Big-bang reforms and sops: Centre allows 100% FDI in telecom sector

Telcos have got four-year moratorium on spectrum dues.

The relaxations would bring relief to companies such as cash-starved Vodafone Idea.

The Union Cabinet on Wednesday cleared a relief package for the telecom sector, allowing 100 per cent foreign direct investment (FDI) through the automatic route. It also provided moratorium on payment of spectrum dues by telcos.

“100 per cent FDI in telecom via the automatic route was approved by the cabinet,” telecom minister Ashwini Vaishnav told the media. So far, up to 49 per cent investment was allowed through the automatic route.

The 100 per cent FDI will not be applicable to investors from countries that share a land border with India, such as China and Pakistan, because of FDI regulations imposed by the government in April 2020, which aim to thwart any hostile takeover of domestic businesses.
Moratorium on dues

The relief measures would be for the stressed sector and “not for a specific company”, sources in the telecom ministry were quoted as saying by The Indian Express.

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The package allows relaxation to telcos on payment of long-outstanding dues, including a four-year moratorium on spectrum installment which is due in April 2022. There could also be a reduction in spectrum usage charges (SUC) and licence fees, reports in the media said.

The relaxations would bring relief to companies such as cash-starved Vodafone Idea, that owe a huge amount to the government in statutory dues. Vodafone Idea has to pay about Rs 50,399.63 crore in such dues.

The package will also likely pave the way for reforms in the telecom sector such as redefining Adjusted Gross Revenue prospectively. The spectrum holding period, currently 20 years, maybe extended too.

According to an NDTV report, the relief measures consist of a component where telecom companies may get an option to convert interest on their spectrum dues amounting to four-year moratorium, into government equity.

Telecom players have long complained that a major chunk of their revenue goes into paying taxes to the government, with Airtel chairman Sunil Bharti Mittal even seeking government help for the same.

Vodafone Idea and Bharti Airtel have been asking the government for reduction in the levies paid by telcos such as license fee and spectrum usage charges, and waiver on reduction of interest rates for dues to be paid to the Department of Telecommunications.

Vodafone Idea’s Kumar Mangalam Birla had even said that if the government did not provide relief measures, his company would have to shut. In August this year, he stepped down from the debt-laden company.

Also read: Defence, security included as govt amends telecom licensing terms

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