Telecom analysts: Centre realistic with its non-tax revenue targets for 2021-22

Representative image: Reuters

Telecom analysts are of the opinion that the government has set a realistic target for its non-tax revenue collections from telecom operators for 2021-22.

Budget documents released on February 1 show that the government has slashed its budgeted telecom non-tax receipts for 2021-22 by 60 percent to Rs 53,987 crore.

In the previous budget (2020-21), the government had set an ambitious revenue target of Rs 1.33 lakh crore but had later revised it to Rs 33,737 crore.

FY2021 is not the first time that the government will fetch only a quarter of its expected target. Revenue from the telecom sector has been falling short of the government's estimates since 2016 as a result of the financial stress in the sector.

The analysts believe this drop in budgeted revenue collection from the telecom sector comes on the back of staggered payment of AGR (Adjusted Gross Revenue) dues and the extension of spectrum auction receipts to FY22.

The proceeds from the spectrum auction and AGR payment will make up an important chunk of non-tax revenue for the government, which usually earns its non-tax revenue from the telecom operators in the form of licence fees and spectrum usage charges.

Kunal Vora, Senior  Telecom Analyst at BNP Paribas India, said: “The government has budgeted communication services receipt of INR540b in FY22 versus INR337b realised in FY21. In FY21, the government had budgeted INR1,330b but collected only around one fourth of that. This year’s number appears more realistic to us, considering the collections likely due to the expected collection of AGR dues and the collection of regular license fees/spectrum usage charges."

The revised estimate (RE) of non-tax revenues from communication services for FY2021 stood at Rs 33,737 crore, which is significantly lower than the budget estimate (BE) of Rs 133,027 crore and is also lower than ICRA’s estimates. The lower RE for FY2021 can be attributable to a shortfall in AGR levy collections, as a staggered payment plan was approved by the Supreme Court, and also to the possibility of a spillover of spectrum auction upfront receipts to FY2022, noted Ankit Jain, Assistant Vice President, ICRA Ltd.

The Supreme Court had in October 2019 mandated that telecom operators pay Rs 1,19,292 crore to the Department of Telecommunications as AGR dues. Of this, Bharti Airtel’s dues are pegged at Rs 43,980 crore, while Vodafone Idea’s dues were Rs 58,254 crore.

However, later in September 2020, the Supreme Court had granted 10 years to the operators  to make staggered payments of the AGR dues, including penalty, interest and interest on penalty.

Rohan Dhamija, Partner & Head (India & Middle East) at Analysys Mason, noted: “The government is more realistic this time about the expectations from spectrum sales and therefore has been conservative with its estimates for revenue collection.”

“The estimated non-tax receipts from the telecom sector in FY20-21 saw a revision to Rs33,737 crore from the budgeted Rs1.33 lakh crore due to  Supreme Court’s verdict allowing staggered payment of their AGR liability, which the Centre had accounted for in revenue receipts for the year. Additionally,  spectrum auction planned for the fiscal was postponed because of the outbreak of the COVID-19 pandemic, resulting in downward revision of the receipts," said Prashant Singhal, EY Emerging Markets Technology, Media & Entertainment and Telecommunications (TMT) Sector Leader.

"In FY21-22, the Government has budgeted Rs53,987 crore which is 60% more than the prior year non-tax receipt, potentially to include upfront payment from spectrum auction slated in March and AGR collections,” Singhal added.

The Cabinet had in December 2020 approved the auction of 2251.25 MHz (Megahertz) of spectrum by the end of FY21.

A total of 2251.25 MHz worth Rs 3.92 lakh crore is being offered with a total valuation of Rs 3.92 lakh crore (at the reserve price), the government had said in its official statement.