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Cabinet Approves Big Bang Telecom Reforms, Allows 100% FDI; Check Other Relief Measures

The relief package for the telecom sector will come as a breather to the three private players at a time when Vodafone Idea is confronting an existential crisis.

Minister for Communications Ashwini Vaishnaw addresses the Cabinet briefing. (Image: Twitter/ANI)

New Delhi: The Union Cabinet has approved nine structural reforms and five process reforms in the telecom sector, Minister for Communications Ashwini Vaishnaw said on Wednesday. “These reforms will change the framework of the entire telecom sector. They will deepen and broaden the industry,” he said.

The wide set of measures proposed entail reforms for the ailing sector by way of granting moratorium on unpaid dues, redefining AGR prospectively and cut in Spectrum Usage Charges. The relief package for the telecom sector come as a breather to the three private players at a time when Vodafone Idea is confronting an existential crisis.

Here are some of the measures announced today:

100% FDI In Telecom Sector: The government has announced 100 per cent foreign direct investment (FDI) in the telecom sector through the automatic route. Earlier, up to 49 per cent was allowed through the automatic route and the rest had to go through the government route.

“Today the cabinet has decided to allow 100 per cent FDI through automatic route in the telecom sector. All safeguards will be applicable,” said Vaishnaw.

Moratorium On Unpaid Dues: A moratorium of 4 years has been approved for the dues of telecom service providers. Those who avail of the moratorium, will have to pay interest on the moratorium amount at Marginal Cost of Funds based Lending Rate (MCLR) plus 2 per cent rate.

“A reasonable interest rate of MCLR + 2 per cent interest rate has been offered and the penalty has been completely scrapped. This will pave way for large-scale investments in the telecom sector. Investment means employment — more the investment, more the employment,” said Vaishnaw.

Redifining AGR: Announcing the PM’s “bold decision” over AGR (adjusted gross revenue) today, Vaishnaw said, “A decision has been taken to rationalise the definition of AGR. All non-telecom revenue will be taken out of AGR.”

Spectrum Usage Charges: The Union minister said spectrum sharing is also being completely allowed, it has been made completely free. “For future auctions, duration of spectrum will be 30 years instead of 20 years. Also if someone takes spectrum and business conditions/technology changes then after a lock-in period of 10 years it can be surrendered by paying spectrum charge,” said Vaishnaw.

“There was a regime of heavy interest, penalty and interest on penalty on payment of license fees, spectrum user charges and all kinds of charges. It has been rationalised today. Annual compounding (of interest) will be done instead of monthly compounding,” said the minister for communications.

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