Committee To Suggest Modalities For R&D Support Channelised From USO Funds, Says Telecom Secretary

A committee is being set up to suggest guidelines for sanction of R&D funds, to the tune of Rs 450-500 crore, which will be allocated from the portion of USOF annual collections following the recent Budget announcement, according to DoT Secretary K Rajaraman.

The committee, which is being constituted, is expected to give its views in the next 30-35 days, Rajaraman told PTI.

Nearly Rs 450-500 crore will flow towards R&D efforts with this, as the Budget has proposed to allocate five per cent of annual collections under the Universal Service Obligation Fund (USOF), to enable affordable broadband and mobile service proliferation in rural and remote areas.

Rajaraman further said the next set of reforms, likely to be announced in 3 to 4 months, will look to improve ease of doing business, reduce compliance burden, and lower the cost of doing business for a whole host of players operating in the sector.

Elaborating on a Budget announcement related to R&D activities, Rajaraman said, "A technical committee, with experts, is being formed which will recommend suitable norms for USOF R&D scheme...for financing the R&D efforts, the kind of products that will be supported."

As the annual collections under USOF come to over Rs 9,000 crore every year; at five per cent, the R&D component will work out to roughly Rs 450-500 crore.

Put simply, the USOF is aimed at providing financial support for the provision of telecom services in commercially unviable rural and remote areas of the country. The resources for the implementation of USO are raised by way of collecting universal service levy which is a percentage of adjusted gross revenue (AGR) of telecom companies.

Rajaraman said the development of intellectual property locally is crucial for a strategic sector like telecom where security, job creation and exports are a priority, and the Department of Telecommunication (DoT) wants to ensure the induction of indigenous technology in the medium to long term.

Hence, the R&D initiative is geared to support local companies to develop products, which will enable the proliferation of broadband, better speeds, improvement in service quality in rural areas, and reduce the cost of service through suitable technology development, the top DoT official said.

"This will be a broad objective of research we will support. We will have products that can be manufactured in India at a much lower cost, and in a manner which is appropriate to India's rural and remote terrain," he noted.

This, along with the Budget announcement on the launch of a scheme for design-led manufacturing to build a strong 5G ecosystem as part of the production linked incentive (PLI), is expected to strengthen India's tech proposition. 

The Rs 12,000-crore telecom PLI scheme will be "modified" to accommodate the design-led component in addition to the existing manufacturing support being offered.

"Over Rs. 7,000 crore has been sanctioned for 31 companies under the first phase of PLI, so the balance amount of Rs 4,000 crore plus will be available...for that the guidelines will be tweaked in a manner that it supports design within the country along with manufacturing," Rajaraman said.

Working out the revised guidelines will take 40 to 45 days, he informed.

On the industry expressing its disappointment at Union Budget not addressing some long-standing demands, such as a cut in levies, Rajaraman said September 2021 reforms were a "big step forward" and more measures are on the anvil.

"Basically, we will be looking at a variety of reforms, reforms which improve ease of doing business, reduce compliance burden...reduce the cost of doing business in the sector for various players," he said pointing out that the sector has different kinds of licensees, from pure ISPs to mobile operators and from virtual network operators to satellite service providers.

"The idea is to make life easier for these businesses so they are able to give affordable wide and variety of products," he elaborated.

The 'reforms 2.0' could be announced within 3 to 4 months, he said.

The telecom sector had got a shot in the arm with the government, last year, approving a blockbuster relief package that included a four-year break for companies from paying statutory dues, permission to share scarce airwaves, change in the definition of revenue on which levies are paid and 100 per cent foreign investment through the automatic route. Telcos have also been given the option to convert the interest amount pertaining to the dues moratorium period, into equity.

The telecom sector prospects are looking up, Rajaraman said citing the Q3 FY22 performance of various telcos. He asserted that global investors are also seeing value in investing in India, which represents a big market.

Google will invest as much as $1 billion in Bharti Airtel in picking up a 1.28 per cent stake and in scaling up offerings of India's second-largest mobile phone operator. 

On whether Google's latest move is an endorsement of how global players are looking at the Indian market now, Rajaraman said, "Very true, if you look at September reforms, we have made FDI 100 per cent automatic, also a lot of compliance burden have been knocked off."

He added that investors see a lot of value in investing in India and even otherwise, it is a very big market. "Now with all these possibilities, they see a further growth and opportunity here, so obviously they would invest."

On Vodafone Idea's decision to opt for converting about Rs 16,000 crore interest dues payable to the government into equity in lieu of about 36 per cent stake, and whether the numbers have been validated by DoT, Rajaraman said the finance ministry will be looking at the entire calculation, and come to a conclusion.

The DoT will support the finance ministry in taking the decision, he added.