Cabinet approves fresh lifeline for telecom firms

Postpones AGR deadline; allows 100% FDI in auto mode

In a bid to provide substantial relief to the cashstrapped telecom companies like Vodafone Idea, which owes thousands of crores in unprovisioned past statutory dues, the Union Cabinet on Wednesday approved a crucial package for the telecom sector. The slew of measures granted to the sector include a moratorium on unpaid dues, redefining adjusted gross revenue or AGR prospectively and cuts in spectrum usage charges, etc.

Announcing the decision on the sector, communications and IT minister Ashwini Vaishnaw said that all those who will avail of the moratorium will have to pay some interest. The moratorium will start from October 1. “The reforms are deep and broad. They are structural. These reforms will bring in change today, tomorrow and in the future as well. I do not like to put a number on the package as it is revenueneutral for the government,” the minister said, adding that the moratorium will not impact the government’s revenues.

The Cabinet also approved 100 per cent FDI through the automatic route.

The package comes six weeks after Kumar Mangalam Birla resigned from the post of chairman of Vodafone Idea Ltd on August 4. Vodafone, which was created from the merger of British telecom giant Vodafone’s India unit and Birla’s Idea Cellular Ltd, has to pay about `50,399.63 crores in statutory dues dating back over past many years.

According to top government sources, the proposed measures will be beneficial for the ailing telecom companies and will pave the way for reforms in the sector as well. “Besides, these concrete measures taken by the government are expected to ease the cash flow issues being faced by some players in the industry,” sources said.

“The steps being deliberated will offer immediate relief to the sector. There is also a component of equity-related conversion, that is being mulled, which, if accepted, will offer a gesture of goodwill and help companies raise funds,” the sources added.

Vodafone Idea Ltd, in its annual report, has flagged the industry’s “unsustainable financial duress” and hoped that the government would provide the support to address “all structural issues”.

The Union Cabinet has approved measures such as a moratorium on unpaid dues of telecom companies, redefining adjusted gross revenue or AGR prospectively and cuts in spectrum usage charges, etc.

All the companies which will avail of the moratorium will have to pay some interest. The moratorium will start from October 1.

The government’s package comes six weeks after Kumar Mangalam Birla resigned from the post of chairman of Vodafone Idea on August 4. It will give a fresh lifeline to Vodafone Idea.