Aiming to give a fillip to foreign direct investment (FDI) in the telecom space, the investment promotion cell of the Department of Telecommunications (DoT) has suggested a four-point strategy, say news reports.
According to this body, regulatory uncertainty has adversely impacted investment in the sector over the past two years. The total FDI inflow in the telecom sector has declined from $2,549 million in 2008-09 to $304 million in 2012-13.
To tackle this, it has proposed raising the extra commercial borrowing limit for operators, providing viability gap funding through institutions such as IDFC and allowing a higher rate of accelerated depreciation on capital goods used for rolling out networks.
Elaborating on this, the investment promotion cell has stated that the telecom sector is a capital intensive one, where huge investments are required for spectrum acquisition and network rollout. Therefore, telecom operators should be allowed to fund this capital expenditure through external commercial borrowings, instead of rupee loans.
Pushing for a higher rate of accelerated depreciation, the investment cell has stated that the existing tax laws permit only 15 per cent depreciation on a majority of the products used in the telecom sector and nearly nine years are required to claim tax deduction for the cost of capital goods. It has stated that the rate should be increased to 25 per cent as it would encourage further investments in expanding telecom infrastructure.
On the issue of viability gap funding, the investment cell has noted that current policy frameworks make only PPP projects eligible for grants. Going forward, viability gap funding may also be provided to tower companies to subsidise capital expenditure and recurring cost of green initiatives.
