The government has released the Union Budget 2020. Under the budget, Rs 60 billion has been allocated to the BharatNet programme for the financial year 2020-21. Further, fibre to the home (FTTH) connections through BharatNet are set to link 100,000 gram panchayats (GPs) during the year.

On the revenue side, government expects revenues collection worth Rs 1.33 trillion from the telecom sector in financial year owing to adjusted gross revenue (AGR) dues.

There has been no announcements regarding the rationalisation of levies and taxes currently imposed on the severely distressed telecom sector and telecom infrastructure is not taken into consideration that is going to build out the country.

As per the Finance Minister, the focus of Budget 2020 remained on boosting income and purchasing power of the citizens on the backdrop of emerging technologies such as artificial intelligence and machine learning.

Key highlights of Budget 2020 for telecom industry

  • The Finance Minister has proposed a new scheme to promote domestic manufacturing of mobile phones and electronics. The details of the scheme are to be released soon.
  • Bharat Sanchar Nigam Limited (BSNL) and Mahanagar Telephone Nigam Limited (MTNL) will get fund infusion of around Rs 376.4 billion collectively, primarily for 4G spectrum and implementation of voluntary retirement scheme. As per the government, Rs 141.15 billion will be infused in BSNL and Rs 62.95 billion in MTNL for 4G spectrum. Besides, Rs 25.41 billion and Rs 11.33 billion will be provided to BSNL and MTNL as grant in aid for payment of goods and services tax (GST).
  • In another positive move for the sector, the government has reduced the import duty on telecom equipment.
  • Further, a policy to enable private sector to build data centre parks throughout the country has also been proposed.
  • With a view to connect the unconnected, government has announced leveraging digital connectivity to all institutions at GPs levels such as police stations and post offices.
  • Meanwhile, government also proposed setting up of five new smart cities, for which Rs 64.5 billion has been allocated for the Smart Cities Mission for 2020-2021.
  • Further, Rs 80 billion has been allocated for national mission on Quantum Technology and Application over 5 years.
  • Over 550 Indian railway stations are to be digitised with Wi-Fi facilities.

However, no substantial relief has been offered in the Budget 2020 for the ailing telecom sector saddled with Rs 1.47 trillion in unpaid statuary dues. Further, industry was left disappointed on telecom not being included in the definition of infrastructure sector.

Industry reactions:

Commenting on the budget, Rajan S. Mathews, Director General, Cellular Operators Association of India (COAI) said, “We welcome the government’s overarching positive theme for the Budget 2020-21, that includes enabling an aspirational India, through major fundamental structural reforms targeted at fostering healthcare, education, skill development, ensuring economic development for all and further a caring, humane and compassionate society. The Hon’ble Finance Minister Nirmala Sitharaman, emphasised on country’s growth and Digital inclusion will hinge on advanced technologies such AI, robotics, machine learning, analytics, among others, which essentially relies on telecom infrastructure. However, while the Union Budget laid major emphasis on boosting domestic manufacturing of network products, mobile phones, electronic equipment, semi-conductors and healthcare products and has allocated Rs 273 billion for the development of industry and commerce by 2021, it is disappointing that there were no announcements made regarding the rationalisation of levies and taxes currently imposed on the severely distressed telecom sector and telecom infrastructure is not taken into consideration that is going to build out the country. The Budget proposed that the New India will be driven by innovations, AI and computing where data will be the new oil and other significant initiatives such as linking of 100,000 gram panchayats to the BharatNet program by this year and an allocation of Rs 60 billion in this regard, none of our key recommendation appear to have been taken into consideration. A financially healthy and robust telecom sector is imperative to support all these future forward initiatives.  It is also disappointing to note that telecom was not given an infrastructure status even though a slew of crucial reforms have been announced on infrastructure. The telecom sector, which is the backbone of the country’s economy, did not receive significant support.”

As per Ankit Jain, Assistant Vice President, Corporate Ratings, ICRA Limited, “The budget emphasised the importance of creating a robust digital infrastructure and increasing connectivity across the country will provide greater opportunities to telecom operators and drive higher data offtake—especially in rural areas. A strong optic fibre network using higher technologies is essential for building the backbone of telecom connectivity in the country. Thus, the focus continues to remain on the connectivity of the gram panchayats through fibre. Moreover, the development of new technologies like machine learning, internet of things, artificial intelligence continues to remain the focus area. The revised estimate (RE) of non-tax revenues from communication services for FY2020 stood at Rs 589.90 billion, which is 17 per cent higher than the budget estimate (BE) of Rs 505.20 billion and is higher than our estimates. The BE for FY2021 stands at Rs 1,330.27 billion, 125 per cent higher than the RE for FY2020. Despite deferral of spectrum payments due in FY2021 and FY2022, the higher BE for FY2021 can be attributable to some participation in 5G spectrum auctions and expectation of payments of AGR-related dues.”

Meanwhile, Hemant Joshi, Partner, Deloitte India, stated “Budget of Convergence of technologies, industries, geographies for inclusive growth, leveraging existing native knowledge and existing assets like Railways etc.”

While Sathish Gopalaiah, Partner, Deloitte India, added “The government has chartered ambitious plans for universal broadband and connectivity to all gram panchayats of India. The 2020 budget allocation of Rs 60 billion to BharatNet program reinforces the government’s agenda of connectivity for all and sustain the momentum in national broadband. India is the second largest smartphone market globally. Smartphones are causing a positive ‘multiplier effect’ for number of associated markets such as advertising, accessories and hardware, content and services. Government budget initiatives towards promoting electronics manufacturing in India, particularly mobile phones, semi-conductor packaging and electronic equipment is certainly a positive for the industry and we expect this will attract investments, create employment opportunities for our young workforce and augment our ‘Digital India’ story”.