The Cabinet on Wednesday approved a new telecom policy — the National Digital Communications Policy (NDCP) — that aims to attract $100 billion investment in the sector by 2022 and increase high-speed broadband penetration several times over. It also unveiled a new package for the beleaguered sugar industry, which is struggling to clear record cane arrears and facing the spectre of a worsening glut. The NCDP seeks to “rationalise” levies such as spectrum charges to rejuvenate the debt-ridden telecom sector and provide broadband access to all with 50 megabits per second speed, 5G services and create 40 lakh new jobs by 2022.
The policy, however, fell short of the industry’s expectations when it comes to laying a definite roadmap for reducing taxes and levies that cripple the sector.
Telecom consultancy firm ComFirst India’s director Mahesh Uppal said, “I think the policy is much too vague and there are key elements missing. It does not suggest that government has done a comprehensive review on the licensing regime. There is no way one can reform the licensing regime without the government taking a short-term hit on revenues. There is no evidence, direct or indirect, that the government is ready to do that.”
Assorted levies and other imposts like spectrum usage charges (SUC) and licence fees account for 33-35% of the Indian telecom industry’s revenue, making it one of the most heavily taxed globally. Telecom operators pay 3-5% of adjusted gross revenue (AGR) as SUC and 8% of AGR as licence fee to the department of telecommunications.
Speaking to reporters after the Cabinet meeting, telecom minister Manoj Sinha said the ministry would now start working on rationalisation of levies. “We have to discuss the details with stakeholders… We expect to complete the process within a year,” he said.
“The key objectives of NCDP are broadband for all, creating 4 million additional jobs in the digital communications sector, enhancing contribution of the sector form 6.5% in 2017 to 8% of India’s GDP by 2022, propelling the country to the top 50 nations in the ICT Development Index of ITU from 134 in 2017,” the minister noted.
Under the latest sugar package of Rs 5,538 crore for the next marketing year starting October, the government could offer Rs 13.88 per quintal of cane directly to farmers for supplies of the raw material to mills. A similar assistance of Rs 5.50 per quintal was provided earlier this year. Separately, an aid of Rs 1,000-3,000 per tonne of sugar could be offered to mills for transporting the sweetener locally for exports, depending on distance from ports.
Abinash Verma, director general, Indian Sugar Mills Association (Isma), said: “The government’s decision to pay Rs 13.88 per quintal of sugarcane as part of FRP (fair and remunerative price) directly to the farmers will reduce the industry’s cane price liability by around 5% over the next year’s FRP of Rs 275 per quintal of sugarcane. This is the largest financial assistance towards FRP ever given by the government and will substantially reduce expenditure and working capital requirement of sugar mills in the next year.”
Part reimbursement of internal transport freight and handling charges on sugar exports will encourage sugar mills to export sugar and reduce the surplus inventory that they would be carrying and building up next year.
While the Centre has been helping the sugar industry clear cane dues in recent years through packages, including loans and interest subsidy, the steps have failed to prevent arrears from piling up at regular intervals when sugar prices drop, thanks to generous and unreasonable hikes in cane prices by both the Centre and states like Uttar Pradesh. On top of that, the food ministry this year reintroduced the sales quota system from June, impeding mills’ ability to cut inventory and clear cane arrears fast.
Cane dues stood alarmingly high at Rs 14,845 crore as of mid-August, a record for this time of the year (Uttar Pradesh alone made up for over 70% of the arrears).
According to an Isma estimate, mills were losing Rs 63 per quintal of cane due to exorbitantly high cane prices fixed by the Centre. Of course, the losses have somewhat declined from this level due to a pick-up in sugar prices of late. However, the fact that the government has raised the FRP of cane to Rs 275 per quintal for 2018-19, against Rs 255 this year ( although a rule change caps the effective hike for 2018-19 at 2.4% year-on-year) , will inflate their losses from the current level.
Recently, the government announced an up to 25% hike in prices of ethanol, meant for blending with petrol, for 2018-19 provided mills have produced it from cane juice, without extracting sugar out of it. The idea was to help cut surplus sugar production.
In June this year, the government approved a package comprising Rs 4,440-crore loans to mills to expand ethanol production capacity and Rs 2,507-crore aid in the form of interest subsidy on the loan and carrying cost of creating a buffer stock. Before that, an output-linked assistance of Rs 5.50 per quintal to farmers for cane supplies (with potential cost of Rs 1,540 crore to the exchequer) was approved.
The Cabinet also approved acquisition of privately-held equity in GST Network which will make the not-for-profit company 100% government-owned. This proposal was approved the GST Council earlier this year.