Moratorium on telecom woes

Big Bang Boost

- Rationalises AGR definition

- Non-telecom revenue taken out of AGR

- 100% FDI in automatic route

- Telecos can surrender spectrum after 10yrs

- Interest penalty compounded annually as against current monthly method

New Delhi: The Union Cabinet on Wednesday approved a big-bang relief package for the stressed telecom sector that includes a four-year break for companies from paying statutory dues, permission to share scarce airwaves, change in the definition of revenue on which levies are paid and 100 per cent foreign investment through the automatic route.

The measures, aimed at providing relief to companies such as Vodafone Idea that have to pay thousands of crores in unprovisioned past statutory dues, also include the scrapping of Spectrum Usage Charge (SUC) for airwaves acquired in future spectrum auctions. Among procedural reforms, shifting from prepaid to post-paid connections and vice-versa will not require fresh KYC.

Briefing reporters on the decisions taken by the Union Cabinet headed by Prime Minister Narendra Modi, Telecom Minister Ashwini Vaishnaw said nine structural reforms for the telecom sector have been approved that are aimed at fostering healthy competition in the sector to provide choice to customers and pave the way for the entry of new players. The government excluded non-telecom revenues from the definition of Adjusted Gross Revenue (AGR) prospectively. Telecom companies have to pay a pre-fixed percentage of AGR to the government as statutory levies but this will apply prospectively. The inclusion of non-telecom revenues had led to thousands of crores of dues piling up on companies like Vodafone Idea, pushing them to the verge of bankruptcy.

For the past dues, the Cabinet allowed a moratorium or deferment of up to four years in annual payments. But the telecom companies will have to pay a small interest during the moratorium period. Also, the government will have an option to convert the due amount pertaining to the deferred payment into equity at the end of the moratorium/deferment period. A moratorium on AGR-related dues will offer space to the cash-strapped firms to improve its business and clear dues over a longer period. "The telecom relief package is revenue neutral for the government," the minister said. The Cabinet also allowed 100 per cent FDI (Foreign Direct Investment) in the sector under the automatic route.

So far, up to 49 per cent was allowed through the automatic route and anything thereafter had to necessarily go through the government route. The latest measures are expected to ease the cash flow issues being faced by some players in the industry. Spectrum user charges have been rationalised and there will be now an annual compounding of rates. Spectrum can now be surrendered as well as shared. Spectrum auction calendar will be created while tower set up process is now simplified on the basis of self-approval. Rationalising spectrum charges, the Cabinet replaced monthly compounding of interest on spectrum usage charges with annual compounding as well as brought down the interest rate.