‘market distorting’ by economists. It also called the move “anti-consumer”. The deadline for filing comments and counter comments has been extended till February 28 and March 13, respectively.

Telcos like Bharti Airtel have said that average revenue per user (ARPU) needs to go up initially to Rs 200, and eventually to Rs 300, for which a floor price was needed. Telcos and experts say setting a floor price is expected to hasten revenue recovery at the sector, thus giving confidence to lenders and investors about the sector’s viability, say experts.

The push for floor pricing comes with Vodafone Idea struggling to generate funds to pay its adjusted gross revenue (AGR) dues by the March 17 deadline set by the Supreme Court. The government is considering offering soft loans to stressed telcos, besides other steps, but there is a debate on who will fund this loan.

At an inter-departmental meeting on Sunday, finance ministry officials suggested that banks should offer loans on easy terms to Vodafone Idea to help meet the AGR dues, officials involved in the discussions said.

The finance ministry was against using the Rs 51,000-crore lying in the Universal Services Obligation Funds (USOF) kitty, or using the consolidated fund of India — as proposed by telcos — that would drain the government of any finances. Telcos contribute 5% of their AGR — which is part of the 8% licence fee — towards USOF.

“But banks would obviously be jittery, given Vodafone Idea’s market cap is far lower (Rs 11,149.33 crore at Monday’s close of trading) than its dues worth Rs 57,000 crore (as per the government’s estimates),” a senior government official told ET.

Vodafone Idea’s own estimates have pegged its AGR dues at around Rs 23,000 crore, of which Rs 7,000 is the principle. It has paid only Rs 3,500 crore so far.