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Cabinet approves 100% FDI under automatic route in Telecom Sector

Cabinet approves 100% FDI under automatic route in Telecom Sector_4.1

The Union Cabinet, chaired by Prime Minister Narendra Modi has approved a number of structural and process reforms in the Telecom sector, to provide relief to ailing telecom service providers, struggling with high levels of debt. A total of 9 structural and 5 process reforms have been approved by the Union Cabinet.

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The relief package is expected to protect and generate employment opportunities, promote healthy competition, protect the interests of consumers, infuse liquidity, encourage investment and reduce the regulatory burden on Telecom Service Providers (TSPs).

Some major reforms announced are as follows:

  • Change in the definition of AGR: The definition of Adjusted Gross Revenue (AGR) has been changed and now all non-telecom revenue will be removed from AGR.
  • Rationalised Spectrum Usage Charges: The monthly compounding of interest on spectrum usage charges is replaced by annual compounding and the interest rate will come down, based on the formula MCLR + 2%. Penalty on payment of licence fees, spectrum user charges and all kinds of charges have been completely scrapped.
  • Four-year Moratorium on dues: Moratorium has been announced on statutory dues of the telecom sector for four years. It will be applicable from October 1, 2021
  • Foreign Direct Investment (FDI): The government has increased the FDI in the Telecom sector under the automatic route from 49% to 100%.
  • Auction calendar fixed: Spectrum auctions will henceforth be held in the last quarter of every financial year.

Important takeaways for all competitive exams:

  • Minister of Communications: Ashwini Vaishnaw.

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