Dept of Telecommunications removes 3% floor rate on spectrum usage charges payments

Dept of Telecommunications removes 3% floor rate on spectrum usage charges payments

23 Jun    Finance News

In a relief for telecom operators, the Department of Telecommunications (DoT) has finally removed the 3% floor rate on spectrum usage charges (SUC), a move which would in the long run make such payments zero on their entire spectrum holding. FE had reported in its Tuesday edition that operators had expressed their disappointment on Monday at a pre-bid conference that the government, despite committing to remove the floor in September 2021, had not yet notified it. They had pointed out that the non-removal would make the whole exercise of not charging SUC now onwards meaningless.

“We have clarified that the SUC floor has been removed. Whatever the telecom operators are paying now, that percentage will be reduce in future,” an official in DoT said.

The notification issued on the removal of the floor said that spectrum acquired through auctions held after September 15, 2021 in different access spectrum bands, will not attract SUC.

The floor was fixed in 2016 to protect government revenues as SUC charges at that time was lowered to 3% as an incentive to participate in auctions. Before that operators used to pay between 3%-8% as SUC for spectrum acquired administratively and through auctions. The government came out with a weighted average formula in 2016 that was designed in such a way that with time as operators acquire more spectrum in auctions, their SUC would come down from say 4.5-5% to 3%. It could have gone below that hence a floor rate was fixed.

The removal of the floor rate was required to give effect to the telecom relief package announced by the government in September 2021, where apart from providing a four-year moratorium to operators on their AGR and spectrum dues, the government had also said that there would be no SUC on airwaves acquired in future auctions.

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