Cabinet Approves Telecom Reforms with 100% FDI Through Automatic Route
New Delhi, September 15: In what are being hailed as 'big bang reforms', the Union Cabinet on Wednesday approved a relief package for the telecom sector that includes a four-year moratorium on payment of statutory dues by telecom companies as well as allowing 100% foreign investment through the automatic route. With fears of a duopoly in the sector abounding, the move seems to be aimed at assuaging the rot that has set in.
Briefing reporters on the decisions taken by the Cabinet, Telecom Minister Ashwini Vaishnav said nine structural reforms for the telecom sector were approved.
The definition of AGR, which had been a major reason for the 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% FDI 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. According to industry bodies, the measures are expected to ease the cash flow issues being faced by some players in the industry.
According to a report in Livemint, the package essentially provided much-needed relief to the cash-strapped Vodafone Idea which owes about Rs 50,399 crore to the Centre.
There was 49% FDI allowed in the sector through the automatic route and the rest was through the government. The measures are said to be put in place to ease cash flows and boost 4G services across the country and investment in 5G services, reports say.
The move comes six weeks after billionaire Kumar Mangalam Birla resigned as chairman of beleaguered Vodafone Idea Ltd (VIL) on August 4.
VIL's August 4 intimation about the top-level changes had come on a day stock exchanges seeking clarification from the company over the widely reported June 7 letter of Birla to the Cabinet Secretary offering his stake in Vodafone Idea to the government or any company approved by the government for free.
VIL, which was created from the merger of British telecom giant Vodafone's India unit and Birla's Idea Cellular Ltd, has to pay about Rs 50,399.63 crore in statutory dues dating back over past many years.
Some within the government are said to have questioned the use of taxpayer money to bailout telcos who had failed to provision for statutory dues during the pendency of legal cases.
Vodafone Idea, in its annual report, has flagged the industry's "unsustainable financial duress" and hoped that the government would provide the necessary support to address "all structural issues" faced by the sector.
The total gross debt (excluding lease liabilities and including interest accrued but not due) as of June 30, 2021 of VIL stood at Rs 1,91,590 crore, comprising of deferred spectrum payment obligations of Rs 1,06,010 crore and adjusted gross revenue (AGR) liability of Rs 62,180 crore that are due to the government.
Industry analysts too have been sounding an alarm over the risks of the Indian telecom market turning into a duopoly.
Apex association COAI recently made a strong pitch for cut in levies, doubling tenure of auctioned radiowave holdings, along with 7-10 year moratorium for spectrum payments, to address viability concerns of the sector.
Last month, Sunil Mittal, Chairman of India's second largest telecom company Bharti Airtel, had made a passionate pitch for hike in tariffs and a cut in government levies to save the industry.
Mittal had said while 35 per cent of industry's revenue goes to the government in taxes and levies, telcos are loaded with an extraordinary debt of AGR (Adjusted Gross Revenue) dues and spectrum payments.
Levies are far too high in the telecom sector, Mittal had said adding that "levies and load on industry needs to be brought down" for India to truly realise its digital vision.
With PTI Inputs
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