Relief for Telecom Sector: Cabinet Okays 4-Year Moratorium on AGR Dues, 100% FDI

The Union Cabinet has approved a relief package for the financially-strapped telecom sector.

Union Railway Minister Ashwini Vaishnaw during a press briefing on the Cabinet decisions, at National Media Centre in New Delhi, Wednesday, Sept. 15, 2021.

(Photo: PTI)

The Union Cabinet on Wednesday, 15 September, approved a relief package for the financially-strapped telecom sector, a move that will benefit companies such as Vodafone Idea, Bharti Airtel, and Reliance Jio.

"In the telecom sector, nine structural reforms and five process reforms have been approved by the cabinet. These reforms will change the framework of the entire telecom sector. They will deepen and broaden the industry," Union Minister for Communications Ashwini Vaishnaw said at a press conference, news agency ANI reported.

The reforms proposed under the package include the granting of moratorium on unpaid dues, redefining AGR, and changes in the norms for spectrum sharing.

As part of the package, all non-telecom revenue will be taken out of AGR. Spectrum sharing has been permitted and will be completely free.

'Deep and Broad Reforms Required by Telecom Industry for Long Time': Vaishnaw

"[A] deep and broad series of reforms have been brought. It was much required by the industry for a very long time," Minister for Communications Ashwini Vaishnaw was quoted as saying by ANI at the press conference.

The Cabinet has also permitted 100 percent FDI (Foreign Direct Investment) through automatic route in the telecom sector.

"There was a regime of heavy interest, penalty & interest on penalty on payment of license fees, spectrum user charges & all kinds of charges. It has been rationalised today. Annual compounding (of interest) will be done instead of monthly compounding."

Union Minister of Communications Ashwini Vaishnaw as quoted by ANI

A moratorium of four 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 MCLR + 2 percent rate," the Union minister announced.

The package "will pave way for large-scale investments in the telecom sector. Investment means employment – more the investment, more the employment," Vaishnaw said, ANI reported.

The relief package will provide a breather to Vodafone Idea, which is on the verge of bankruptcy. A moratorium on AGR-related dues will allow the telecom company to clear its dues over a longer period, as per a Mint report.

"PM Modi has a very clear vision for telecom sector — that telecom services reach even marginalised sections in remote areas. So it's very important to have a robust telecom sector where Balance Sheet of companies, their cash flow stay safe," Vaishnaw said.

CPI (M) has criticised the government on its introduction of the relief package.

"All this is being done to ensure that monopoly of PM Modi's corporate friends continue in the telecom sector while the PSUs are destroyed. This is shameful. A govt which is acting only for crony capitalists and not the people," the party said on Twitter.

(With inputs from ANI, Mint and PTI)