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No let-ups

The government rejects a two-year
moratorium on cellphone licences.

The finance ministry has rejected a demand made for a two-year moratorium on licence fees claiming the move is not viable.

Licence fees earn the exchequer up to Rs 20 billion a year and Rs 40 billion is more than the government is willing to spare, considering the uncertainties over the earnings from taxes. The government also may have remembered the outstanding Rs 14 billion from cellular operators when taking the decision.

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The cellular operators have another offer if the government cannot agree to the moratorium -- an extension of the licence period, may be to 10 years, keeping the net present value of the licences constant.

But DoT sources said that if the same licence lasted double the time, it would effectively be worth half the amount paid. But the Industrial Credit and Investment Corporation of India, in a report to DoT, had suggested that if the operators earn profits during the period, a fixed percentage of the profits could be taken as the licence fee. The report also cited examples to suggest that extending the licence period alone could increase the viability of the projects.

The licence agreement says that at the end of 10 years, the licence will be extended for a further term following negotiation of terms and conditions. Even if the same terms are carried over, the government could get another Rs 200 billion for the extended period.

But cellular operators have been claiming that without support there would be no licence fees to collect since all the operators would soon fold up. But the DoT points out that the promoters of Hutchison Max have earned Rs 5.7 billion by selling equity. It also points out the cases of telecom licences being sold. If the operators just wanted to make a quick buck, there was no need for the government to pay the price, sources said.

-Compiled from the Indian media

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