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Cabinet approves moratorium of four years for telcos to pay AGR dues

The decision is expected to offer interim cash flow relief to the sector where two of the three largest private telcos are saddled with dues.

September 15, 2021 / 08:32 PM IST
Representative image.

Representative image.

In a big relief to the debt-strapped telcos - Vodafone Idea and Bharti Airtel, the Cabinet on September 15 announced a moratorium of four years for the payment of the Adjusted Gross Revenue (AGR) dues. 

The announcement is a part of the big bang relief package for the telecom sector that includes nine structural reforms and five process reforms.

The four year moratorium also extends to other telecom dues such as the due payments of spectrum purchased in the past auctions except the recently concluded auctions earlier this year.

The deferment is protected by an interest component, which the telecom companies will have to pay right from the first day of the commencement of the moratorium period from October 1, at the rate of MCLR plus 2 percent.

The decision by the Cabinet has come just weeks after Kumar Mangalam Birla resigned as chairman of the loss making Vodafone Idea on August 4.

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The Supreme Court had in October 2019 mandated that telecom operators pay Rs 1,19,292 crore to the Department of Telecommunications as AGR dues. Of this, Bharti Airtel’s dues are pegged at Rs 43,980 crore, while Vodafone Idea’s dues were Rs 58,254 crore.

However, later in September 2020, the Supreme Court had granted 10 years to the operators to make staggered payments of the AGR dues, including penalty, interest and interest on penalty through March 31, 2031. 

Vodafone Idea, promoted by Aditya Birla Group and UK’s Vodafone Group, has paid Rs 7854 crore as AGR dues, meanwhile Bharti Airtel has paid Rs 18,000 crore as AGR dues. 

Both Vodafone Idea and Bharti Airtel have been trying to get their AGR dues reduced through legal means but so far all their efforts have failed. In fact, the telcos had even moved a review petition for a July order by the Supreme Court which had junked their pleas for recalculation of their AGR liabilities saying that there have been arithmetical errors on the part of the telecom department in calculating the dues. 

The definition of AGR, which had been a major bone of contention for the sector has been rationalised by excluding non-telecom revenue of telecom companies on prospective basis.

Telecom Minister Ashwini Vaishnav said, "PM Modi took a bold decision over AGR today. A decision has been taken to rationalise the definition of AGR. All non-telecom revenue will be taken out of AGR. There was a regime of heavy interest, penalty & interest on penalty on payment of license fees, spectrum user charges and all kinds of charges. It has been rationalised today."

Booster-Shot-for-Telecom (1)

Announcements related to Spectrum 

The Minister also announced increasing the tenure of spectrum license to 30 years from 20 years presently for the future auctions.

There will also be no Spectrum Usage Charges (SUC)  for spectrum acquired in the future auctions and the additional SUC charges for spectrum sharing have also been removed, the telecom minister announced.

The government will also allow companies to surrender spectrum after paying a surrender charge with a lock in period of 10 years.

The minister also said that a a spectrum auction calendar will be made for proper planning by the industry.

Other Announcements 

A 100 per cent FDI (Foreign Direct Investment) in telecom via the automatic route was also approved by the Cabinet.

The Cabinet also approved the simplification of the KYC norms for the customers and a single window clearance through Department of Telecommunications (DOT) portal for setting up of telecom towers.

To facilitate ease of doing business for the industry, the telecom minister said that the 1953 Customs Notification for wireless equipment removed to enable easier purchase of telecom equipment by the telecom operators.

Vaishnav also said that presently over 300-400 crore customer acquisition forms are lying in the warehouses of the Telecom Service Providers (TSPs) will now be stored in a digital format.

Telecom Minister said that the relief package is applicable to the entire industry and not just any particular company, however added that telecom companies already going through the insolvency process would need to get clarity from NCLT courts.

Addressing the briefing telecom minister also said that should be a healthy competition in the sector and noted that there will be further reforms when 5G is auctioned so that more players would enter the sector.

He also added that the reforms announced are revenue neutral to the government.

"The reforms are expected to generate employment opportunities, promote healthy competition, protect interests of consumers, infuse liquidity, encourage investment and reduce regulatory burden on Telecom Service Providers (TSPs)," the government said in a statement.

 

 

 

 

 

 
Shreeja Singh
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