In what comes as a huge relief for the telecom sector, the Modi government has approved a relief package for the sector, which includes a four-year moratorium on payment of statutory dues by telecom companies as well as allowing 100 per cent foreign investment through the automatic route.
This announcement, particularly comes as a lifesaver to companies like Vodafone Idea which had to pay thousands of crores to the Centre in unprovisioned past statutory dues. The reforms have come weeks after billionaire Kumar Mangalam Birla resigned as chairman of Vodafone Idea (Vi) on August 4.
Meanwhile, Sunil Mittal-led Bharti Airtel has paid dues worth Rs 18,000 crore and still owes Rs 25,976 crore to the government
Briefing reporters on the decisions taken by the Cabinet, Telecom Minister Ashwini Vaishnav said nine structural reforms for the telecom sector were approved. The definition of Adjusted Gross Revenue (AGR), which had been a major reason for the stress in the sector, has now been rationalised by excluding non-telecom revenue of telecom companies. AGR refers to revenues that are considered for payment of statutory dues.
"Cabinet has approved a 4-year moratorium on payment of statutory dues by telcos. Telcos to pay interest on moratorium period," the Telecom Minister said.
'The reforms are deep and broad. They are structural. These reforms will bring in change today, tomorrow and in the future. I do not like to put a number on the package as it is revenue-neutral for the government,” the minister said. The moratorium will not impact the government's revenue, the minister assured.
The following are the new relief measures that have been introduced by the Centre:
- Four-year moratorium on payment of statutory dues by telecom companies, both AGR and spectrum charges.
- Definition of AGR has been rationalised by excluding non-telecom revenue of telecom companies.
- 100 per cent FDI (foreign direct investment) in telecom via the automatic route has been approved.
- The regime of heavy interest, penalty and interest on penalty on payment of licence fees, spectrum charges and all kinds of charges has been rationalised.
- The Centre will do annual compounding of interest instead of the monthly compounding.
- Spectrum auction will be done for 30 years, instead of 20 years. After completing 10-years lock-in period, the buyer will have the option to surrender by paying surrender charges.
- Spectrum sharing has been completely allowed and made free.
Image courtesy: PTI