The Union Cabinet approved various structural and process reforms on September 15, 2021 to boost the Indian Telecom sector. These changes are expected to reduce regulatory burden from the Telecom Service Providers (TSPs) and also contribute to growth of the Indian economy.
Major Relief in Telecom Sector
- The first and most important reform is with respect to calculation of Adjusted Gross Revenue for Telecom Service Providers.. Earlier AGR was calculated on the gross revenue of the complete business of the company. In this order, it is approved that non-telecom revenues are excluded from AGR calculation going forward.
- The second major relaxation is related to the replacement of dues in the telecom sector. Now, the telecom companies will get a 4 year moratorium period on their dues which will start from 1st October 2021. This will resolve the cash flows problems in the industry.
- The third major reform is 100% Foriegn Direct Investment (FDI) through automatic route has been approved by the center in the telecom sector. Before this, only 49% of investment was allowed through the automatic route and companies with more than 49% foreign investment had to get approval from the Ministry of Home Affairs.?
- The fourth major reform is related to late payment of license fees and Spectrum Usage Charges (SUC). The interest payable on late payment will be SBI’s MCLR plus 2% instead of SBI’s MCLR plus 4%. Also, the interest payable will be compounded yearly instead of monthly.?
- In future spectrum auctions, the spectrum tenure is increased to 30 years from 20 years. Surrender of spectrum after 10 years of acquisition is also allowed now.
- For new spectrums acquired, SUC will not be charged.
- Other than this, spectrum sharing has been allowed between telecom companies without any additional costs.
- In addition, the Bank Guarantee for the license fee will be drastically reduced. Companies would require only one central BG, whereas earlier there used to be a separate BG for each license area/ service/ license category.
More changes have been announced which will reduce the expenses of telecom companies
- Digitalizing the KYC process so that there is no paper work to acquire new customers. Customers who want to shift from prepaid to postpaid or vice versa, won’t require to renew KYC.
- A digital solution will replace paper Customer Acquisition Forms (CAFs).
- One more change is that a calendar will be created for spectrum auctions.
The Cabinet’s decision reinforces the Prime Minister’s vision of a robust and sustainable Telecom Sector that opens opportunities for new investments. As a result of this relief, 4G is also expected to become more mainstream and new opportunities for 5G will be created.
