Budget leaves telecom industry disappointed; TAIPA rues hike in customs duty on optical fibre

The telecom industry was left disappointed as the Budget did not provide much-anticipated relief from high taxes and levies imposed on the sector. The Tower and Infrastructure Providers Association (TAIPA) Friday said the government's move to raise customs duty on optical fiber cable to 15 percent from the current 10 percent will seriously impede the roll-out of 5G in India.

Tilak Raj Dua, Director General of TAIPA, said the budget was "lackluster" as the hike in the basic customs duty would result in higher capital expenditure, eventually "burning a hole in the pockets of the telecom industry which is already facing financial turmoil". Apex industry body Cellular Operators' Association of India (COAI) said it remains optimistic that the government will provide the much-needed financial relief and impetus to the industry in its post-budget review, given the importance of the sector in driving inclusive growth.

"We laud the government for a progressive and forward-looking budget that has provided the building blocks for a USD 5-trillion economy... But the industry needs help, which was not forthcoming in the Budget," Rajan S Mathews, Director General, COAI told PTI. The telecom industry rued that its plea for support was not properly addressed.

The association, however, lauded the emphasis on domestic manufacturing. In a statement, the COAI said that, in many ways, the budget encompasses the vision of the Prime Minister, particularly in the areas of infrastructure, rural connectivity, women empowerment, housing, power and cooking gas in rural areas, with an emphasis on creating a robust digital economy.

The telecom services industry which has been flagging the high levies like license fee and spectrum usage charges had pinned its hopes on the Budget providing the much-needed respite. "It has been shown categorically that the telecom industry has been a significant engine for GDP growth, rural inclusion, women empowerment, and affordable communication services and ubiquitous connectivity," Mathews said in a statement.

As such, the industry hoped the Union Budget would provide relief from the high taxes and fee on the industry," he added. It is pertinent to mention here that the National Digital Communications Policy - the policy blueprint for the sector - talks of catalyzing investments for digital communications sector through review of levies and fees including license fee, spectrum usage charges, the definition of adjusted gross revenue and rationalization of universal service levy.

Further, the telecom sector expressed displeasure on the hike in customs duty on optical fiber cable (OFC) from 10 percent to 15 percent. Taipa, whose members include Bharti Infratel, Indus Towers, American Tower Corporation, etc, said the Indian market for OFC in 2018 is estimated at 29 million fiber kilometer and is projected to grow at a CAGR of 17 percent through 2023.

The mobile tower industry estimates that less than 25 percent of the telecom towers is fiberized as compared to the global counterpart such as China, USA, and Japan wherein more than 80 percent of the telecom infrastructure is fiberized. "In a nutshell, it is a lackluster budget as the hike in the basic customs duty will result in higher capital expenditure eventually burning a hole in the pockets of telecom industry which is already facing financial turmoil. The development will seriously impede the rollout of 5G in India," Dua said.