New Delhi: The department of telecommunications (DoT) may get into a turf battle with the regulator over the implementation of a single licence fee regime that’s aimed at bringing greater accountability and removing the incentive for arbitrage by India’s phone companies.

Mixed effect: Of the listed telcos—Bharti Airtel, Reliance Communications and Idea Cellular—Idea will be the least affected while RCom may be the most affected by the new levy, based on the licences they hold. Rajkumar/Mint

A four-member committee set up by DoT in May has proposed that all the licences that come under its purview be rationalized into a 8.5% levy on adjusted gross revenue (AGR), according to two officials who were part of the committee and didn’t want to be named as they are not authorized to speak to the media.

“The regulator doesn’t need to be involved in deciding on the levy," said one of the DoT officials. “I don’t see the need for the matter to go to the Trai as there will be a minimal impact, so small that the telcos will be able to pass it on to the subscribers."

The other official said the companies wouldn’t need to make their customers pay after a while.

“They will probably pass on the hike in the beginning for a few months, maybe a year, but after that they will absorb it," he said.

Trai wrote a letter to the department on 11 September saying it wants a say in the matter because the implementation of the uniform fee would impact government revenue and operators, who may pass on the increased levy to the consumers.

The regulator said the views of all stakeholders should be taken into consideration before arriving at the new figure.

“Trai is absolutely right in its stand," said regulatory expert Mahesh Uppal, director with Com First (India) Ltd. “This is precisely why the Trai Act was amended in 2004 as you cannot be a credible regulator without having any say in licencing. The licence fee is a major part" of this.

The single licence fee regime discriminates against C circles, or areas that may be less viable than the big cities, he said.

“The move for a uniform licence fee assumes that no operators will go to the C circles, whereas they should be encouraging the operators to expand operations into rural areas. This a reverse of what regulatory incentive is all about," Uppal added.

AGR is defined as the total revenue that accrues to the telecom firm directly after subtracting service taxes that go to the government and interconnection charges that go to the other phone companies.

Thus far, India’s telecom service providers pay 6-10% of their AGR as licence fee depending on the area of operations. They also pay 6% of the AGR to operate national and international long-distance services. Those with Internet telephony licences pay 6% of AGR.

The two officials said the levy was decided on the basis of the weighted average of the aggregate as well as the individual revenues of the telcos to minimize the impact.

After allegations of arbitrage in fees that the telcos pay to the government surfaced late last year, the regulator suggested that an audit of transactions by the country’s phone firms be undertaken.

Telecom firms, including Bharti Airtel Ltd, Vodafone Essar Ltd, Reliance Communications Ltd (RCom), Idea Cellular Ltd and Tata Teleservices Ltd are having their accounts checked by empanelled auditors, who are expected to submit their reports within the next three months.

Another senior DoT official said that minister for communications and information technology A. Raja would take a call on whether the matter should be referred to Trai.

The DoT’s move is likely to impact operators with bigger operations in category C circles such as Assam, Bihar and Orissa.

Of the listed telcos—Bharti Airtel, RCom and Idea Cellular—Idea will be the least affected while RCom may be the most affected by the new levy, based on the licences they hold.