Union Cabinet has actually authorized moratorium plan for cash strapped telecom companiesAmid a slew of reforms for the telecom sector, the Union Cabinet on Wednesday cleared a much waited for relief package for the stressed sector which entails relaxation to mobile business on payment of their long impressive adjusted gross revenue (AGR) fees by providing a four-year moratorium, which will enter into impact from October 1, 2021.
The bundle will come as a huge relief to companies like Vodafone Concept, that owe a big total up to the government in statutory dues.The four year moratorium however is safeguarded by an interest element, which the telecom companies will need to pay right from the very first day of the start of the period (October 1) at the rate of MCLR plus two per cent.The interest part will guarantee continual circulation of income into federal government's coffers and this amount will be utilized for creation of indigenous 5G facilities in the country.
Government's revenue needs to be protected, so telecom business will pay interest on moratorium at MCLR plus two percent.
During the period of the moratorium, this interest component will help set up telecom infrastructure in the country, Telecommunication Minister Ashwini Vaishnaw informed media individuals after the Cabinet meeting.The moratorium will help in reducing problem of both telecom business as well as banks, the minister said.
Banks' balance sheet direct exposure will be considerably lowered and both banking and telecom sectors will witness cash flow enhancement which will be utilized for setting up 5G infrastructure setup, Mr Vaishnaw said.When asked about the size of the moratorium, the minister said, the bundle is revenue neutral to the government and therefore we can not put a total up to it.
He notified that this choice was one amongst the nine structural reforms and five procedural reforms for the sector, which were cleared today by the Cabinet.The package will signal a service to the long standing financial crunch being dealt with by telecom companies and their inability to pay dues worth thousand of crores of rupees in terms of spectrum fees, to the government.The choice by the Cabinet has come simply weeks after Kumar Mangalam Birla resigned as chairman of the cash starved Vodafone Idea.The business had actually long been looking for federal government's intervention in regards to bailing it out financially.Even Sunil Bharti Mittal, chairman of Airtel, the nation's second biggest telecom business, had actually looked for federal government's help.He had actually said that a major chunk of the telecom industry's profits enters paying federal government taxes.In another significant choice, the Cabinet cleared 100 percent foreign direct investment (FDI) in the telecom sector through automated path, which will encourage greater participation of players.However all safeguards will apply, Mr Vaishnaw said.