Breather for telcos: 2-year moratorium on payment of spectrum dues

Union Finance Minister Nirmala Sitharaman addresses the media after a cabinet meeting, in New Delhi | PTI
The debt-ridden telecom industry, looking for financial relief from the government, has got a two-year moratorium in making payments for past spectrum auctions. 

The Union Cabinet on Wednesday decided to defer spectrum payments dues of the telcos for 2020-21 and 2021-22, a move that will offer an estimated Rs 42,000-crore overall relief to Bharti Airtel, Vodafone Idea and Reliance Jio over the next two years. While Vodafone Idea has got the maximum relief of more than Rs 24,500 crore, Airtel and Jio’s moratorium is pegged at around Rs 11,000 crore and Rs 6,800 crore, respectively. The Cabinet decision is based on a recommendation by a committee of secretaries headed by Cabinet Secretary Rajiv Gauba. 

This comes soon after all three private telecom operators announced they were raising mobile phone tariff. Sources said the government had asked telecom firms to set their house in order by raising tariffs before seeking relief. Setting a tariff floor was the other option. The recent Supreme Court order, asking telcos to pay AGR dues of around Rs 1.33 trillion, only pushed Bharti Airtel and Vodafone Idea to say the liabilities would make it tough for them to continue as going concerns. After the Cabinet meeting, Finance Minister Nirmala Sitharaman told the media in a late-night briefing that the deferred amount will be spread out equally over the remaining installments.

However, she clarified that the existing time period specified for making the payments wouldn’t be extended. Also, the interest, as specified at the time of auctioning, would be charged so that the net present value (NPV) of the payable amount is retained. 

The telecom firms opting for a two-year moratorium would need to provide a guarantee of the revised annual installment payable for 2022-23. Thanking Telecom Minister Ravi Shankar Prasad and the Department of Telecom (DoT) for supporting the industry and pushing the industry request to the FM, Cellular Operators Association of India director general Rajan S Mathews said, “this will certainly provide some immediate cash flow relief to the industry”.

However, the association, representing all major telcos, has pointed out that the high level of levies and taxes continued to be a challenge for the sector. “The telcos pay up to 30 per cent of their revenues to the government, by way of various levies and taxes, which is an enormous burden on the industry. 30 per cent of what is collected is passed on to the government.”

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