Ground Report | New Delhi: 100% FDI in Telecom sector; The government on Wednesday announced major reforms in the telecom sector. Under this, with the approval of the relief package for the telecom sector, 100 percent foreign direct investment (FDI) has been allowed through the automatic route.
100% FDI in Telecom sector
Briefing reporters about the decisions taken by the cabinet, Telecom Minister Ashwini Vaishnav said that nine structural reforms were approved for the telecom sector. The definition of AGR, which was a major cause of tension in the sector, has been rationalized by excluding non-telecom revenues of telecom companies. AGR refers to the revenue which is considered for payment of statutory dues.
“The cabinet has approved a moratorium of 4 years on payment of statutory dues by telcos. Telcos to pay interest on the moratorium period,” the Telecom Minister said.
In the relief package, a moratorium has been given for four years on the payment of statutory dues on the telecom companies.
What does relief mean?
- Notably, the new FDI rule will be applicable to all sectors of the telecom sector.
- While 100% FDI was already allowed in this sector, only 49% was allowed under the automatic route.
- For the rest, it required government approval for security concerns. Thus, the new FDI rule will enable foreign investors to invest without requiring prior approval from the Reserve Bank or the government.
China, Pakistan will not be allowed to invest through automatic route
- Allowing 100% FDI through automatic route was under consideration of the Telecom Commission since 2017. However, this automatic route-policy will not apply to firms in India’s neighboring countries such as Pakistan and China.
- This April, the government made some policy changes that require companies from any country sharing a border with India to approach the government for investment.
What else did the cabinet approve today?
- Telecom Minister Ashwini Vaishnav said that the cabinet has approved nine structural reforms for the telecom sector. He said the cabinet has approved rationalization of spectrum user charges, among other things.
- To ease the cash flow issues faced by many telecom companies, Vaishnav said the government has decided to rationalize the definition of AGR. AGR has been redefined to exclude non-telecom revenue of telecom companies.
AGR is a major reason for the tension in the telecom sector
- AGR has been a matter of dispute between the government and telecom companies for years. This is considered a major cause of tension in the region. AGR refers to the usage and license fee that telecom operators pay to the government.
The Telecom Minister said that all the decisions have been taken keeping in mind the guidelines of the Supreme Court and the revenue of the government.