Telcos can pay for spectrum in 16 years: Telecom Commission
Telecom Commission extends duration for spectrum payments to 16 years from 10 years , lowers telcos’ interest burden, in line with recommendations of inter-ministerial group
New Delhi: The Telecom Commission on Friday offered welcome relief to debt-laden telecom firms by giving them six more years to pay for spectrum purchases and lowered their interest burden.
India’s apex telecom policymaking body extended the duration for spectrum payments to 16 years from 10 years, in line with the recommendation of an inter-ministerial group (IMG).
The Telecom Commission also enabled lower interest rates on unpaid dues of telecom companies by at least two percentage points. This is being done by replacing the prime lending rate (PLR) with marginal cost of fund-based lending rate (MCLR) to calculate the interest owed by telecom operators for delayed payment of licence fee and spectrum usage charges, said a person with direct knowledge of the matter.
The replacement of PLR with MCLR was also recommended by the IMG to ease the financial stress of telecom firms. The group was set up in May to study the problem of the sector and suggest solutions.
“The move certainly helps the industry as it will improve the cash flow in the near term. But we are hoping the Commission addresses a lot of issues that are affecting the sector such as spectrum usage charge and AGR,” said Rajan Mathews, director general of Cellular Operators Association of India.
AGR is short for adjusted gross revenue in spectrum trading. Telcos pay roughly 8% of AGR as licence fee and an additional 3% as spectrum usage charges, which are the two major sources of government revenue from the industry.
Mint reported on Friday that the Telecom Commission was expected to offer interim, piecemeal sops to debt-laden telecom firms, pending a comprehensive relief package that’s still some distance away.
On some matters such as calculation of AGR in spectrum trading, the Commission is expected to seek legal opinion from the law ministry, which will further extend the process of putting together a comprehensive package, Mint reported.
The IMG recommended to the commission that instead of taking into account the full present value of the spectrum for calculating AGR during the sale or purchase of spectrum, telecom companies should be allowed to pay only the “differential”, which is the difference between the current value of the radio waves and the rate at which spectrum was bought in the first instance.
New entrant Reliance Jio Infocomm Ltd has opposed any relief being extended to the sector; the incumbents have lobbied hard to push their demands, citing fierce price competition from the company led by Mukesh Ambani and their own debt, which was Rs4.5 trillion at the end of 31 March. They owe close to Rs3 trillion in spectrum payment charges, according to industry estimates.
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