Life donation to telecom companies: Four years relief in all government payments

- Revised definition of AGR, only telecom revenue will be taken into account

The government's decision will benefit Vodafone-Idea by Rs 16,000 crore, Bharti Airtel by Rs 9,500 crore and Reliance Jio by Rs 3,000 crore.

- Five-G spectrum auction likely to start in February 2022

New Delhi: To ease the strained telecom sector, the Union Cabinet on Wednesday gave telecom companies a six-year moratorium on all government arrears including adjusted gross revenue (AGR) and spectrum. The decision will give life to decaying telecom operators like Vodafone Idea.

Informing the cabinet meeting, telecom ministry chief Ashwini Vaishnav said the government was announcing several relief packages aimed at providing relief to the indebted telecom sector and creating long-term employment opportunities.

He said that 4 structural reforms and 2 process reforms have been decided for the revival of telecom sector. Most importantly, a 3-year moratorium will be provided for AGAR payments. By simplifying the definition of AGR, only telecom revenue will be taken into account. The government will not count non-telecom revenue as adjusted gross revenue.

The telecom minister said the norms of interest, penalties and penalties on interest on license fees, spectrum user charges and other charges would also be relaxed. Instead of a monthly compounding, it will now be calculated with annual interest.

Making the biggest announcement, the minister said that loans would be given to telecom companies at an interest rate of +3 per cent of MCLR. Apart from this the penalty will be fully waived. All these changes will be effective from October 1. Apart from this, even after 3 years, the government will have the option to convert the arrears of AGR into equity.

Other reforms will also be done at the time of allocation of 3G spectrum, the telecom minister added.

Kumar Mangalam Birla, former chairman of Vodafone Idea Limited, had earlier written a letter to the Cabinet Secretary offering his stake in Vodafone Idea to the government or any company approved by the government free of cost. Then on August 8, billionaire Birla resigned as chairman and shares of Vodafone Idea Ltd. plunged.

On the AGR issue, Vodafone-Idea owes Rs 30,500 crore to the telecom ministry. However, according to some analysts, the government cannot use taxpayers' money to bailout telecoms.

Sources said that AGR has also approved the proposal to convert the telecom company's debt into equity in addition to the moratorium in payments.

100% FDI allowed in telecom sector

In the cabinet meeting, the Modi government has taken important decisions for the future along with the important relief given to the telecom sector. The Union Cabinet on Wednesday approved 100% foreign investment in the Indian telecom sector. Telecom Minister Ashwini Vaishnav said the government has approved 100% foreign direct investment (FDI) in the sector through automatic routes. Market analysts believe that the biggest beneficiary of the decision will be the country's most tense Vodafone-Idea. Vodafone plc may come forward to make new investments as the situation improves in the future or other companies may also come forward to invest.

Advertisements made by the Central Government for the telecom sector

* The government has announced a moratorium on the payment of spectrum fees and AGR installments to telecom companies for four years.

* The definition of AGR has been simplified. Non-telecom revenue will not be included in the outstanding amount of AGR.

* Earlier, telecom companies had to pay monthly compound interest on the penalty, now they have to pay the penalty on an annual basis.

* In future, any telecom company will be given a telecom license for 90 years instead of 50 years. Spectrum will be in lock-in period for 10 years.

* To increase foreign investment in the telecom sector, 100 per cent foreign investment has been allowed through the automatic route. Earlier, it was 5 per cent.

* Previously customers had to fill up a long form to get a mobile connection. Now all the forms will be digitized and the new customer's form will also be filled digitally.

* Customers had to face huge difficulties in getting KYC to shift from prepaid to postpaid and from postpaid to prepaid connection. The Cabinet has decided to simplify the process.