Relief for Telcos: 4 Years Moratorium for AGR Dues, 100% FDI, Rationalisation of BGs, KYC Norms
Moneylife Digital Team 15 September 2021
Giving a significant relief to telecom service operators, the Union Cabinet on Wednesday announced a moratorium or deferment of up to four years in annual payments of dues arising out of the adjusted gross revenue (AGR) judgement or spectrum payments. The Cabinet meeting headed by prime minister (PM) Narendra Modi decided to bring nine structural reforms and five procedural reforms plus relief measures for the telecom sector. The Cabinet also decided to ease the know-your-customer (KYC) procedure for subscribers. The Cabinet also decided to allow 100% foreign direct investment (FDI) under automatic route to encourage investment in the telecom sector. The package is expected to boost 4G proliferation, infuse liquidity and create an enabling environment for investment in 5G networks.
 
 
 
 
 
 
The Cabinet approved measures for addressing liquidity requirements of all telecom service providers (TSPs). It includes moratorium or deferment of up to four years in annual payments of dues arising out of the AGR judgement, however, by protecting the net present value (NPV) of the due amounts being protected. “Moratorium or deferment on due payments of spectrum purchased in past auctions, excluding the auction of 2021, for up to four years with NPV protected at the interest rate stipulated in the respective auctions,” it says in a release.
 
The Union Cabinet also provided an option to the TSPs to pay the interest amount arising due to the moratorium of payment through equity.
 
For the option to convert the due amount about deferred payment by way of equity at the end of the moratorium or postponement period, the ministry of finance (MoF) will finalise guidelines.
 
“This will be applicable for all TSPs and will provide relief by easing liquidity and cash flow. This will also help various banks having substantial exposure to the telecom sector,” the government says.
 
The Cabinet also decided to bring know-your-customer (KYC) reforms, allowing an app-based self-KYC and bringing down the e-KYC rate to Re1. In a tweet, Ashwini Vaishnaw, minister for railways, communications, electronics & information technology, says a telecom subscriber can change her plan from pre-paid to post-paid and vice versa without undergoing fresh KYC. 
 
 
Here are the structural reforms announced by the Union Cabinet...
 
1. Rationalisation of Adjusted Gross Revenue-AGR:  Non-telecom revenue will be excluded on a prospective basis from the definition of AGR.
 
2. Bank Guarantees (BGs) Rationalised: Huge reduction in BG requirements (80%) against licence fee (LF) and other similar levies. No requirements for multiple BGs in different licensed service areas (LSAs) regions in the country. Instead, one BG will be enough.
 
3. Interest Rates Tationalised/ Penalties Removed: From 1 October 2021, delayed payments of licence fee (LF)/spectrum usage charge (SUC) will attract an interest rate of State Bank of India (SBI)’s the marginal cost of funds-based lending rate (MCLR) plus 2% instead of MCLR plus 4%; interest compounded annually instead of monthly; penalty and interest on penalty removed.
 
4. For auctions held henceforth, no BGs will be required to secure instalment payments. The industry has matured and the past practice of BG is no longer required. 
 
5. Spectrum Tenure: In future Auctions, the tenure of spectrum increased from 20 to 30 years.
 
 
6. Surrender of the Spectrum will be permitted after 10 years for spectrum acquired in future auctions.
 
7. No Spectrum Usage Charge (SUC) for spectrum acquired in future spectrum auctions.
 
8. Spectrum Sharing encouraged- additional SUC of 0.5% for spectrum sharing removed.
 
9. To Encourage Investment, 100% foreign direct investment (FDI) under automatic route permitted in the telecom sector. All safeguards will apply.
 
Here are the procedural reforms announced by the Union Cabinet...
 
1. Auction Calendar Fixed - Spectrum auctions to be normally held in the last quarter of every financial year.
 
2. Ease of Doing Business Promoted - The cumbersome requirement of licences under 1953 Customs Notification for wireless equipment removed and replaced with self-declaration.
 
3. Know Your Customers (KYC) Reforms: Self-KYC (app-based) permitted. E-KYC rate revised to only one rupee. Shifting from pre-paid to post-paid and vice-versa will not require fresh KYC.
 
4. Paper Customer Acquisition Forms (CAF) will be replaced by digital storage of data. Nearly 300-400 crore paper CAFs lying in various warehouses of TSPs will not be required. Warehouse audit of CAF will not be necessary.
 
5. SACFA Clearance for Telecom Towers Eased. The department of telecom (DoT) will accept data on a portal based on a self-declaration basis. Portals of other agencies (such as Civil Aviation) will be linked with DoT portal.
 
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