Recently, India’s federal cabinet approved an aid package for its cash strapped telecommunications
sector, including a four year moratorium on radio wave payments owed to the government. The deferred payment cycle will begin in October. “We believe that there must be healthy competition in the sector and for that there will be more reforms when the 5G spectrum
is auctioned, so that more and more players can enter this sector,” says Ashwini Vaishnaw, Telecom Minister.
The relief package focuses on telecommunications service providers such as Vodafone Idea and Bharti Airtel that are on the brink of going bankrupt and have to clear a huge amount as part of Adjusted Gross Revenue (AGR) dues. The importance of saving these companies has already been specified by various research firms such as credit rating agency Icra. Icra said in its statement that the survival of these telecom companies is important as its absence would effectively reduce the private telecom space to a duopoly, a development that could be ultimately harmful for consumers.
Create Employment Opportunity
This relief package provides relaxation to telecom companies and in long run it is expected to protect and generate employment opportunities, promote healthy competition, protect interests of consumers, infuse liquidity, encourage the investment from big players and reduce the regulatory burden on the Telecom Service Providers (TSPs). Also, the moratorium provided by government on issues related to Adjusted Gross Revenue will offer space to the cash strapped firm to improve its business and clear dues over a longer period.
Rationalised Spectrum Charges
This relief package will rationalise the spectrum charges that telecom firms have to bear. The monthly compounding of interest on the usage of spectrum charges will be replaced by annual compounding and the interest rate will be decreased. This has been a long standing demand of the telecom industry especially by Vodafone Idea and Bharti Airtel. Industry experts believe that telecom industry which is reeling under financial stress, might get a breather soon due to this relief package.