India’s Telecom Regulatory Authority (TRAI) has made important suggestions regarding license fees and regulations for DTH (direct-to-home) services.
These suggestions are in line with changes made by the Department of Telecommunications (DoT) that redefined key terms like Adjusted Gross Revenue (AGR) and Bank Guarantee (BG) as part of structural reforms.
DTH License Fees and Policy Guidelines
TRAI’s recommendations concern DTH broadcasting services in India, which are governed by policy guidelines for obtaining licenses. These guidelines lay out a license fee (LF), a fee charged to service providers for the privilege of conducting licensed activities.
According to these guidelines, DTH operators are required to pay a quarterly LF, which is 8% of their Adjusted Gross Revenue (AGR), to the Ministry of Information and Broadcasting (I&B).
Bank Guarantee and License Agreement
A Bank Guarantee (BG) is a financial tool ensuring that service providers fulfill their obligations under the license agreement. The current DTH guidelines stipulate an initial BG of Rs. 5 crore for the first two quarters. Afterward, the BG should match the LF for two quarters and other dues.
Revenue Calculation and Definitions
The recommendations specify that Gross Revenue (GR) includes all revenue from operations, interest, dividends, rent, etc., without offsetting related expenses.
Applicable Gross Revenue (ApGR) for license fee calculations is the total GR minus specific items like revenue from DoT-issued licenses, government reimbursements, and other income.
Key highlights from TRAI announcement includes:
- Adjusted Gross Revenue (AGR) Definition: AGR will not include GST if it’s part of ApGR.
- Revised Form-D and Digital Reporting: The Ministry should adopt the updated Form-D format for revenue and fee reporting, shifting towards a fully digital submission process.
- Annual Fee based on AGR: Licensees are required to pay an annual fee equal to 3% of AGR.
- Phased Reduction of License Fee: DTH License Fee should gradually become zero within three years, with no fees after the 2026-2027 financial year.
- Bank Guarantee (BG) Requirements: Licensees must initially provide a Bank Guarantee of Rs. 5 crore, followed by further guarantees based on License Fee and dues calculations.
- Licensor’s BG Enforcement: The Licensor can enforce the BG if license conditions are violated.
- Electronic Bank Guarantees Encouraged: The use of Electronic Bank Guarantees is promoted for business convenience.
These recommendations are designed to align DTH services with the structural reforms of DoT and to foster their growth in a competitive broadcasting market.
They focus on clarifying revenue-related definitions, simplifying administrative procedures, and reducing license fees and bank guarantees.