Big relief for Airtel, Vodafone, others! Modi Cabinet approves Rs 42,000 crore cash flow to telcos in a two-year moratorium

In a big relief to the telcos  — Airtel, Vodafone and Jio, the Union Cabinet has approved the recommendation of the Committee of Secretaries (CoS) and allowed telcos a two-year moratorium on spectrum-related dues which translates into a Rs 42,000 crore financial support to the stressed sector. Deferment of spectrum auction installments would ease the cash outflow of the stressed telcos and facilitate payment of statutory liabilities and interest on bank loans. The move to defer payments for 2020-21 and 2021-22 will give Rs 42,000 crore relief to Bharti Airtel, Vodafone Idea and Reliance Jio, highly placed sources said.

Cabinet announcements did not put any figure on the benefits in numbers ."In view of the current financial stress faced by major telecom service providers and in pursuant of the recommendations by Committee of Secretaries, it is decided to defer receipts of spectrum auction installments due from the telecom service providers from the years 2020-21 and 2021-2022," Finance Minister Nirmala Sitharaman said on Wednesday. The deferred amounts, she said would be equally spread over the remaining installments.

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"These deferred amounts bill be spread equally in the remaining installments to be paid by telecom companies. Interest, as stipulated while auctioning the concerned spectrum, will, however, be charged so that NPV is protected, she noted.

However, telecom companies opting for a two-year deferred payment would have to furnish a bank guarantee.Industry body COAI welcomed MoF`s announcement on Telecom Sector but said high level of levies and taxes continues to be a challenge for the sector.

"We welcome the fact that the government recognises the financial distress of the telecom sector and has provided relief in the form of deferments of spectrum payments. We are very thankful to our Minister Prasad and the DoT for supporting us and pushing forward our request to the FM for action. This will certainly provide some immediate cash flow relief to the industry.

"However, the high level of levies and taxes continues to be a challenge for the sector. The telcos pay up to 30% of their revenues to the government, by way of various levies and Taxes, which is an enormous burden on the industry. 30% of what is collected is passed on to the Government. We have been requesting the Government that these levies and Taxes be rationalised and the same is also one of the important goals of NDCP.

"However, these aspects of the NDCP are yet to be operationalised and we are engaging with the government on the same. We humbly request the government to consider the vexing issue of AGR and address the anomaly of continuing with the previous legacy issue of revenue share and License Fees and SUC when spectrum has already been paid for up front. We hope the government will consider this request of either eliminating AGR or redefining these in line with our request and then reduce the LF and SUC to 3% and 1% respectively", Rajan S Mathews, DG, COAI said.

Continued operation by telecom service providers, according to the statement, would give a fillip to employment and economic growth. In addition, the improved financial health of service operators would facilitate the maintenance of quality of services to the consumer.

Following the Rs 1 lakh crore worth of Q2 loss by telcos, the Centre had formed a Committee of Secretaries to look into relief package to the ailing sector.The recent adverse Supreme Court ruling asking the telecom companies to pay up outstanding to the Department of Telecommunications (DoT) within three months, coupled with the existing cumulative debt of Rs 7.5 lakh crore, has made the incumbents heavily leveraged.

Indian telecom operators owe the government nearly Rs 1.47 lakh crore in license fee (LF) and spectrum usage charges (SUC), the communications ministry told Parliament Wednesday. Of the total amount, license fee comes to Rs 92,642 crore as of July this year, while SUC comes to Rs 55,054 crore as of October end this year.