The communications ministry is considering a proposal to allow the Telecom Regulatory Authority of India retain 2 per cent of the annual licence fees collected from service providers, thus ensuring greater financial independence for the telecom regulator.

At present, Trai is dependent on the government for its funds, which are allocated from the budgetary support.

"We are moving towards a regime whereby 2 per cent of annual licence fees collected from telecom operators will be earmarked for Trai. This will make the regulator stronger," top government sources told Business Standard.

At present, 5 per cent of the revenue collected from telecom service providers is diverted for universal services obligation. If the communications ministry's plan is accepted, it would mean 7 per cent of the licence fees will go into different funds.

Cellular and basic operators currently pay 12 per cent, 10 per cent and 8 per cent of their annual revenues depending on the circle they operate in.

Trai had earlier written to the government for a separate cadre and financial independence. The proposal had not found favour with the finance ministry. However, the ministry of communication is backing the proposal now, sources said.

The government's move is in line with international practices wherein regulators are funded through the licence fee collected from operators. The Insurance Regulatory and Development Authority and Securities and Exchange Board of India are also funded through fees collected from companies and intermediaries.

The Budget for 2003-04 had allocated Rs 1.67 crore (Rs 17 million) to Trai. If the latest proposal is accepted, the regulator would get nearly Rs 4 crore (Rs 40 million) based on the total licence fees collected this year.

Financial teeth

• At present, Trai is dependent on the government for its funds.
• If communications ministry's proposal is accepted, the regulator would get nearly Rs 4 crore based on the total licence fees collected this year.
• Similar proposal by Trai had earlier been rejected by finance ministry.