4-year moratorium for AGR contributions, 100% FDI, rationalization of BGs, KYC standards

Granting significant relief to telecom service operators, the Union Cabinet on Wednesday announced a moratorium or postponement of up to four years in annual dues payments resulting from the Adjusted Gross Income (AGR) judgment or adjudication. spectrum payments. The Council of Ministers headed by Prime Minister Narendra Modi decided to bring nine structural reforms and five procedural reforms as well as relief measures for the telecommunications sector. The Firm also decided to streamline the Know Your Customer (KYC) procedure for subscribers. The Cabinet also decided to authorize 100% of foreign direct investment (FDI) automatically to encourage investment in the telecommunications sector. The package is expected to stimulate the proliferation of 4G, inject liquidity and create an environment conducive to investment in 5G networks.

The Cabinet approved measures to meet the liquidity needs of all telecommunications service providers (TSPs). It includes a moratorium or deferral of up to four years in annual payments of contributions arising from the AGR judgment, however, by protecting the net present value (NPV) of the amounts owed protected. “Moratorium or deferral on payments due for spectrum purchased in past auctions, excluding the 2021 auction, up to four years with NPV protected at the interest rate stipulated in the respective auctions,” states he in a press release.

The Union Cabinet also offered TSPs the option of paying the amount of interest arising from the moratorium on equity payments.

For the option to convert the amount due on the deferred payment into equity at the end of the moratorium or deferral period, the Ministry of Finance (MoF) will finalize the guidelines.

“This will be applicable to all TSPs and will provide relief by facilitating liquidity and cash flow. It will also help various banks with substantial exposure to the telecommunications sector, ”the government said.

The Firm also decided to introduce Know Your Customer (KYC) reforms, allowing app-based auto-KYC and lowering the e-KYC rate to Re1. In a tweet, Ashwini Vaishnaw, Minister of Railways, Communications, Electronics and Information Technology, says a telecommunications subscriber can change their plan from prepaid to postpaid and vice versa without undergoing a new one. KYC.

Here are the structural reforms announced by the Union cabinet …

1. Rationalization of adjusted gross income-AGR: Non-telecom revenues will be prospectively excluded from the definition of the AGR.

2. Streamlined Bank Guarantees (BG): Considerable reduction in BG requirements (80%) compared to license fees (LF) and other similar levies. No requirement for multiple BGs in different Licensed Service Area (LSA) regions of the country. Instead, a BG will suffice.

3. Rationalized interest rates / Penalties eliminated: As of October 1, 2021, late payment of License Fee (LF) / Spectrum Usage Fee (SUC) will result in a lending rate interest rate based on the marginal cost of funds (MCLR) of the State Bank of India (SBI) grossed up 2% instead. MCLR plus 4%; interest compounded annually instead of monthly; penalty and interest on penalties eliminated.

4. For auctions held now, no BG will be required to guarantee installment payments. The industry has matured and the past practice of BG is no longer required.

5. Spectrum duration: In future auctions, the spectrum duration has been reduced from 20 to 30 years.

6. Abandonment of the specter will be authorized after 10 years for frequencies acquired in future auctions.

7. No spectrum usage fees (SUC) for spectrum acquired in future spectrum auctions.

8. Spectrum sharing encouraged- additional 0.5% SUC for the sharing of the deleted spectrum.

9. TO encourage investment, 100% automatic foreign direct investment (FDI) authorized in the telecommunications sector. All guarantees will apply.

Here are the procedural reforms announced by the Union cabinet …

1. Corrected auction calendar – Spectrum auctions are normally held in the last quarter of each financial year.

2. Ease of doing business promoted – the onerous licensing requirement under the 1953 Customs Notification for wireless equipment has been removed and replaced by self-declaration.

3. Know Your Customers (KYC) reforms: Auto-KYC (app based) allowed. E-KYC rate revised to one rupee. Switching from prepaid to postpaid and vice versa will not require a new KYC.

4. Paper customer acquisition forms (CAF) will be replaced by digital data storage. Almost 300-400 crore of paper CAF in various TSP warehouses will not be needed. The CAF warehouse audit will not be necessary.

5. SACFA authorization for telecommunications towers is relaxed. The Department of Telecommunications (DoT) will accept the data on a portal based on self-reporting. Portals of other agencies (such as civil aviation) will be linked to the DoT portal.

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