Currently, all telcos pay 0.75% of their total revenues towards ADC, which is used to support state-owned BSNL's unviable fixedline operations in rural India. The phasing out of this levy will enable the industry to save about Rs 700 crore per annum.

Within hours of the Trai announcement, all telecom companies said that they would pass on the savings to their subscribers.

"We welcome the move. On our part, we are committed to passing on the benefit to our customers in an equitable manner and will announce it shortly," said a Vodafone Essar spokesperson. "As a leader in the telecom sector, we are committed to pass on the benefits of ADC relief to the customers, primarily in the rural areas as desired by Trai," a Bharti Airtel statement said. CDMA operator Tata Teleservices, too, said it will pass on the savings to its subscribers.

Speaking to ET, Trai chairman Nripendra Misra warned that the regulator would intervene and reduce tariffs if telcos failed to pass on the benefits to their subscribers. "We are waiting to see how much of these benefits that operators get from the ADC phase-out is passed on to the subscriber. If we feel that it is not being passed on in its entirety, we will fix tariffs," Mr Misra said.

In a bid to pacify the concerns of state-owned BSNL, which has warned that it would be forced to discontinue all its fixedline operations across rural India if the ADC levy were to be abolished, Trai has also recommended that the government provide a subsidy of Rs 2,000 crore per annum to BSNL for the next three years from the Universal Obligation Fund (USOF).