The Union Cabinet has authorized a vital assistance assortment for the cash-strapped telecom firms that encompasses a four-year moratorium on the expenditure of statutory dues by telecom corporations as well as permitting 100% FDI through the voluntary route.
This move is targeted at relieving companies associated with the telecom sector such as Vodafone Idea that has to spend thousands of crores in unprovisioned past statutory dues. The approval of this package is being considered as the big bang moment of the current scenario. The vast bunch of criteria formulated implicate reforms for the reluctant sector. One of the ways is by granting a moratorium on unpaid dues, redefining Adjusted Gross Revenue (AGR), and cut in SUC, Spectrum Usage Charges.
Ashwin Vaishnaw, Telecom Minister informed the media about the decisions taken by the Union Cabinet at its meeting. He asserted about those nine structural reforms and their approval.
Let’s try to analyze and study this entire issue in 9 points. Pointers are as follows:
1. Telecom Companies were in search of that much-needed relaxation. They got the desired relief due to the relief package. Reliance Jio, Vodafone Idea, and Bharti Airtel were highlighted by the cabinet to emphasize certain points. The cabinet mentioned, “These are expected to protect and generate employment opportunities, promote healthy competition, protect interests of consumers, infuse liquidity, encourage investment and reduce the regulatory burden on Telecom Service Providers (TSPs),”
2. Vodafone’s Idea is on the verge of destruction. It is being said that Vodafone’s Idea is on the edge of becoming destitute. The package mainly provided relief to it. AGR-related dues will be offered with a moratorium. This will be the space for a cash-strapped company to enhance its industry and clear dues over a lengthier term.
3. Moratorium of dues is the most influential decision authorized by the cabinet as per the relief package. A four-year moratorium has been certified on dues of telecom service providers (TSPs). Nonetheless, TSPs who want to opt for the moratorium will have to expend interest on the amount served under the benefit.
4. The vastly integral part of the measures pertains to the controversial topic of AGR. The description of AGR has been shifted to exclude non-telecom revenue. Vaishnaw said, “All non-telecom revenue will be removed from AGR.” Another significant declaration was related to rationalizing spectrum charges that telecom associations have to accept. The monthly compounding of interest on spectrum usage charges will be rebuilt by annual compounding and the interest rate will decrease as per the formula MCLR + 2%.
5. The Centre has furthermore declared openly 100% foreign direct investment (FDI) in the telecom sector through the computerized route as part of its extensive package for the telecom sector.
6. Almost 49% was enabled through the automatic route and anything subsequently had to inevitably go through the administration route. These measures are anticipated to alleviate the cash flow problems being faced by some performers in the exchange
7. The telecom sector was smashed by the apex court ruling in 2020, making it unavoidable for Vodafone Idea and Bharti Airtel to pay their pending dues to the Central Government.
8. Bharti Airtel, Vodafone Idea, and Reliance Communications – owed approximately ₹92,000 crores to the Centre as license tariff and ₹41,000 crores as spectrum usage fees, according to the reports of the telecom department.
9. Cabinet Secretary Rajiv Gauba got a piece of paper from the former chairman of Vodafone Idea, Kumar Mangalam Birla, in July. He wrote about proposing his stake in Vodafone Idea to the Centre or any firm approved by the government for free. The interesting element is the resignation of Birla as the chairman in the last month.
This is all about the authorization of the relief package summarized in just ten points.