The Department of Telecommunications (DoT) has worked out a four point action plan to finance telecom infrastructure projects worth Rs 6,500 billion under the 12th Five Year Plan, including overseas borrowing.
According to DoT, operators should be encouraged to finance capex-intensive spectrum acquisitions and network rollouts through external commercial borrowings instead of high-cost rupee loans. The department has asked an internal panel looking at infrastructure financing to make specific provisions to ensure that the operators and the tower companies are able to avail and benefit from financial incentives such as accelerated depreciation, viability gap funding (VGF) and flexible loan repayments over a 12 to 15 year time period. In addition, DoT has also suggested that the general depreciation on capital goods consumed in the telecom sector be enhanced from 15 per cent to 25 per cent.
DoT is of the view that the current tax laws allow only 15 per cent depreciation on majority telecom sector inputs and it takes eight to nine years to claim tax deduction for the cost of capital goods. This is why benefits of accelerated depreciation would encourage further investments in expanding telecom infrastructure in rural areas. Further, the department plans to appoint a nodal agency like IDFC through which VGF can be provided to telecom tower companies. DoT has directed the panel looking at infrastructure financing to suggest ways to extend VGF to tower companies for subsidising their capex requirements and helping them meet their green telecom policy targets.
DoT?s green policy requires telecom companies to power 50 per cent of all telecom towers in rural areas and 20 per cent in urban areas by hybrid power by 2015. And by 2020, the operators need to run 75 per cent and 33 per cent of their total telecom towers in the rural and urban areas, respectively, on hybrid power.
