Budget 2026–27: Telcos seek relief, space wants incentives

As the Union Budget 2026–27 approaches, telecom operators and the private space industry have urged the government to treat connectivity as strategic national infrastructure—spanning fibre networks and ground-based mobile radios, as well as satellites and ground systems in the orbit-to-earth layers.

In its budget expectations 2026 note for technology, media, and telecom, Deloitte India points out that the Union Budget for 2026–27 comes at a time of “sharp global trade tensions” and a revived debate around India’s tariff profile, making cost competitiveness a key budget theme.

On its part, the Cellular Operators Association of India (COAI) has sought relief from levies and interventions under the Goods and Services Tax (GST) to ease cash blockages and improve telcos’ investment capacity for next-generation rollouts. The Indian Space Association (ISpA), on the other hand, has called for infrastructure classification, fiscal incentives, and government procurement reforms to accelerate private sector scale-up and position India among the top spacefaring nations.

Together, the two sets of submissions signal a shift: connectivity is no longer a single-sector issue, but an integrated infrastructure stack supporting governance, finance, defence, disaster response, and enterprise digitisation. At the same time, they expose policy tensions—especially on GST design, fiscal headroom, and the role of the state in demand creation.

Telecom Seeks Levy Relief to Fund Network Rollout

COAI has asked for a reduction of the licence fee from 3% of adjusted gross revenue (AGR) to 0.5–1%, and recommended pausing the Digital Bharat Nidhi contribution until the unused corpus is fully utilised by the Department of Telecommunications (DoT).

“COAI, as the industry body for telecom operators, has been advocating for measures that would reduce the sector’s financial burden, thereby enabling further expansion and rollout of next-generation connectivity to achieve the goal of a Viksit Bharat,” said Lt Gen Dr SP Kochhar, Director General, COAI.

According to Deloitte, the budget strategy should focus on “improving cost competitiveness” through rationalisation of input tariffs and enhanced trade facilitation measures, reinforcing the industry’s broader case for reducing structural cost burdens.

COAI said the licence fee, a combination of licence charge and the Digital Bharat Nidhi contribution, “is a huge financial burden for the Licensed Telcos”, and requested that the licence fee be reduced to 0.5–1% “just to cover the administrative costs”.

Impact: Levy relief can strengthen operator cash flows and improve investment headroom for 5G densification, fibre expansion, and enterprise-grade network upgrades. The trade-off is lower government receipts in the near term, at a time when other strategic sectors are seeking larger incentive outlays.

Space Seeks Infra Status and Lower Cost Capital

ISpA has urged formal recognition of the space sector as ‘critical infrastructure’, including ‘space and satellite Infrastructure’ under the Harmonised Master List of Infrastructure Sub-Sectors to unlock long-term, low-cost finance.

“As India stands at the threshold of becoming a global space power, with private sector participation enabled under the Space Policy 2023, the next critical step is fiscal, regulatory, and structural support to accelerate growth and position India among the top three spacefaring nations,” said Lt Gen AK Bhatt, Director General, ISpA, in the submission.

Bhatt also flagged financing barriers for long-gestation projects, noting: “Recognising space infrastructure as a distinct infrastructure sub-sector is essential to unlock scale, private investment, and global competitiveness.”

Similarly, the Deloitte document noted that “tax, GST and duty incentives, combined with low-cost financing”, can make large-scale infrastructure projects “more financially viable and attractive”, helping shorten payback and unlock private capex—aligning with ISpA’s case for infrastructure-grade financing.

Impact: Infrastructure status can de-risk long-gestation projects, expand institutional financing, and make private sector scale viable across satellites, launch systems, and ground infrastructure. For telecom, it strengthens the feasibility of satellite layers for backhaul, redundancy, remote coverage, and disaster recovery.

GST Reforms: Shared Pain Point, Split Solutions

Both telecom and space highlight GST design as a constraint—but propose different solutions.

COAI has requested GST exemption on regulatory payments such as licence fee, Spectrum Usage Charges (SUC), and spectrum assigned under auction. Alternatively, it suggested reducing the GST on spectrum-related payments under reverse charge from 18% to 5%, and allowing the use of accumulated Input Tax Credit (ITC) to discharge GST under reverse charge to reduce cash outflow.

“Special benefit may be provided to telecom operators in GST by way of exemption of GST on regulatory payments of LF, SUC and spectrum assigned under auction,” COAI stated in its Budget 2026–27 submission.

ISpA has taken the opposite position, arguing that exemptions block ITC and raise costs. “Current GST exemptions inadvertently block ITC, raising costs for domestic missions and distorting competitiveness,” said Bhatt, recommending that satellites, launch vehicles, and launch services be classified as “Zero-Rated Supplies, not exempt supplies”.

Meanwhile, Deloitte also backed an ITC-led approach for infrastructure buildouts, recommending “full GST Input Tax Credit refunds” on capital assets—reinforcing ISpA’s argument that exemptions can block credits and raise effective costs.

Impact: This is the clearest contradiction. Telecom’s exemption-led relief may ease immediate cash constraints, while the space sector is pushing for a GST architecture that preserves ITC flow through zero-rating and refunds.

A budget solution that relies on exemptions risks creating asymmetry unless the GST design simultaneously protects ITC availability for long-cycle space manufacturing.

Procurement Push Signals a Different State Role

ISpA has placed demand creation at the centre of its proposal, recommending that at least 50% of government procurement for space-based services, hardware, and missions be sourced from Indian private entities, under the oversight of Indian National Space Promotion and Authorisation Centre (IN-SPACe).

“Predictable demand is the single most powerful driver of private investment,” Bhatt said, adding that “a formal procurement mandate will anchor industry growth while allowing ISRO to focus on strategic and exploratory missions.”

COAI’s note does not seek procurement mandates. Its model is burden reduction—levy relief and GST reforms—to enable market-led rollout funded through improved cash flows and investment headroom.

Impact: This presents a policy instinct tension: space seeks government as an anchor buyer to scale domestic capability, while telecom seeks fiscal relief so operators invest independently. Budget choices here will determine whether India’s connectivity-industrial policy becomes more procurement-driven or relief-driven.

Satellite Data Controls May Shape Satcom Scale

ISpA has recommended empanelment and secure-access frameworks for satellite data as its use expands across governance and commercial applications. It has suggested procurement only from empanelled Indian companies, geo-tagging of space entities and authorised users, restricting access to sensitive satellite data, and linking incentive eligibility to compliance.

“With growing use of satellite-derived data in governance and commercial applications, standardisation and security are critical,” ISpA said, proposing “a structured procurement and access framework” to support the domestic industry while safeguarding national interests.

Impact: Stronger access controls can improve national security and reduce the risk of misuse as satellite-derived services scale. However, as telecom and satcom converge into hybrid operating models, controls that are not designed for speed and simplicity could add compliance friction for service providers and slow deployment.

One Infrastructure Stack, Two Policy Instincts

Telecom and space are converging into a single connectivity stack—where fibre and radio networks form the base, and satellites increasingly add redundancy, backhaul, remote reach, and mission-grade resilience. In that sense, COAI and ISpA are aligned in positioning connectivity as national infrastructure rather than merely a service-sector output.

Yet the prescriptions differ. Telecom’s approach is relief-led: cut levies, rationalise GST burden points, and recalibrate spectrum economics to release investment headroom.

Space is capability-led: recognise infrastructure, lower capital cost, mandate procurement participation, rationalise taxes through ITC-friendly design, and strengthen regulatory certainty to crowd in private investment.

For Budget 2026–27, the challenge is to balance these without distortion. GST is the immediate example, but the same trade-off applies across fiscal headroom, incentives, and regulatory design—especially as telecom networks increasingly absorb satcom capabilities into mainstream connectivity planning.