After 2 Droughts, Skies could Shower a Bounty
Met forecasts well-distributed rains, cheering farmers & kindling hopes of economic revival on rural demand surge
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.
BATTING FOR INDUSTRY
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.