NEW DELHI: The increase in basic customs duty from 10% to 15% on certain specified telecom equipment will increase the cost of providing services for telecom service providers (TSPs), says the Cellular Operator Association of India (COAI).
The COAI, which represents the three private telecom operators - Reliance Jio, Bharti Airtel, and Vodafone Idea - reasoned that the increasing cost is due to telecom operators continuously upgrading their networks with the advent of new technology.
Finance Minister Nirmala Sitharaman on Tuesday proposed a 5% increase in import duty on motherboards, also known as printed circuit boards, to boost domestic telecom gear manufacturing.
“The Government has also proposed to increase Basic Customs Duty from 10% to 15% on PCBA of certain specified telecom equipment. This will increase the cost of providing services as the telcos are continuously upgrading their networks with the advent of new technology,” said S P Kochhar, Director General of COAI.
In fact, COAI has previously requested exemptions from customs duties for certain telecom equipment to alleviate the cost challenges associated with deploying this critical infrastructure.
Kochhar said that over the past 5 to 6 years, the government has gradually increased the customs duty on telecom equipment to 20%, posing a substantial financial burden and significantly impacting the rollout of 5G services in India.
”It is recommended that the customs duty be reduced to zero and then gradually increased depending on the creation of an ecosystem for manufacturing of telecom gear in India. Further, until high-quality equipment is available domestically at competitive prices, COAI urges the government to reduce customs duties for 4G and 5G network products, as well as other related items, to NIL,” said Kochhar.
Peeyush Vaish, Partner and TMT industry leader at Deloitte India believes that an increase in Basic Customs Duty (BCD) will boost domestic manufacturing of telecom equipment.
He stated that it would have been more beneficial if the reduction had been put in place two years ago when massive 5G deployment was happening in the country.
Meanwhile, the government has allocated Rs 1.28 lakh crore for telecom projects and public sector firms under the telecom ministry, with a majority of funds earmarked for state-owned BSNL.
Of the total proposed allocation, over Rs 1 lakh crore is meant for BSNL and MTNL-related expenses, including a Rs 82,916 crore infusion in BSNL for technology upgradation and restructuring.