100% FDI, other Major Telecom Reforms Approved by Cabinet

The five process structural reform will give much-needed relief to Vodafone-Idea — confronting an existential crisis, as well as to Airtel.

Good news for Vodafone Idea & Airtel: 100% FDI in telecom sector
Good news for Vodafone Idea & Airtel: 100% FDI in telecom sector

New Delhi: In a first, the Union Cabinet on Wednesday allowed 100% foreign direct investment (FDI) in the country’s struggling telecom sector via the automatic route. This forms part of the five process structural reforms proposed by Ashwini Vaishnaw, Minister for Communications.

Earlier, only 49% FDI was allowed through the automatic route and anything above that needed to pass through government route.

“Today the cabinet has decided to allow 100 per cent FDI through automatic route in the telecom sector. All safeguards will be applicable,” said Vaishnaw, adding that these reforms will transform the framework of the entire telecom sector, deepening and broadening the industry.

The wide set of measures proposed entail reforms for the ailing sector by way of granting moratorium on unpaid dues, redefining AGR prospectively and cut in Spectrum Usage Charges. The relief package for the telecom sector come as a breather to the three private players at a time when Vodafone Idea is confronting an existential crisis.

Apart from the 100% FDI approval, these are some of the other measures that were announced by the Communication minister:
  • 4 Years Moratorium On Unpaid Dues:

Modi cabinet has given major relief to Telecom companies by approving a moratorium of 4 years. Companies availing moratorium will have to pay the interest at MCLR plus 2 per cent rate. No penalty will be levied on these service providers, making way for “large-scale investments in the telecom sector” Investment means employment — more the investment, more the employment,” said Vaishnaw.

  • Rationalisation of AGR: 

The central government has rationalised AGRs, believed to be one of reasons for dispute between telecom companies and the telecom department. The minister said that it is PM Modi’s bold decision “to rationalise the definition of Adjusted Gross Revenue, of which all non-telecom revenue will be taken out.”

Supreme Court of India had upheld the earlier way of totalling the spectrum charges that included both telecom and non-telecom revenues.

  • Spectrum Usage Charges: 

According to the minister, spectrum sharing has been made completely free and partial. The duration of spectrum will now be 30 years compared to 20 years earlier, applying for all future auctions that will now be held in the last quarter of the financial year. “Also if someone takes spectrum and business conditions/technology changes then after a lock-in period of 10 years it can be surrendered by paying spectrum charge,” said Vaishnaw.

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