On 15th of September 2021, the Indian government has decided to bring reforms in the Telecom sector being the back bone of digital vision. It’s a real delight to see that government has come with a relief and administrative demand for the industry. Today there is a huge demand in the telecom sector. Before this using mobile device where only limited it was only for the purpose of communication. Today its service is catering to the demand in the field of Banking, security, entertainment, shopping, employment & even education. In this pandemic both students and teachers are communicating and online study is in progress. Even work related meetings are taking place virtually through Online. So the demand has increased. Telecom industry has also contributed in the field through generating employment.
Realizing unprecedented demand the Central Government has opted to bring some new reforms in the sector.
The Union Cabinet, chaired by the Hon. Prime Minister Shri Narendra Modi, has approved a number of structural and process reforms in the Telecom sector. These are expected to protect and generate employment opportunities, promote healthy competition, protect interests of consumers, infuse liquidity, encourage investment and reduce regulatory burden on Telecom Service Providers (TSPs).
The package is also expected to boost 4G proliferation, infuse liquidity and create an enabling environment for investment in 5G networks.
Nine structural reforms and Five procedural reforms plus relief measures for the Telecom Service Providers are as below:
1. Rationalization of Adjusted Gross Revenue (AGR): Non-telecom revenue will be excluded on prospective basis from the definition of AGR.The charges are calculated based on all the revenues earned by a telecom including non-telecom related sources such as deposit interests and asset sales. AGR is the usage and licensing fee that telecom operators are charged by the Department of telecommunications (DoT). Previously it was decided that Spectrum usage charges and licensing fees pegged between 3% to 5% and 8% respectively. It was a long pending issue & demands raised by the telecom companies.The Hon. Court has dismissed the plea of telcos seeking rectification of alleged errors in calculation of AGR.
2. Four-year Moratorium on payment of statutory dues by telecom- The Hon. Supreme court has allowed telecom companies 10 years time to pay their AGR dues to the government. Thus the Union government has decided to give time of 4 years moratorium on payment of spectrum dues. Those company opting towards the service will be required to pay interest on the amount availed under the benefit.
3. Interest rates rationalized/ Penalties removed: MCLR (Marginal Cost of Funds based lending rate) it is the lending rate below which banks are not permitted to lend. (From 1st October, 2021, Delayed payments of License Fee (LF)/Spectrum Usage Charge (SUC) will attract interest rate of SBI’s MCLR plus 2% instead of MCLR plus 4%; interest compounded annually instead of monthly; penalty and interest on penalty removed.
4. Fixed Calendar for Spectrum Auction- The Union government has decided that spectrum auction will be held in the last quarter of every financial year. This move will also promote other players to participate. Spectrum auction in India is a market where the existing companies should provide best quality services where some companies are focused more in money value services.
5. Spectrum Tenure: In future Auctions, tenure of spectrum increased from 20 to 30 years. Apart from this, a telecom company will be allowed to surrender its spectrum after completing its tenure of 10 years (lock in period) from the date of purchase.
6. Know your Customer Reform- The telecom companies were already urging with the government to scrap the Aadhar based e-KYC which was considerably very high price of Rs. 41. Application based self e-KYC will be permitted only and the rate has been revised of Rs 1 & switching from pre-paid to post paid and vice-versa will not required fresh KYC.
7. Customers Acquisition Forms to be stored digitally- Paper CAF (Customers Acquisition Forms) will be replaced by digital storage of data. Many forms are lying in office premises & warehouses of TSPs (Telecom service provider). The process has already been taking place where to acquire new sim card one is required to submit electronically. This will boost digital India campaign. SACFA (Standing Advisory Committee on Radio Frequency Allocation) clearance for telecom towers eased. DOT will accept data on a portal based on self-declaration basis. Portals of other Agencies (such as Civil Aviation) will be linked with DOT Portal. Warehouse audit of CAF will not be required. This will also promote in ease of doing business.
8. Spectrum sharing Fee- Spectrum Usage Charges (SUC) 0.5% for spectrum sharing removed. One should understand what is spectrum is a range of electromagnetic waves and when we talk about telecom spectrum, we’re talking about the frequencies that are used to transmit sound and data across the country to our phones. Every telecom operator has been assigned certain portions of spectrum to use in India, through auctions and administrative allocations. Essentially, you have spectrum “bands”, and frequencies around a particular band are then auctioned off.
9. 100% FDI via automatic route approved:-To encourage investment,Now that with the new reforms the government has provided relief to the telecommunication sectors by providing them 4 years moratorium on AGR dues and rationalized in the definition of AGR and allowing 100% FDI( Foreign Direct Investment) through the automatic routes.100% Foreign Direct Investment (FDI) under automatic route permitted in Telecom Sector. All safeguards will apply. Before this reforms only 49% FDI were permitted via automatic route anything above were permitted but had to go necessarily through government route.