Telecom relief package likely to cost Rs 14,000 crore to govt in FY22: Report

The Union Cabinet on Wednesday approved a much-needed relief package for the stressed telecom sector. The package is likely to reduce non-tax revenues from the sector by around Rs 14,000 crore this fiscal year if companies opt for the offer.

The relief package is likely to benefit the telecom companies, which are struggling to contain losses amid tariff war between the three biggest players in the sector - Reliance Jio, Bharti Airtel and Vodafone Idea.

Also read: Govt allows 100% FDI in telecom sector through automatic route, relief to telecom firm on payment of dues

Under the telecom package announced on Wednesday, the government is deferring non tax revenues at Rs 46,000 crore per year for four years starting from FY2023. This comprises Rs 14,000 crore related to the moratorium on AGR dues and Rs 32,000 crore from the moratorium on spectrum dues, a Free Press Journal report stated.

"We now assess the inflows from the telecom sector into the GoI's FY2022 non tax revenues to be limited to Rs 28,000 crore, trailing the budgeted Rs 54,000 core, which will modestly widen its fiscal deficit," said Aditi Nayar, Chief Economist, ICRA Limited told Business Standard.

Among several decisions, the Cabinet has approved a four-year moratorium on all dues by telecom operators including the adjusted gross revenue (AGR), however, those operators availing the moratorium will have to pay interest of "MCLR+2 per cent".

The cabinet has also approved the change in the AGR definition and now non-telecom revenue will not be calculated under AGR, prospectively. The Cabinet has allowed 100 per cent FDI in telecom under the automatic route, which comes as a major move.

According to a Business Today report, both Vodafone Idea and Bharti Airtel will gain the most from the telecom relief package.

Vodafone Idea's financials are weak and the company is facing bankruptcy if it's not rescued in time. The AGR-related benefit will surely provide it with the much-needed breathing space, which will help it re-strategise its business and clear the pending dues in a longer period.

Check out latest DH videos here: