Cabinet may consider relief package for telecom sector on Wednesday

The Union Cabinet may consider on Wednesday a moratorium on payment of spectrum dues by telecom firms as part of a package for the sector aimed at giving relief to companies such as Vodafone Idea that have to pay thousands of crores of rupees in unprovisioned past statutory dues.

The relief package under consideration includes telecom firms getting an option to convert interest on spectrum dues of the four-year moratorium period into government equity, three sources with the knowledge of the development said.

The move comes six weeks after billionaire Kumar Mangalam Birla resigned as chairman of beleaguered Vodafone Idea Ltd (VIL) on August 4.

VIL's August 4 intimation about the top-level changes had come on a day stock exchanges seeking clarification from the company over the widely reported June 7 letter of Birla to the Cabinet Secretary offering his stake in Vodafone Idea to the government or any company approved by the government for free.

VIL, which was created from the merger of British telecom giant Vodafone's India unit and Birla's Idea Cellular Ltd, has to pay about Rs 50,399.63 crore in statutory dues dating back over past many years.

Some within the government are, however, questioning using taxpayer money to bailout telcos who had failed to provision for statutory dues during the pendency of legal cases.

Overall, the telecom relief package is likely to outline reforms for the sector by way of granting moratorium on unpaid dues, redefining AGR (Adjusted Gross Revenue) prospectively and cutting Spectrum Usage Charges, a source said.

The package, which initially was widely expected to be taken up by the Cabinet last week, will offer a breather to the three private player industry, at a time when VIL is confronting existential crisis.

Sources said that the measures will be prospective, and will pave the way for reforms in the sector.

Among the measures being discussed are a four-year moratorium on payments, AGR and spectrum, redefinition of AGR to exclude non-telecom items, and a cut in SUC, sources said, adding that these concrete measures are expected to ease the cash flow issues being faced by some players in the industry.

The steps being deliberated will offer immediate relief to the sector, they said adding that there is also a component of equity-related conversion, that is being mulled, which, if accepted, will offer a gesture of goodwill and help companies raise funds.

Vodafone Idea, in its annual report, has flagged the industry's "unsustainable financial duress" and hoped that the government would provide the necessary support to address "all structural issues" faced by the sector.

The total gross debt (excluding lease liabilities and including interest accrued but not due) as of June 30, 2021 of VIL stood at Rs 1,91,590 crore, comprising of deferred spectrum payment obligations of Rs 1,06,010 crore and adjusted gross revenue (AGR) liability of Rs 62,180 crore that are due to the government.

Industry analysts too have been sounding an alarm over the risks of the Indian telecom market turning into a duopoly.

Apex association COAI recently made a strong pitch for cut in levies, doubling tenure of auctioned radiowave holdings, along with 7-10 year moratorium for spectrum payments, to address viability concerns of the sector.

Last month, Sunil Mittal, Chairman of India's second largest telecom company Bharti Airtel, had made a passionate pitch for hike in tariffs and a cut in government levies to save the industry.

Mittal had said while 35 per cent of industry's revenue goes to the government in taxes and levies, telcos are loaded with an extraordinary debt of AGR (Adjusted Gross Revenue) dues and spectrum payments.

Levies are far too high in the telecom sector, Mittal had said adding that "levies and load on industry needs to be brought down" for India to truly realise its digital vision.