2 min read.Updated: 15 Sep 2021, 04:43 PM ISTMeghna Sen
In big bang reforms, the Union Cabinet has approved a crucial relief package for the cash-strapped telecom firms that includes a four-year moratorium on payment of statutory dues by telecom companies as well as allowing 100% FDI through the automatic route
In a move to provide relief to companies such as Vodafone Idea that have to pay thousands of crores in unprovisioned past statutory dues, the Union Cabinet has approved a crucial package for the telecom sector.
The wide set of measures proposed entail reforms for the ailing sector by way of granting moratorium on unpaid dues, redefining Adjusted Gross Revenue (AGR) prospectively and cut in Spectrum Usage Charges.
Telecom Minister Ashwini Vaishnaw briefed the media on decisions taken by the Union Cabinet at its meeting held today. Vaishnav said nine structural reforms for the telecom sector were approved.
Here is your 10-point cheat sheet to this big story:
1. The relief package provided much-needed relaxation to telecom companies -- Vodafone Idea, Reliance Jio and Bharti Airtel. “These are expected to protect and generate employment opportunities, promote healthy competition, protect interests of consumers, infuse liquidity, encourage investment and reduce regulatory burden on Telecom Service Providers (TSPs)," the Cabinet said.
2. The package primarily provided relief to Vodafone Idea, which is on the brink of going bankrupt. A moratorium on AGR-related dues will offer space to the cash-strapped firm to improve its business and clear dues over a longer period.
3. The package, which includes one of the most important decisions approved by the Cabinet as part of the telecom relief package, is the moratorium of dues. A four-year moratorium has been approved on dues of telecom service providers (TSPs).
However, TSPs who want to opt for the moratorium will have to pay interest on the amount availed under the benefit.
4. The most crucial part of the measures is related to the contentious issue of AGR. The definition of AGR has been changed to exclude non-telecom revenue. “All non-telecom revenue will be removed from AGR," Vaishnaw said.
Another important announcement was related to rationalising spectrum charges that telecom firms have to bear.
The monthly compounding of interest on spectrum usage charges will be replaced by annual compounding and the interest rate will come down, based on the formula MCLR + 2%.
5. The Centre has also announced 100% foreign direct investment (FDI) in the telecom sector through the automatic route as part of its comprehensive package for the telecom sector.
6. So far, up to 49% was allowed through the automatic route and anything thereafter had to necessarily go through the government route. These measures are expected to ease the cash flow issues being faced by some players in the industry.
7. The package is also expected to boost 4G proliferation, infuse liquidity and create an enabling environment for investment in 5G networks.
8. The telecom sector was hit by the apex court ruling in 2020, making it mandatory for Bharti Airtel and Vodafone Idea to pay their pending dues to the Central Government.
9. The telecom firms – Bharti Airtel, Vodafone Idea and Reliance Communications – owed nearly ₹92,000 crore to the Centre as license fee and ₹41,000 crore as spectrum usage fees, as per the telecom department.
10. Former chairman of Vodafone Idea, Kumar Mangalam Birla, earlier in July wrote to cabinet secretary Rajiv Gauba, offering his stake in Vodafone Idea to the Centre or any firm approved by the government for free. And last month, Birla resigned as the chairman of Vodafone Idea.
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