The Union Cabinet on Wednesday announced 100 per cent foreign direct investment (FDI) in the telecom sector through the automatic route as part of its comprehensive package for the telecom sector. Till date, up to 49 per cent was allowed through the automatic route and anything thereafter had to necessarily go through the government route.
In a big relief to the debt-strapped telcos – Vodafone Idea and Bharti Airtel, the Cabinet announced a moratorium of four years for the payment of the Aggregated Gross Revenue (AGR) dues.
These measures are expected to ease the cash flow issues being faced by some players in the industry. Peeyush Vaish, Partner & Telecom Sector Leader, Deloitte India, said: “The savings in the cash flows will boost the telecom sector and pave the way for 5G auctions in India.”
“The government is clearly committed to a speedy rollout of next-generation services in India through 100% FDI and also through self-declaration route for tower’s rollout,” Vaish added.
Nine structural reforms and five process reforms were approved by the cabinet for the telecom sector. “These reforms will change the framework of the entire telecom sector,” says Ashwini Vaishnaw.
Speaking about the newly approved telecom relief package, Raja Lahiri, Partner & Leader, Overseas Listings at Grant Thornton Bharat, said: “PLI scheme for telecom sector is an excellent move to boost the telecom sector in India, which is at a crucial juncture for the industry. Telecom is the “heart” of the digital revolution and India being the 2nd largest telecom market globally, with about 765 million broadband subscribers, will require additional investments to enhance telecom infrastructure and networks, including 5G. This will surely pave the way to attract investments in telecom equipment manufacturing & networking products and enhance domestic production as well. “
AGR definition rationalised
Further, Telecom Minister Ashwini Vaishnaw said the Union cabinet rationalised the Adjusted gross revenue (AGR) definition by excluding non-telecom revenue of telcos from payment of statutory levies. AGR refers to revenues that are considered for payment of statutory dues.
Speaking about the issue of AGR, Ashwini Vaishnaw said, “PM [Prime Minister Narendra] Modi took a bold decision over AGR (adjusted gross revenue) today. A decision has been taken to rationalise the definition of AGR. All non-telecom revenue will be taken out of the AGR.”
“Non-telecom revenue will be removed from the AGR definition. Now there will be annual compounding…,” he said.
The relief package aims to provide much-needed relaxation to telecom companies — Vodafone Idea, Reliance Jio, and Bharti Airtel.
The package included a four-year moratorium on AGR-related dues besides allowing telecom firms to surrender unused spectrum. Those availing it will have to pay interest on moratorium amount (at Marginal Cost of Funds based Lending Rate i.e. MCLR + 2%).
Vodafone Idea owes Rs 50,399.63 crore in statutory dues to the Central Government. AGR refers to revenues that are considered for payment of statutory dues.
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.
The telecom firms – Bharti Airtel, Vodafone Idea and Reliance Communications – owed nearly Rs 92,000 crore to the Centre as license fee and Rs 41,000 crore as spectrum usage fees, as per the telecom department.
Spectrum auction
Speaking about spectrum auction Vaishnaw said that for future auctions, the duration of the spectrum will be 30 yrs instead of 20 yrs. Also if someone takes spectrum & business conditions/technology changes then after a lock-in period of 10 yrs it can be surrendered by paying spectrum charge.
Spectrum sharing is also being completely allowed, it has been made completely free.
