Relief to Voda-Idea: Cabinet approves moratorium on payment of levies, other reforms

Mukesh Ranjan

Tribune News service

New Delhi, September 15

In a much-awaited and desired relief, the government approves a big-bang reform package for the cash-starved telecom sector, with the announcement of four-year moratorium on payment of dues, besides a number of structural and process related to the industry.

Announcing the decision of the Union Cabinet chaired by Prime Minister Narendra Modi, Minister for Information Technology (IT) and Communication Ashwini Vaishnav said, “The reforms are deep and broad. They are structural. These reforms will bring in change today, tomorrow and in the future. I do not like to put a number on the package as it is revenue-neutral for the government.” He went on to add that the moratorium would not impact the government’s revenue.

Incidentally, the government announced the package six weeks after Kumar Mangalam Birla resigned from the post of Chairman of Vodafone-Idea Limited, which was created following the merger of British telecom giant Vodafone’s India unit and Birla’s Idea Cellular Ltd. The company has to pay around Rs 50,399.63 crore as statutory dues based on AGR (Adjusted Gross Revenue) over the past many years.

The relief package will include a moratorium on payments for airwaves and is aimed at helping Telecom Service Providers (TSPs) like Bharti Airtel, Reliance Jio and Vodafone Idea, industry sources said, adding that as per the announcement the companies would also have the option to convert interest on spectrum dues of the four-year moratorium period into government equity.

Last year, the Supreme Court passed a ruling asking Bharti Airtel and Vodafone Idea to clear the government dues, which hit the sector hard and even the banks led by SBI have called on the government to give Vodafone Idea more time to clear its tax dues.

Meanwhile, along the relief package, the government has also approved a number of structural and process reforms in the sector. “These are expected to protect and generate employment opportunities, promote healthy competition, protect interests of consumers, infuse liquidity, encourage investment and reduce regulatory burden on the TSPs,” the Minister said.

Among these changes there are 9 structural and 5 process reforms and the AGR definition has been rationalised to exclude non-telecom revenues, the Minister said, adding that to encourage investment, 100 percent foreign direct investment (FDI) under automatic route is permitted, besides rationalising spectrum user charges.

“In future auctions, tenure of the spectrum will be increased to 30 years from 20 currently. Auction calendar has been fixed. Spectrum auctions will be normally held in the last quarter of every financial year. Tower set-up process will now be simplified on the basis of self-approval,” the Minister said. The KYC process for shifting to postpaid from prepaid has been done away with and all portals will be integrated with that of Department of Telecommunication (DoT) for ease of doing business and living, he added.

The Minister noted that the decisions taken today will provide relief to TSPs by easing liquidity and cash flow, which in turn will help several of the banks having substantial exposure to the telecom sector.

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