MEGA SUPPORT FOR TELECOM SECTOR
WHY IN THE NEWS?
Recently, the Union Government has approved some important reform proposals for the telecom sector which involves structural and procedural measures. These reforms were taken by addressing their short term liquidity needs and long term issues of telecom companies.
As per analysts, it is said that the most important measure among all of them is a four-year moratorium on payment of AGR dues and further expects that it could provide the telecom sector a break of around Rs 45,000 crore per year for the next four years.
WHAT IS AGR?
Telecom operators have a liability to pay license fee and spectrum charges in the form of revenue share to the Centre.
The revenue amount which is used to calculate this revenue share is called AGR(Adjusted Gross Revenue).
It is charged by the Department of Telecommunications.
HOW AGR IS CALCULATED AND CONTROVERSIES RELATED TO IT
The Department of Telecommunications includes all revenue earned by a telecom company for its revenue calculations which also includes the revenue earned from non-telecom sources such as deposit interests, dividend income, rental receipts, sale of assets etc.
But, those companies thought that only telecom sourced revenue will be included in calculation of AGR, and non telecom revenue is excluded from AGR calculation.
The telecom sector was liberalised under the National Telecom Policy, 1994, under which licenses were issued to companies and they had to pay a fixed license fee.
To provide freedom from the fixed license fee, the government in 1999 introduced that licensees will now follow a revenue sharing fee model. Under this, operators were required to share a percentage of their AGR with the government.
But, there remains a dispute in the definition of AGR.
SC 2020 JUDGEMENT
On September 1, 2020 SC gave its final judgement on the AGR issue. SC has directed telecom companies to pay AGR and interest and penalty on non-payment of AGR dues.
SC has asked telecom companies to make payments in yearly installments for 10 years, starting from April 1 2021 to 31 March 2031.
And, if those telecom companies fail to pay all the installments they will be punishable under the law.
MORATORIUM ON AGR DUES
Government has decided to provide a 4 year moratorium on payment of all dues, which are liable to pay by telecom companies after SC Judgement of September 2020.
It will support debt-laden companies such as Vodafone Idea(merged on 31 August 2018) on an immediate basis.
A moratorium of four years on payment of spectrum purchased in past auctions has also been offered to the telecom companies.
Telecom sector can now receive 100 % Foreign direct investment(FDI) through an automatic route, which was 49%.
RATIONALISATION TO THE DEFINITION OF AGR
Government has decided to rationalise the definition of AGR by excluding all non-telecom revenue from AGR, which was the pain point of the telecom companies.
The compounding of interest on AGR will now be done now on an annual basis which was monthly till now.
SPECTRUM USAGE CHARGES(SUC)
Till now, companies have to pay 3-5 percent of their adjusted gross revenue (AGR) as spectrum usage charge and if they share spectrum with another operator, operators must pay an additional 0.5 per cent of AGR for that band as SUC.
Now, an additional SUC of 0.5 per cent, which was levied on spectrum sharing, has been waved off. This will promote spectrum sharing.