As the Union Cabinet on Wednesday approved several reforms and relief measures for the telecom sector, Union Minister for Communications, Ashwini Vaishnaw said that these measures will change the entire framework of the Indian telecom sector.
Among several decisions, the Cabinet has approved a four-year moratorium on all dues by telecom operators including the adjusted gross revenue (AGR), however, those operators availing the moratorium will have to pay interest of “MCLR+2 per cent” and a change in the definition of AGR.
Post the change in definition all non-telecom revenue will not be calculated under AGR, prospectively.
The decisions came at a time when the sector is going through severe stress and is on the brink of duopoly with Vodafone Idea in a beleaguered state.
Vodafone Idea would be most benefited from the government decision on moratorium on dues.
Addressing the media post the Cabinet meeting, the minister said: “Today, 9 structural reforms and 5 process reforms in the telecom sector have been approved. These reforms will change the framework of the entire telecom sector.”
In another major move, the Cabinet has allowed 100 per cent FDI in telecom under the automatic route.
Further, spectrum user charges will be rationalized and there will be now an annual compounding of rates. Spectrum can now be surrendered and also shared by the telcos.
“In order to provide relief to the troubled telecom sector, the Union Cabinet agreed a moratorium on operators’ payment of spectrum dues on Wednesday. This will give troubled telecom carriers like Vodafone Idea much-needed breathing room as they pay millions of crores of rupees in unprovisioned previous statutory dues,” Sonam Chandwani, Managing Partner at KS Legal & Associates.
“The liability is postponed rather than totally written off. The banks association breathes a sigh of relief, as they owe large sums to Vodafone. Though it is unclear how Vodafone Idea will pay off the obligations, the extra time does help with stress management,” she said.