AGR licence fee for wireline broadband may be slashed to Re 1

The proposal may provide relief to the tune of Rs 9,000 crore to service providers.

The Union Cabinet may soon take up the proposal seeking reduction in the licence fee for wireline broadband - from 2.5 per cent of the adjusted gross revenue to Re 1 of the AGR  - a move aimed at proliferation of these services.

It could be taken up by the Cabinet next week.

This is the relief package earmarked for the telecom sector from the Department of Telecommunications (DOT), an official said.

The DoT was tasked by the ministry of finance to chalk out relief measures for the industry, amid the lockdown.

According to people in the know, the proposal may provide relief to the tune of Rs 9,000 crore to service providers.

According to an industry official: “This will lead to better penetration of broadband services and, in turn, benefit firms by way of lower licence fees.

"A reduction from the current 2.5 per cent of the AGR to Rs 1 of the AGR has been proposed, which is expected to be taken up by the Cabinet next week.”

The government hopes this will result in higher subscription of broadband connections.

It has already been approved of, by the Digital Communications Commission (DCC) - the apex decision making body in the telecom sector.

At present, the wireline customer base is abysmally low at 2 per cent.

With this proposal, the Centre hopes for a sharp uptick.

Experts believe that if India focusses on increasing its broadband user base, it could lead to an increase in the gross domestic product (GDP).

For instance, if the tele-density is 10, the GDP is 1 per cent and for every 10 per cent rise in tele-density, GDP rises by 1 per cent.

The Centre also hopes a robust broadband network will drive digital penetration and, in turn, higher revenue for the exchequer in the form of higher GST.

These services attract a GST rate of 18 per cent.

“This has two revenue channels for the government - licence fees and GST,” the official added.

The telecom market in the country is worth Rs 2.5 trillion, of which the wireline and enterprise business together account for Rs 1 trillion and mobile services account for the remainder.