JOIN USGovt allows 100% FDI in telecom sector through automatic route, relief to telecom firm on payment of dues
In a big reform for the telecom sector, the Centre Wednesday allowed 100% foreign direct investment (FDI) through automatic route in place of 49% at present. The rule will, however, not apply to countries that share a land border with India.
Countries that share a border with India include Pakistan, Bangladesh, China, Nepal, Myanmar and Bhutan. The government had imposed regulations on foreign direct investments originating from countries that share a land border with India to thwart any hostile takeover of domestic businesses in April 2020.
The government also approved a four-year moratorium on payment of statutory dues by telecom companies, a move that comes as a relief to ailing telecom operators like Vodafone Idea that have to pay thousands of crores of rupees of the past statutory dues.
Along with that, the government also rationalised the definition of adjusted gross revenue (AGR) by excluding non-telecom revenues of telecom firms. The AGR issue was the major reason for stress in the telecom sector.
Telecom shares jumped up to 5% after the relief package was approved. Bharti Airtel jumped 4.53% and Vodafone Idea rose 2.76% on the BSE. Shares of Tata Communications gained 1.38%.
Briefing reporters on the Cabinet decision, Telcom minister Ashwini Vaishnaw said these measures are expected to ease the cash flow issues being faced by some players in the industry.
He said the moratorium will facilitate capital investment cycle and de-stress the balance sheet of the telecom sector. It will also infuse healthy competition in the sector.
The reforms are expected to boost proliferation and penetration of broadband and telecom connectivity, the minister said after a huge surge in data consumption, online education, work from home, interpersonal connect through social media, virtual meetings amid the Covid pandemic.
The package is also expected to boost 4G proliferation, infuse liquidity and create an enabling environment for investment in 5G networks.
In another major decision, a telecom firm can hold spectrum for 30 years instead of the current 20. Spectrum can also be surrendered after 10 years in case of any technology change.
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