Cabinet approves relief package for stressed telecom sector

Cabinet approves relief package for telecoms sector
A rickshaw puller speaks on his mobile phone as he waits for customers in front of advertisement billboards belonging to telecom companies in Kolkata February 3, 2014. Reuters/Rupak De Chowdhuri/Files

New Delhi: India's Union Cabinet on Wednesday approved a much-expected relief package for the country's cash-strapped telecoms sector that includes a four-year moratorium on payment of statutory dues by telecom companies as well as allowing 100 per cent foreign investment through the automatic route.

Shares in wireless carriers Bharti Airtel rose 5.4% and Vodafone Idea were up 2.9% at 0816 GMT on the news.

The so-called relief package, which is likely to include a moratorium on payments for airwaves, will help India's three major wireless carriers including tycoon billionaire Mukesh Ambani's Reliance Jio but especially the embattled Vodafone Idea.

Briefing reporters on the decisions taken by the Cabinet, Telecom Minister Ashwini Vaishnav said nine structural reforms for the telecom sector were approved.

The definition of AGR, which had been a major reason for the stress in the sector, has been rationalised by excluding non-telecom revenue of telecom companies.

AGR refers to revenues that are considered for payment of statutory dues.

The minister said that 100 per cent FDI (Foreign Direct Investment) in telecom via the automatic route was approved by the Cabinet.

Among the measures approved were a four-year moratorium on unpaid dues, AGR and spectrum dues, he said.

These measures are expected to ease the cash flow issues being faced by some players in the industry.

The telecoms sector was shaken by Jio's entry in late 2016 with free voice and cut-price data plans.

Jio pushed several rivals out of the market, while others - such as the Indian unit of Britain's Vodafone and local Idea Cellular - were forced to regroup.

The sector was also hit by a Supreme Court ruling last year which forces carriers Bharti Airtel and Vodafone Idea to give in to a government demand for billions of dollars in dues which they have long contested.

Vodafone Idea has paid the government 78.54 billion Indian rupees ($1.07 billion) in telecoms dues, regulatory filings show, but still owes roughly 500 billion.

Banks led by State Bank of India have called on the government to give Vodafone Idea more time to clear its tax dues and airwaves' fees, Reuters reported this week.

Vodafone, which has a net debt of 1.91 trillion rupees, has previously raised serious concerns about its ability to stay afloat without government help. Its billionaire non-executive chairman stepped down last month.

Bharti Airtel has said it paid dues estimated at 180 billion rupees and government figures show it owes a further 259.76 billion.

Separately, the cabinet also approved a production-linked incentive scheme for the automobile sector, the source said, without giving details.


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