Licence fee cut on broadband mulled

Proposal to cut fee on fixed-line services to `1/year

The government is considering a proposal to reduce the licence fee for fixedline broadband services to households, a move that would boost access and lower cost for internet service in Asia's thirdlargest economy.

Under the proposed plan, licence fee on the socalled adjusted gross revenue (AGR) earned from households for providing fixed-line broadband services will be slashed to Re 1 a year, people with knowledge of the matter said. The note said the estimated licence fee for fixed-line broadband services, calculated at the rate of 8 per cent of adjusted gross revenue, is about Rs 880 crore a year.

Relevant ministries have been asked to share their view on the proposal before it goes to the cabinet for approval, the people said, asking not to be identified as the matter is not public.

If implemented, lower costs could help Mukesh Ambani's Reliance Jio Infocomm Ltd accelerate its broadband services launched last year offering. Jio offers premium streaming services bundled with free high-definition television and set-top box for life time subscribers. Besides 350 internet services providers, the change in policy will aid Bharti Airtel Ltd and Vodafone Idea Ltd.

There will be no change for services provided to commercial users, including large corporations and business establishments, the people said. It is estimated the government will lose Rs 5,927 crore, assuming a 10 per cent growth in revenues over five years, but the gains from increased digital access, including job creation, far outstrip the revenue foregone, the people said.

The current virus pandemic has triggered work from home across the globe.

The proposal also cited a

2019 report from International Telecommunication Union suggesting an increase of 10 per cent in fixed-line broadband penetration can yield an increase in

1.9 per cent in GDP per captia.

Despite higher duties on Chinese products, consumer durables have been taking the free trade agreement (FTA) route to sneak into the country. Even the brands operating domestic manufacturing units are heavily dependent on China for their components. The industry is looking forward to the incentives under the phased manufacturing programme (PMP) for components.

In 2018, India had doubled the import duty on a few Chinese products, including air-conditioners, refrigerators and washing machines from

10 to 20 per cent. However, in FY19, the imports went up, as Chinese products found an easy way into the market through Asean countries with which India has a free trade agreement.

Import of refrigerators went up from Rs 3,497 crore in FY18 to Rs 3,919 crore in FY19, air-conditioners from Rs 7,495 crore to Rs 8,343 crore and washing machines and laundry machines from Rs 1,258 crore to Rs

1,670 crore, up 33 per cent, in FY19.

The FTA with some of the countries, including the Asean block, has brought down duties on finished products to nil, whereas import of components still attracts duties. Hence traders find the zero duty products cheaper than domestically manufactured products.