Trai drops 1% turnover penalty proposal, caps telcos’ false reporting fine at ₹5 cr

The Telecom Regulatory Authority of India (Trai) has withdrawn a proposal to impose a penalty of up to 1% of turnover on service providers submitting inaccurate financial reports following objections from operators.

Instead, Trai opted for a cap-based, tranche-based penalty framework in its final regulations. ₹Depending on whether the violation is major or minor and the turnover of the company, a penalty of ₹ 5 crore may be imposed.

For operators with annual turnover over 200,000 ₹Penalty for submitting false report and hiding material facts is limited to ₹5,000 crore ₹1 crore and maximum for minor violations ₹5 crore for major violations. For service providers with the highest annual turnover ₹500 croreThe limit of the penalty is as follows: ₹25 lakh for minor violations and ₹50 lakhs for the big ones.

For operators with annual turnover over 200,000 ₹500 crore and up to ₹5,000 crore is the limit of penalty ₹50 lakh for minor violations and ₹1 crore for big ones.

Changes to the provisions regarding financial incentives under the Telecommunications Tariff Order, 1999 and Reporting System for Accounting Separation Arrangements, 2016 were announced by Trai on Tuesday.

The regulator relies on operators’ applications to verify their revenues, calculate regulatory charges such as license fees and spectrum usage charges, and intervene to ensure fair competition and protect consumer interests.

The decision to remove penalties as a percentage of turnover was a relief for telecom operators who wanted the proposal to be withdrawn completely. According to operators, no other sectoral regulator in India imposes turnover-related penalties for routine reporting delays. They told Trai that regulators were instead imposing fixed nominal penalties to encourage compliance.

“In case of misreporting, the nature of non-compliance must first be assessed on a case-by-case basis. This analysis can be done by taking into account factors such as intent, materiality, impact on regulation or competition and the service provider’s track record of compliance,” Trai said in a notification on the updated Accounting Separation (Amendment) Regulations (ASR).

Types of violations

According to Trai, unintentional errors such as typos, formatting issues and minor calculation inconsistencies are often minor oversights that do not change the intended meaning but may need to be corrected for accuracy. In contrast, intentional omission or misrepresentation of important information can impact decision-making and regulatory processes and should be considered serious violations.

“This will eliminate not only unintentional or willful negligence, but also violations by larger operators, which may have a broader regulatory and cost impact compared to smaller entities,” Trai said.

“Separating the penalty from percentage of turnover and introducing a fixed structure will benefit operators. The earlier proposal would have created a huge compliance burden on operators and would have been difficult to implement,” said Satya N. Gupta, former principal advisor to Trai.

However, Gupta said the chances of operators violating the ASR are generally small because the financial reports submitted have been audited.

According to the amended ASR regulations, the proposed penalty if the telecom operator fails to report ₹25,000 for each day of delay in the first seven days. If the default continues for more than seven days, operators will be liable for an additional payment ₹40,000 for each subsequent day of delay, subject to maximum delay ₹10 lakhs.

Recommended daily penalty for continued violations in consecutive years: ₹50,000-75,000, ceiling ₹25 lakhs. Misrepresentation or reporting of false financial information is subject to maximum penalties in this case: ₹5 crore.

Of course, the operators also wanted the regulator to eliminate the system of submitting financial reports, since the audited financial statements already contained such information. However, the regulator wanted detailed financial and non-financial information for analysis and decision-making purposes.

In October, the telecommunications regulator proposed higher fines under amendments to two regulations – the Draft Telecoms Tariff Order (72nd Amendment) and the Reporting System for Accounting Separation (Amendment) Regulations, 2025. The change in tariff order mandates that new tariff plans or changes in existing tariffs be notified to Trai within seven working days of implementation. The regulator reviews the plans and intervenes if a change is anti-competitive, predatory or harmful to consumer interests.

higher penalties

According to the amended regulations, harsher penalties are foreseen starting from 2000 if service providers do not notify their new plans or prices in a timely manner. ₹10,000 per day and doubling for the first week of the delay ₹From now on, 20,000 per day, at most ₹500,000.

During the consultation process, telcos had argued that increased financial penalties for delays in reporting tariff plans and administrative compliances were contrary to the government’s broader objectives of promoting ease of doing business, including simplifying compliance and decriminalizing minor procedural errors.

Trai said a predictable, transparent and proportionate enforcement framework increases regulatory certainty and ultimately supports ease of doing business.

“The financial deterrent framework is not intended to be revenue-generating, but is merely designed to encourage timely compliance and ensure regulatory oversight among service providers,” the regulator said.