India announces relief package for troubled telecom sector
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India announces relief package for troubled telecom sector

New Delhi, 16-September-2021, By IBW Team

India announces relief package for troubled telecom sector

In what is being termed as big bang reforms, India’s federal government on Wednesday approved a relief package for the financially beleaguered telecom sector that 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.

The package could come as a big relief for British telecom giant Vodafone’s Indian unit, which operates under the brand name VodafoneIdea, in the face of falling subscribers and revenues on one hand and a huge standing payout to the government in terms of dues.

Briefing reporters on the decisions taken by the Union Cabinet, Telecom Minister Ashwini Vaishnav said nine structural reforms for the telecom sector were approved, a New Delhi datelined report by PTI stated.

The definition of AGR (adjusted gross revenue), which had been a major reason for stress in the sector, has been rationalised by excluding non-telecom revenue of telecom companies.

AGR refers to revenues that are considered for payment of statutory dues.

The minister said that 100 per cent FDI (Foreign Direct Investment) in telecom via the automatic route was approved by the Cabinet.

Among the measures approved were a four-year moratorium on unpaid dues, AGR and spectrum dues, he said.

These measures are expected to ease the cash flow issues being faced by some players in the industry.

According to The Hindu  newspaper, some of the highlights of the package include the following:

  • Non-telecom revenue to be excluded on prospective basis from definition of Adjusted Gross Revenue.
  • Huge reduction in bank guarantee requirements (80%) against License Fee (LF) and other similar levies.
  • No requirements for multiple bank guarantees in different licenced service areas (LSAs) regions in the country.
  • Interest rates rationalized/Penalties removed.
  • In future auctions of spectrums, tenure of spectrum increased from 20 to 30 years.
  • Surrender of spectrum will be permitted after 10 years for spectrum acquired in the future auctions.
  • No spectrum usage charge (SUC) for spectrum acquired in future spectrum auctions.
  • Additional SUC of 0.5 percent for spectrum sharing removed
  • 100 percent foreign direct investment (FDI) under automatic route permitted in telecom sector.
  • Spectrum auctions to be normally held in the last quarter of every financial year.
  • Cumbersome requirement of licenses under 1953 Customs Notification for wireless equipment replaced with self-declaration.
  • App-based self-KYC (know your customer data) permitted. E-KYC rate revised to only Re.1.
  • Shifting from pre-paid to post-paid and vice-versa will not require fresh KYC.
  • Paper customer acquisition forms (CAF) will be replaced by digital storage of data.

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