TRAI recommends no license fee for DTH operators after FY27

The Telecom Regulatory Authority of India (TRAI) released the recommendations on license fees and policy matters on DTH (direct-to-home) services, proposing no license fee for DTH operators after the end of FY27.

According to TRAI, DTH operation in India requires a license fee for providing broadcasting services in India. A license fee is a non-tax fee levied on a service provider against the privilege of being permitted to carry out a licensed activity.

As per the provisions of the guidelines by the telecom department, the DTH operators are required to pay a license fee, which is 8% of the adjusted gross revenue (AGR) on a quarterly basis. In line with this, TRAI says the DTH licensee should pay an annual license fee equivalent to 3% of adjusted gross revenue (AGR). "The Authority recommends that the license fee for DTH licensees should be brought down to zero in the next three years. DTH licensees should not be charged any license fee after the end of the financial year 2026-2027."

Apart from this, TRAI has recommended the rationalisation of bank guarantees for DTH operators. Bank Guarantee (BG) is a type of financial instrument to ensure that a service provider pays their dues on time and is obligated to fulfil the terms and conditions of the license agreement. The extant DTH guidelines prescribe a bank guarantee for an amount of ₹5 crore for the first two quarters, and thereafter, for an amount equivalent to a license fee for two quarters and other dues not otherwise securitised.

"The Authority is of the view that the Bank Guarantee should exist to securitise the payment of license fee and other dues otherwise not securitised and security for the due observance and performance of the terms and conditions of the said license. In DTH Sector, it may be noted that only one Bank Guarantee has been prescribed, which is both the financial as well as the performance Bank Guarantee, to safeguard the non-payment of license fee or violation of any of the license conditions. Therefore, the Bank Guarantee for DTH licensees may be treated as Financial and Performance Bank Guarantee," says TRAI.

"The licensee should submit a Bank Guarantee for an amount equivalent to 20% of the estimated sum payable, equivalent to license Fee for two quarters and other dues not otherwise securitised, as being made by DoT in its structural reforms," it adds.

According to the authority, once the license fee becomes zero, the licensee should submit a bank guarantee (performance bank guarantee) for a fixed amount equivalent to ₹5 crore from any scheduled bank to the "Ministry of Information and Broadcasting, which should be valid for a minimum of one year and renewed every year to ensure it remains valid for the entire currency of the license agreement."

The authority has also recommended electronic bank guarantees for ease of doing business.

These recommendations have been carried out in line with the guidelines issued by the department of telecommunications by rationalising the definitions of adjusted gross revenue and bank guarantee (BG) under structural reforms.