Posted in economics

Relief Package for Telecom Industry

Dr Debesh Roy, Chairman, InsPIRE

Government of India on 15 September 2021 announced a major relief package for telecom companies, overburdened with regulatory dues. The package would also attract the much needed foreign investment and encourage competition in the sector.

The announcement includes a major relief for the telecom operators by way of a four-year moratorium on adjusted gross revenue (AGR) dues, and the option for the government to convert dues into equity after the moratorium period expires. Also, non-telecom revenue will be removed from AGR.  

It is also important that the government has taken the decision to protect government revenue by charging interest on the companies availing the moratorium. The interest rate charged will be marginal cost of funds based lending rate (MCLR) plus 2%., which is quite reasonable, and the penalty has been eliminated. The moratorium is expected to resolve the cash flow problem of the telecom companies, and also the improved cash flow can be utilised for investing in the upgradation of technology. 

The relief package includes the following measures to give the much needed boost to the telecom sector:

  • 100% FDI in the sector through the automatic route, with safeguards. Presently 100% FDI is allowed, but only 49% is in the automatic route.
  • About 80% reduction in bank guarantee requirements against licence fee and other similar levies.
  • Interest rates are to be rationalised, and penalties are to be removed with effect from 01 October 2021.
  • No bank guarantees will be required to secure instalment payments for future auctions.
  • In future auctions, tenure of spectrum has been increased from 20 to 30 years.
  • Spectrum usage charge (SUC) would not be levied for spectrum acquired in future auctions.
  • No additional SUC of 0.5% would be charges for spectrum sharing.

Author:

Institute for Pioneering Insightful Research and Edutech Private Limited

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s