The government will be conducting spectrum auctions this year to enable the launch of 5G services by private telecom operators within the current fiscal. Also, a design-led manufacturing scheme for building an ecosystem for 5G will be launched, the outlay for which might be allocated from the existing production linked scheme (PLI) for telecom equipment.

The telecom equipment PLI has an outlay of Rs 12,195 crore, but since Rs 4,000 crore- Rs 4,500 crore is not utilised, it can be used for 5G.

Although the spectrum auctions will be conducted this year, the government has fixed a very modest revenue target from the telecom sector at Rs 52,806.36 in FY22-23. This is despite the bumper revenue receipts from telecom sector in current FY21-22 fiscal. As per the revised estimates, the government is likely to get Rs 71,959.24 crore from communications services, primarily due to prepayment of spectrum dues by Reliance Jio and Bharti Airtel. The government had fixed a revenue receipt target of Rs 53,986.72 crore from telecommunications services for FY22.

The modest revenue target from telecom for FY23 indicates that the government is anticipating low upfront payments from the operators for spectrum auction. Operators have sought another five-six years’ moratorium on spectrum dues and no upfront payment, or maybe 10% of the total bid value.

The finance minister also announced that to enable affordable broadband and mobile service proliferation in rural and remote areas, 5% of annual collections under the Universal Service Obligation Fund (USOF) will be allocated. “Our vision is that all villages and their residents should have the same access to e-services, communication facilities, and digital resources as urban areas and their residents. The contracts for laying optical fibre in all villages, including remote areas, will be awarded under the BharatNet project through PPP in 2022-23. Completion is expected in 2025. Measures will be taken to enable better and more efficient use of the optical fibre,” she said.

Last year, the government had approved a revised implementation strategy for the BharatNet project by opting for public-private partnership (PPP) mode in 16 states, for which the government would provide Rs 19,041 crore as viability gap funding. With the additional allocation, the total outlay for BharatNet has increased to Rs 61,109 crore, which includes the already approved amount of Rs 42,068 crore in 2017.

Regarding electronics manufacturing, the finance minister said customs duty rates are being calibrated to provide a graded rate structure to facilitate domestic manufacturing of wearable devices, hearable devices and electronic smart metres.

Commenting on the announcement, Prashant Singhal, TMT Emerging Markets Leader, EY, said a clear focus on 5G spectrum auctions and rollout will help India catch up with the rest of the world. Globally, 200 telcos in 78 countries have already launched commercial 5G services. Moreover, the government’s move to launch a design-led manufacturing scheme as part of PLI will help to position India as a hub for 5G equipment manufacturing and exports.

KG Purushothaman, partner and Telecom Sector Leader, KPMG, said while some industry demands on reducing government levies remain to be addressed, the commitment of the government towards launch of 5G, new PLI schemes to promote manufacturing of 5G equipment and strengthening of digital infrastructure will boost the momentum in the sector.

“The Union Budget of the year 2022-23 is pro-growth with emphasis on providing further impetus to the Digital India initiative. We are glad to see the focus on the enhancement of digital connectivity and the announcement for the required spectrum auction in 2022 for the rollout of 5G mobile services,” SP Kochhar, DG COAI, said.