Af­ter 2 Droughts, Skies could Shower a Bounty

Met fore­casts well-dis­trib­uted rains, cheer­ing farm­ers & kin­dling hopes of eco­nomic re­vival on ru­ral de­mand surge

The Economic Times - - Front Page - Our Bu­reau

New Delhi: The weather of­fice has forecast sur­plus, well-dis­trib­uted mon­soon rain­fall this year af­ter two con­sec­u­tive droughts, cheer­ing farm­ers and kin­dling hopes that the surge in ru­ral de­mand af­ter the ex­pected good har­vest will pro­pel eco­nomic growth. The promis­ing out­look from the coun­try’s most re­spected weather fore­caster came along with en­cour­ag­ing data show­ing that con­sumer in­fla­tion had fallen be­low 5% while in­dus­trial out­put had bounced back af­ter con­tract­ing for three months. This is ex­pected to boost eco­nomic and busi­ness sen­ti­ment af­ter a long phase of farm dis­tress and over­all de­mand slump.

The In­dia Me­te­o­ro­log­i­cal De­part­ment (IMD) said the mon­soon will de­liver 6% sur­plus rain in its fa­bled four-month jour­ney from the Ker­ala coast to the lofty moun­tains in Kash­mir. Of­fi­cial Mon­soon Forecast:

Prob­a­bil­ity of ex­cess rain is 30%, which will help re­plen­ish reservoirs, but also raises flood fears

In his let­ter to the FM, Prasad has said the telecom de­part­ment (DoT) is of the view that auc­tions, li­cence fees and spec­trum us­age charges for the cur­rent fi­nan­cial year, which started on April 1, would fetch .₹ 70,000 crore of rev­enue. How­ever, in the Bud­get pre­sented on Fe­bru­ary 29, the es­ti­mated rev­enue re­ceipts from the sec­tor have been pegged at .₹ 98,994.93 crore.

Eco­nomic Af­fairs Sec­re­tary Shak­tikanta Das had pre­vi­ously jus­ti­fied the rev­enue pro­jec­tions from telecom and called them re­al­is­tic. To ar­rive at these es­ti­mates, the gov­ern­ment had pegged pay­ments from li­cence fees at around .₹ 20,000 crore, from past and up­com­ing auc­tions in July at over .₹ 55,000 crore, and the rest from in­dus­try ar­rears. While Das didn’t spec­ify what the ar­rears were for, in­dus­try ex­perts say it could in­clude the over .₹ 23,000 crore due from tel­cos as one­time spec­trum charge, a mat­ter which is sub ju­dice.

For cal­cu­lat­ing the auction pro- ceeds, the fi­nance min­istry may have taken into ac­count rev­enue from auc­tion­ing a big chunk of air­waves in the 700 MHz 4G band, for which the sec­tor reg­u­la­tor had sug­gested a record price of .₹ 11,485 crore a unit. At this price, the gov­ern­ment could raise over .₹ 4 lakh crore, if all the air­waves in the 700 MHz band were to be sold. This comes to al­most 75% of the to­tal ex­pected pro­ceeds of .₹ 5.4 lakh crore, the lat­ter num­ber be­ing rev­enue from sale of all spec­trum and not just the 700 MHz band. To be sure, the gov­ern­ment will only get 25% or 33% of the to­tal as up­front pay­ment this fis­cal, with tel­cos pay­ing the rest in 10 in­stall­ments as per rules gov­ern­ing sale of air­waves.

But DoT is still grap­pling with the is­sue of whether to sell all spec­trum in the 700 MHz band or sell only a part of what is avail­able, given the op­po­si­tion from tel­cos. Also, the fact that some op­er­a­tors have bought air­waves through trad­ing could hurt de­mand at the auc­tions, some say.


In the let­ter, Prasad has also bat­ted for the telecom in­dus­try and re­quested the fi­nance min­istry to re­con­sider the pro­posed 15% ser­vice tax on spec­trum al­lot­ment.

DoT has said im­po­si­tion of such a charge, along with the de­fer­ment of the Cenvat credit of the tax im­posed, will dampen in­dus­try sen­ti­ment.

Ac­cord­ing to es­ti­mates by the telecom in­dus­try, the pro­posed ser­vice tax on all spec­trum al­lot­ments, in­clud­ing auc­tions and trad­ing deals, would cost the in­dus­try .₹ 30,000 crore in the first year, forc­ing telecom op­er­a­tors to raise tar­iffs. Ac­cord­ing to GSM in­dus­try body Cel­lu­lar Op­er­a­tors As­so­ci­a­tion of In­dia (COAI), the move would not only make the cost of ac­quir­ing spec­trum higher by 47-71%, damp- en­ing buyer in­ter­est in up­com­ing auc­tions, it would also eat into the tel­cos’ cor­pus re­quired to ex­pand ser­vices such as 3G and 4G.

The pro­posal is “un­in­ten­tion­ally puni­tive and is ev­i­dently re­sult­ing in ma­te­rial dis­tor­tion and dis­crim­i­na­tion to the in­dus­try”, COAI had said in a let­ter to the fi­nance min­istry last week. The gov­ern­ment has also pro­posed that the Cenvat credit of the tax im­posed on such as­sign­ment be de­ferred over the du­ra­tion of the li­cence pe­riod. How­ever, the in­dus­try body had con­tended that credit on spec­trum trad­ing deals should not be de­ferred as it would amount to a dou­ble whammy for the in­dus­try.

Ar­gu­ing against im­po­si­tion of tax on spec­trum as­sign­ment, which was a sov­er­eign func­tion, COAI said the gov­ern­ment would be cre­at­ing a tax cas­cad­ing im­pact which will ad­versely af­fect op­er­a­tors work­ing on thin­ning mar­gins.

“They will find it dif­fi­cult to set off this ad­di­tional tax and will end up with cash block­ages and/or bear this as ad­di­tional cost,” COAI said.


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