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Union Cabinet gives Rs 42,000 cr cash flow to telcos

Union Cabinet gives Rs 42,000 cr cash flow to telcos

Sentinel Digital DeskBy : Sentinel Digital Desk

  |  22 Nov 2019 1:05 PM GMT

New Delhi: In a big relief to the telcos –Airtel, Vodafone, and Jio, the Union Cabinet has approved the recommendation of the Committee of Secretaries (CoS) and allowed telcos a two-year moratorium on spectrum-related dues which translates into a Rs 42,000 crore financial support to the stressed sector.

Deferment of spectrum auction installments would ease the cash outflow of the stressed telcos and facilitate payment of statutory liabilities and interest on bank loans.

The move to defer payments for 2020-21 and 2021-22 will give Rs 42,000 crore relief to Bharti Airtel, Vodafone Idea and Reliance Jio, highly placed sources said.

Cabinet announcements did not put any figure on the benefits in numbers .”In view of the current financial stress faced by major telecom service providers and in pursuant of the recommendations by Committee of Secretaries, it is decided to defer receipts of spectrum auction installments due from the telecom service providers from the years 2020-21 and 2021-2022,” Finance Minister Nirmala Sitharaman said on Wednesday.

The deferred amounts, she said would be equally spread over the remaining installments.

“These deferred amounts bill be spread equally in the remaining installments to be paid by telecom companies. Interest, as stipulated while auctioning the concerned spectrum, will, however, be charged so that NPV is protected, she noted.

However, telecom companies opting for a two-year deferred payment would have to furnish a bank guarantee. Industry body COAI welcomed MoF’s announcement on Telecom Sector but said the high level of levies and taxes continues to be a challenge for the sector.

“We welcome the fact that the government recognizes the financial distress of the telecom sector and has provided relief in the form of deferments of spectrum payments. We are very thankful to our Minister Prasad and the DoT for supporting us and pushing forward our request to the FM for action. This will certainly provide some immediate cash flow relief to the industry.

“However, the high level of levies and taxes continues to be a challenge for the sector. The telcos pay up to 30% of their revenues to the government, by way of various levies and taxes, which is an enormous burden on the industry. 30% of what is collected is passed on to the Government. We have been requesting the Government that these levies and Taxes be rationalized and the same is also one of the important goals of NDCP.

“However, these aspects of the NDCP are yet to be operationalized and we are engaging with the government on the same. We humbly request the government to consider the vexing issue of AGR and address the anomaly of continuing with the previous legacy issue of revenue share and License Fees and SUC when the spectrum has already been paid for upfront. We hope the government will consider this request of either eliminating AGR or redefining these in line with our request and then reduce the LF and SUC to 3% and 1% respectively”, Rajan S Mathews, DG, COAI said. (IANS)

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