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Shot in the arm for telecom sector as Centre approves structural, procedural reforms

Telecom companies have also got a liquidity push

INDIA-ECONOMY-TELECOM-VODAFONE-STOCKS (File) Representational image | AFP

The Centre has approved a series of key telecom reforms, including allowing 100 per cent FDI, aimed at propelling the sector to adopt newer technologies, bringing more players into the market, and be future-ready. These reforms have two components: nine structural reforms and five procedural reforms.

The telecom companies have also got a liquidity push as the government put a moratorium of four years in annual payments of dues arising out of the Adjusted Gross Revenue (AGR) judgement. The companies will have to pay all the dues in a six-year period if they take the deferment of four years starting from October 1.

Telecom Minister Ashwini Vaishnaw clarified that the government will not forgo any revenue as the companies will pay the dues in equal instalments in six years, while an interest of two per cent will be charged for the due during the deferment period. This move is expected to help cash-strapped Vodafone-Idea and Airtel. The government has given an option to the telecom service providers to pay the interest amount arising due to the said deferment of payment by way of equity.

Last year, the apex court had asked telecom companies to clear their AGR dues of around Rs 1.43 lakh crore in 10 years. While, Vodafone-Idea has already paid the government Rs 7,854 crore in dues, it still owes over Rs 50,000 crore. Airtel has paid dues worth Rs 18,000 crore, and owes Rs 25,976 crore more.

Among the nine structural reforms, the Union cabinet approved rationalisation of AGR where non-telecom revenue will be excluded on prospective basis from the definition of AGR; huge reduction in bank guarantee (BG) requirements (80 per cent) against license fee (LF) and other similar levies. There are no requirements for multiple BGs in different licenced service areas (LSAs) in the country, instead, one BG would be enough. For auctions held henceforth, no BGs will be required to secure instalment payments.

Briefing the media about the cabinet decisions, the telecom minister said the in the area of spectrum tenure for the future auctions, tenure of spectrum has been increased from current 20 to 30 years. The surrender of spectrum will be permitted after 10 years for spectrum acquired in the future auctions, and there will be no spectrum usage charge (SUC) for spectrum acquired in future spectrum auctions.

The government has also allowed spectrum sharing and 100 per cent Foreign Direct Investment (FDI) under automatic route permitted in telecom sector. All security safeguards will apply as companies from Pakistan and China will not be able to participate.

“These reforms 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. The package is also expected to boost 4G proliferation, infuse liquidity and create an enabling environment for investment in 5G networks,” the minister said.

Vaishnaw started the briefing by acknowledging the performance of the telecom sector in meeting COVID-19 challenges posed by huge surge in data consumption, online education, work from home, interpersonal connect through social media and virtual meetings.

In case of the procedural reforms, the government said the KYC norms have been eased. Self-KYC (App based) has been permitted, and E-KYC rate has been revised to mere one rupee. Shifting from prepaid to post-paid and vice-versa will not require fresh KYC.

The minister said paper customer acquisition forms (CAF) will be replaced by digital storage of data. Nearly 300-400 crore paper CAFs lying in various warehouses of service providers will not be required. Warehouse audit of CAF too will not be required.

In other reforms, the auction calendar has been scheduled. They will be held in the last quarter of every financial year, while cumbersome requirement of licenses under 1953 Customs Notification for wireless equipment has been removed.

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