It will also consider a reduction in the total incidence of taxation to help the troubled sector and separately reach out to the regulator to consider some floor on tariffs to help with viability.
The government may not even need to waive interest and penalty on AGR dues adding up to Rs 1.3 lakh crore in case of a long payback period, although that is also being discussed.
“All options are on the table,” said a government official aware of the deliberations. “The government is keen to ensure that the telecom sector remains competitive.”
The panel, which met for the first time last week, discussed various options, including providing relief from taxes.
Another official who attended the meeting said there was a realisation that something will need to be done if the government wants a competitive telecom sector. The panel is headed by cabinet secretary Rajiv Gauba and has officials from key stakeholder ministries and departments.
A Supreme Court decision on October 26 backing the telecom department’s stance on including revenues from non-core items in the definition of AGR while calculating government levies, has created a crisis for the debt-ridden telecom sector. The decision means a Rs 1.3 lakh crore burden on telecom companies.
Bharti Airtel and Vodafone Idea will together need to pay about Rs 80,000 crore. Apart from hurting consumers, government revenues will also depend on companies remaining viable, said the official. The money has to be paid in three months. Under the NPV method, payments stretching into the future are discounted at an agreed rate — the required rate of return the government wants on the outstanding — so that the sum total of all such discounted flows is equal to the total AGR liability of the telecom companies. While government will get its dues without any loss, though over many years, the telcos will get a respite from immediate payments.
Some members of the committee were of the view that tax on the spectrum charges needed to be eased. The telcos have acquired spectrum at high cost and, in addition, face a topup of up to 30% in taxes. A reduction in goods and services tax would need the GST Council’s backing, said another official. States may have reservations on the proposal, considering lower GST collections. Besides, the tax relief will not be specific to the telcos cited above and will cover all telecom companies. “A more holistic view needs to be taken on what should be the total incidence on the sector,” said the first official cited.
The committee is also considering the need for a tariff floor to make the sector viable. It will reach out to the telecom regulator to look into the issue. There are countries that have tariff floors, said the first official, making a case for some intervention to keep the sector competitive.