SDG 9: Industry, Innovation and Infrastructure | SDG 17: Partnerships for the Goals
Ministry of Finance | Department of Telecommunications (DoT) | Ministry of Communications
The Cellular Operators Association of India (COAI) has called for the complete abolition of the Universal Service Obligation Fund (USOF) levy. As an alternative, the industry body recommends suspending the 5% Adjusted Gross Revenue (AGR) contribution until the existing unutilized corpus, which exceeds INR 86,000 Crore, is fully exhausted. Additionally, COAI has urged an urgent reduction in the License Fee from the current 3% to 1%, arguing that this should only cover the administrative costs incurred by the Department of Telecommunications.
Redefining Revenue and Infrastructure Responsibility
The industry has raised concerns regarding the current definition of Gross Revenue (GR), which covers all telecom activities and creates financial ambiguity.
GR Clarification: COAI recommends a more precise definition stipulating that revenue from activities not requiring a license should be excluded from GR calculations.
Fair Share Contribution: The association maintains that Large Traffic Generators (LTGs) should contribute to the development of telecom infrastructure.
Digital Bharat Nidhi: COAI suggests that LTGs should pay into the USO Fund/Digital Bharat Nidhi Fund to support the digital economy on whose infrastructure they operate.
Taxation and Customs Duty Relief
Financial stability is a primary focus, with several tax-related reforms proposed to ease the burden on Telecom Service Providers (TSPs).
Business Loss Carry-Forward: COAI has requested an extension for the carry-forward of business losses from 8 years to 16 years under Section 72 of the Income Tax Act.
Service Tax Exemption: Relief is sought on additional AGR liability arising from Supreme Court judgments, specifically for the period from April 2016 to June 2017. Given that post-GST no input credit is available, imposing Service Tax on these dues would convert it into a direct cost, worsening sectoral stress.
Customs Duty Rationalization: The body recommends reducing customs duties on 4G and 5G network products to NIL, followed by a gradual increase once a domestic manufacturing ecosystem is established.
What is the “Digital Bharat Nidhi” in the context of Indian telecom? The Digital Bharat Nidhi (formerly the Universal Service Obligation Fund) is a pool of funds created through a 5% levy on the Adjusted Gross Revenue of telecom operators. It is intended to finance the rollout of telecom services in rural and remote areas and to encourage research and development. COAI’s recommendation to pause contributions stems from the significant unutilized amount already sitting in this fund.
Policy Relevance
The telecom sector has evolved from a standalone vertical into a horizontal enabler of the national digital economy. Rationalizing its financial burden is critical for the success of Digital India and the rollout of next-generation connectivity.
Accelerated 5G Deployment: Reducing customs duties and regulatory levies will free up capital for TSPs to invest in faster 5G and future 6G network expansion.
Ease of Doing Business: Implementing statutory timelines for the disposal of tax appeals and rectifying Form 26AS data reconciliation will improve cash flow and financial planning for operators.
Infrastructure Sustainability: Shifting the burden of infrastructure development to include Large Traffic Generators ensures a more equitable model for funding the backbone of the digital economy.
Relevant Question for Policy Stakeholders: How can the government balance the need for revenue from regulatory levies with the strategic necessity of ensuring the financial health of telecom operators to achieve a “Viksit Bharat” by 2047?
Follow the full news here: Union Budget 2025-2026: COAI Calls for Further Reforms to Revitalize Industry to Step-Up Contribution for Indian Economy