The Union Cabinet officially approved a broad-based relief package for the telecom sector on Wednesday. The package is expected to provide much-needed relief to ailing telecom service providers that are struggling with high levels of debt.
A total of 9 structural and 5 process reforms have been approved by the Union Cabinet. Each one is aimed at reducing the burden on struggling telcos.
Union minister Ashwini Vaishnaw said the reforms are will change the framework of the telecom sector.
Here is a look at the key telecom sector reforms approved by the Union Cabinet:
DEFINITION OF AGR & SPECTRUM USAGE CHARGES
The first and most crucial part of the relief measures is related to the contentious issue of adjusted gross revenues (AGR). The definition of AGR has been changed to exclude non-telecom revenue.
“All non-telecom revenue will be removed from AGR,” said Vaishnaw during the cabinet press briefing.
Another important announcement was related to rationalising spectrum charges that telecom companies have to bear.
The monthly compounding of interest on spectrum usage charges will be replaced by annual compounding and the interest rate will come down, based on the formula MCLR + 2%.
However, the biggest decision was to remove the penalty related to spectrum usage completely.
Ashwini Vaishnaw said the two decisions will lead to more investments in the country’s telecom sector, leading to better employment.
For future spectrum auctions, the holding period has been increased from 20 years to 30 years. In addition, a telecom company will also be able to surrender spectrum after an initial lock-in period of 10 years after paying a surrender charge.
This will provide flexibility to telecom firms who have to pay hefty amounts towards unused spectrum. Spectrum sharing between telcos has also been completely allowed without any free of cost.
The cabinet has also decided to allow 100 per cent FDI in the telecom sector via automatic route with all applicable safeguards.
Some incremental changes have also been announced, but these will lead to lower expenditure for telecom firms.
For instance, no physical paperwork will be required by telcos for customer acquisition and KYC process will be digitised. The process to renew KYCs for customers who shift from prepaid to postpaid or vice versa won’t be required.
4-YEAR MORATORIUM ON TELECOM DUES
One of the most important decisions approved by the Union Cabinet as part of the telecom relief package is the moratorium of dues. A four-year moratorium has been approved on dues of telecom service providers (TSPs).
However, TSPs who want to opt for the moratorium will have to pay interest on the amount availed under the benefit.