COAI suggests to cut USO fee to 3% and telecom licence fee to 4%

The Cellular Operators Association of India (COAI) has made a pitch for bringing down the total licence fee to 4 per cent from the current 8 per cent of the adjusted gross revenue (AGR) and the reduction in these levies will act as incentives for operators to expand the network in rural areas.

In a letter to the then Department of Telecom (DoT) Secretary Aruna Sundararajan, COAI said the Universal Service Obligation (USO) Fund contribution should be kept in abeyance till the full amount of the corpus is disbursed.

A total Rs 99,674 crore collected for the USOF between the fiscals 2003 and 2019, as much as Rs 50,554 crore remained unutilised as on June 2019. The current USO fee is 5 per cent of the AGR. The USOF is an autonomous body within the telecom department that subsidises telecom infrastructure roll out in rural India.


To achieve the total telecom licence fee of 4 per cent, COAI has suggested a roadmap of reducing the USO contribution immediately to 3 per cent with the ultimate objective of doing away with the levy in the next 2-3 years in line with the recommendations of the telecom regulator. COAI wants the DoT to reduce the current licence fee from 3 per cent to 1 per cent of AGR. At present, the total licence fee is 8 per cent, where 5 per cent is for the USO Fund fee, while the licence fee is 3 per cent.

If the suggested reductions are approved, it will bring down the total licence fee to 4 per cent, COAI said. "The remaining licence fee from three per cent to one per cent of adjusted gross revenue... This will bring the total licence fee to four per cent from the present eight per cent," the COAI said in its letter to DoT of July 19.

The COAI noted that funds disbursed from the USO over last 17 years show the fund requirements of various schemes on an annual basis are never more than Rs 8,548 crore, or around Rs 2,888 crore on an average.

"In this regard, we are of the view that the existing contribution available in USO fund, that of Rs 50,554 crore is more than the requirement to connect 43,000 unconnected villages," the COAI said, adding that the regulatory levies were "additional costs to the consumers". The reduction in these levies will act as incentives for operators to expand the network in rural areas.

Lastly, considering that reduction in levies will act as incentive for telecom service providers to roll out more network in rural areas, we are of the view that the USOF should be reduced immediately.