Cabinet approves relief package for telecom sector: Key points to note

From allowing a four-year break for companies from paying statutory dues to 100 per cent FDI via automatic route, here's a look at the key decisions taken by the Cabinet on telecom sector.

In a bid to provide relief to the stressed telecom sector, the government on Wednesday announced a crucial relief package with a string of reforms which is expected to help the struggling incumbent operators such as Vodafone Idea (Vi) and Bharti Airtel.

The move comes just weeks after billionaire Kumar Mangalam Birla resigned as chairman of Vodafone Idea (Vi) on August 4.

Addressing the media after the Cabinet meeting, Telecom Minister Ashwini Vaishnaw said that nine structural reforms of the stressed sector were approved in the meeting. These are aimed at fostering healthy competition in the sector to provide choice to customers and pave the way for the entry of new players.

We take a look at all the key relief measures announced in today’s briefing:

1. Four-year moratorium on payment of statutory dues by telcos

The Cabinet approved a four-year moratorium on payment of the spectrum dues of telecom service providers (TSPs). However, those TSPs opting for the moratorium will be required to pay interest on the amount availed under the benefit.

“The telecom relief package is revenue neutral for the government,” the minister said.

2. Rationalisation of Adjusted Gross Revenue (AGR)

The government has excluded non-telecom revenues from the definition of AGR prospectively. Telecom companies have to pay a pre-fixed percentage of AGR to the government as statutory levies but this will apply prospectively.

“All non-telecom revenue will be removed from the AGR,” the minister said while addressing the media.

3. 100% FDI via automatic route approved

The Cabinet allowed 100 per cent foreign direct investment (FDI) with safeguards in the telecom sector under the automatic route.

Till now, only 49 per cent was allowed via automatic route and anything above that had to necessarily go through the government route.

These measures are likely to ease the cash flow concerns being faced by some telecom players in the industry.

4. Interest rates rationalized/ penalties removed

The interest which is compounded monthly on the spectrum usage charges (SUC) will now be compounded annually and also the interest rate will be lowed, based on SBI’s MCLR + 2 per cent instead of MCLR plus 4 per cent. Additionally, the penalty and interest on penalty stand removed.

5. Spectrum tenure hiked to 30 years

The future spectrum auctions will be done for a period of 30 years instead of the current 20 years. Apart from this, a telco will be allowed to surrender its spectrum after completing a 10-year lock-in period from the date of purchase.

6. Spectrum sharing made free

Spectrum sharing is being encouraged and the additional SUC of 0.5 per cent for spectrum sharing is removed.

7. Fixed calendar for spectrum auction

Spectrum auctions will be normally held in the last quarter of every financial year.

8. KYC reforms

App-based self-KYC will be permitted and the e-KYC rate revised to only Re 1. Switching from prepaid to postpaid and vice-versa will not require a fresh KYC.

9. Customer Acquisition Forms to be stored digitally

Paper Customer Acquisition Forms (CAF) will be replaced by digital storage of data. Nearly 300-400 crore paper CAFs lying in various warehouses of TSPs will not be required. Warehouse audit of CAF will not be required.

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