Cabinet approves 100% FDI through automatic route in telecom sector 

Union Minister Ashwini Vaishnaw stated that the cabinet has approved nine structural reforms and five process reforms that will change the framework of the entire telecom sector. 

Created On: Sep 15, 2021 16:40 ISTModified On: Sep 15, 2021 16:40 IST

Telecom sector reforms: Union Minister for Communications, Ashwini Vaishnaw informed on September 15, 2021 that the Union Cabinet has decided to allow 100% FDI (Foreign Direct Investment) through an automatic route in the telecom sector. He said that all safeguards will be applicable.

The Union Minister stated that the cabinet has approved nine structural reforms and five process reforms in the telecom sector. He added that these reforms will change the framework of the entire telecom sector and deepen and broaden the industry.

Key Reforms in Telecom Sector

All non-telecom revenue to be taken out of AGR 

The Union Cabinet chaired by Prime Minister Narendra Modi has decided to rationalise the definition of adjusted gross revenue (AGR), a demand that had been put forward by telecom companies for years now. This will pave way for all non-telecom revenue to be taken out of AGR, informed the Communications Minister. 

The definition of AGR had been a major reason for the stress in the telecom sector, as it involved a regime of heavy interest, penalty & interest on penalty on payment of license fees, spectrum user charges and all kinds of charges. AGR refers to revenues that are considered for payment of statutory dues.

Annual compounding of interest to be done instead of monthly

Union Minister Ashwini Vaishnaw also informed that annual compounding of interest will be done now instead of monthly compounding. Under this, a reasonable interest rate of MCLR + 2% interest rate has been offered and the penalty has been completely scrapped. 

This will facilitate large-scale investments in the telecom sector and investment means employment - more the investment, more the employment, said Vaishnaw during the press briefing. 

Spectrum sharing allowed

The Union Minister also informed that that spectrum sharing has been completely allowed and will be free. He added saying that the duration of the spectrum will be 30 years instead of 20 years for future auctions and if someone takes spectrum & business conditions/technology changes then after a lock-in period of 10 yrs it can be surrendered by paying spectrum charge.

4-year moratorium on payment of dues

The Cabinet has also approved a four-year moratorium on payment of statutory dues by telecom companies to ease cash flow issues faced by some of the key players in the telecom sector. The companies that avail the moratorium will have to pay interest on the moratorium amount at MCLR + 2% rate.

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