New Delhi, March 24 The telecom regulator, TRAI, has dropped a proposal to impose penalties of up to one percent of turnover for inaccurate accounting separation or cost reporting by telecom operators, and instead has stipulated a graded penalty framework with caps for such violations.
The information provided in accounting separation reports is required for regulatory purposes such as analyzing costs, revenues, and capital employed in major areas of an operator's business, measuring financial performance, and the profitability of various products and services.
In its draft form, the regulator had proposed a penalty of up to one percent of the service provider's turnover for submitting false or misleading information, a proposal that the industry had criticized as being excessively stringent and disproportionate.
On Tuesday, TRAI released amendments to the provisions of two key regulations – the Telecom Tariff Order and the Accounting Separation.
Regarding accounting separation, TRAI stated, "If the report furnished by the service provider under regulation 5 is false, or if, in its report, the service provider deliberately omits any material fact knowing it to be material, the service provider shall be liable to pay a financial penalty..."
Accordingly, the telecom regulator has stipulated a penalty of up to Rs 25 lakh for minor violations in companies with a turnover of up to Rs 500 crore, and up to Rs 50 lakh if the violation is major.
For companies whose turnover ranges between Rs 500 crore and Rs 5,000 crore, the financial penalty for minor violations is up to Rs 50 lakh, and for major violations, the amount may go up to Rs 1 crore.
For companies with a turnover exceeding Rs 5,000 crore, TRAI has stipulated a penalty of up to Rs 1 crore and up to Rs 5 crore for minor and major violations, respectively.
The service providers will be given a reasonable opportunity to represent against the violation of the regulations, TRAI said.
The regulator added that it may waive the financial penalty, impose a lower amount of the financial penalty, or classify it as minor or major based on the reasons provided by the service provider.
It is important to note that the accounting separation reports of telecom operators are significant from a regulatory perspective in a multi-operator, multi-service environment and are being used by TRAI for various regulatory exercises such as determining Interconnection Usage Charges (IUC) for Voice and SMS, carriage charges, valuation of spectrum, and fixing of roaming charges, domestic leased charges, and International Private Leased Circuit Charges, besides inter-operator comparison of costs, revenues, and investments.
For failure by telecom operators to comply with tariff reporting requirements, TRAI has stipulated a penalty of Rs 10,000 for each day of delay (in the first seven days) and Rs 20,000 for each subsequent day of delay, subject to a maximum of Rs 5 lakh.
Currently, telecom tariffs are under forbearance, which means that operators are free to fix the rates, although they do have to adhere to TRAI's post-facto reporting timeline of seven working days.