Telecom operators slam Trai’s draft rules, call 1% turnover penalty excessive

The government relies on these filings to verify operator revenues, compute statutory levies such as licence fees and spectrum usage charges, and intervene to ensure fair competition and protect consumer interest.

In submissions reviewed by Mint, the operators said the Telecom Regulatory Authority of India's (Trai) proposed framework, which seeks to link monetary penalties to turnover, is disproportionate and would unfairly penalise inadvertent or minor errors.

“The proposed financial disincentive of up to 1% of turnover appears very stringent and should be reviewed by the Authority (Trai) to ensure that it remains fair, proportionate, and consistent with the existing regulations," Cellular Operators Association of India (COAI) said in its submissions to Trai earlier this month. COAI represents Bharti Airtel, Reliance Jio and Vodafone Idea.

Queries emailed to Trai and COAI remained unanswered till press time.

In FY25, telecom operators collectively reported a gross revenue of over ₹3.72 trillion, an increase of 10.7%, according to Trai data. A proposal for linking financial disincentives to turnover has come at a time when Vodafone Idea is eyeing relief on its adjusted gross revenue (AGR) dues up to FY17 from the department of telecommunications (DoT), after a recent Supreme Court verdict. Bharti Airtel, too, wants the government to reassess its case for pending AGR dues.

According to the Trai proposal, if a service provider submits a false report, or knowingly leaves out any important information, it will be required to pay a financial disincentive of up to 1% of its turnover, as determined by Trai, according to the draft regulations.

According to the operators, Trai’s draft rules to increase financial penalties for delays in reporting tariff plans and administrative compliances go against the government’s wider goals of promoting ease of doing business, simplifying compliance, and decriminalising minor procedural errors, as per the Jan Vishwas (Amendment of Provisions) Act, 2023 and the proposed Jan Vishwas Bill 2.0.

“Trai is currently evaluating the inputs received from telecom operators. Any decision on the implementation of the regulations will be taken accordingly," a government official said on the condition of anonymity.

Last month, the telecom regulator proposed steeper fines under amendments to two regulations - the Draft Telecom Tariff Order (72nd Amendment) and the Reporting System on Accounting Separation (Amendment) Regulations, 2025. The tariff order amendment mandates reporting any new tariff plans, or changes to existing ones, to Trai within seven working days of its implementation. The regulator needs the same to review and intervene if a change is anti-competitive, predatory, or harmful to consumer interest.

Similarly, the Accounting Separation Regulations (ASR) are intended to provide transparency and accountability in telecom finances, allowing Trai to monitor the costs and revenues of different services and ensure fair pricing and regulatory decisions.

“The purpose of the regulation is to ensure that telecom service providers report to Trai on a consistent and accurate basis. The present regulation aims to amend the relevant regulatory provisions to enhance the effectiveness of financial disincentives in ensuring regulatory compliance," Trai said in the draft regulations on ASR.

According to telecom operators, ASR-based filings are administrative compliance requirements that do not directly impact the customers, the market behaviour or service quality and there is no loss to the government as well. In fact, the regulator should discontinue the requirement for submission of ASR, and rely on audited financial statements and adjusted gross revenue (AGR) certificates for analytical and statistical assessments.

“Even in the case of compliances related to license fees/spectrum usage charges, non-compliance does not lead to any penalty (post 2021 Cabinet reforms), let alone turnover-based penalty," Bharti Airtel said in its submission to Trai dated 7 November. The operator argued that Trai should first issue advisories and warnings before considering any financial disincentive, and said penalties should not be linked to turnover.

Under ASR, telecom operators must annually submit segment‑wise accounting statements to Trai — breaking down costs, revenues, capital employed, and other relevant financial data by service type (such as wireless access, internet, long‑distance, etc.), and by geographical area/licensed service area — so that the regulator can monitor the financial performance of each service separately and make informed decisions on regulations, and policies.

The regulator said the proposal is also to implement financial disincentive in a graded manner in the case of ASR defaults, which would align with gravity of violation, prescribing a maximum ceiling, and imposing interest on default in payment of financial disincentive.

Under the existing regulations, the penalty is up to ₹10,00,000, without any graded penalty structure.

Reliance Jio called Trai’s proposal for a financial disincentive up to 1% of annual turnover as ultra vires the Trai Act and “unsustainable" in law. “The proposed 1% of turnover disincentive would therefore be punitive, unjustified, and open to challenge as a manifestly arbitrary exercise of power under Article 14 of the Constitution," Jio told Trai in its submission on 7 November. The operator said the draft amendment lacks transparency, as it does not explain why the changes are necessary or how increasing financial disincentives will improve compliance. No data has been provided on the number of past violations or actions taken by Trai, nor any rationale showing how the proposed increase in penalties would lead to better adherence to the rules, it said.

“Linking the financial disincentives with turnover is not the right way for such errors. Further, this is very subjective as to who will decide that there are errors in reporting," said Satya N. Gupta, former principal adviser at Trai.

As part of the amendment to the ASR regulations, if a telecom operator fails to submit reports or provides false reports, the penalty proposed is ₹25,000 for each day of delay for the first seven days. If the default continues beyond seven days, the operators would be liable to pay an additional amount of ₹40,000 for each subsequent day of delay subject to a maximum of ₹1,000,000. For continued violation in the consecutive years, the daily penalty proposed is ₹50,000-75,000, capped at ₹25,00,000. The maximum amount of penalty is linked to turnover.

Similarly, if the service providers don’t report their new plans or prices on time, the regulator has proposed steeper penalties — starting at ₹10,000 a day for the first week of delay, and doubling to ₹20,000 a day after that, up to a maximum of ₹500,000.

Operators argued the regulator should retain or rationalise the current ceiling and rates of financial disincentive to ensure proportionality. The regulator needs to treat first-time or inadvertent delays for first seven days as minor procedural lapses leading to warning letters without financial disincentive, the COAI said.