TBA Explainer: Modi Govt approves relief package for India’s ailing telecom sector. Here’s what it means

The Union Cabinet has cleared a relief package for the embattled telecom sector, in a move to provide relief to companies weighed down by huge Adjusted Gross Revenue (AGR) dues. 

The package would provide relaxation to telecom companies on payment of their long outstanding dues, including a four-year moratorium on spectrum instalment which is due in April 2022, and discontinuation of spectrum usage charges. 

Additionally, telecom companies may also get an option to convert interest on their spectrum dues amounting to four-year moratorium, into equity.

5 Things to Know:

1. The relief package will provide relief to India’s three major wireless carriers, i.e. Reliance Jio, Bharti Airtel and especially, Vodafone Idea. Vodafone Idea, which was created from the merger of British telecom giant Vodafone’s India unit and Birla’s Idea Cellular, owes ₹ 50,399.63 crore in statutory dues to the government.
2. The telecom sector was hit by the Supreme Court ruling last year, making it mandatory for Bharti Airtel and Vodafone Idea to pay their pending dues to the government. The telecom companies, including Bharti Airtel, Vodafone Idea and Reliance Communications, owed around ₹ 92,000 crore to the government as license fee and ₹ 41,000 crore as spectrum usage fees, according to the telecom department.
3. Earlier in 2016, the telecom sector saw an upheaval with the entry of Jio into the market. With its free voice and cut-price data plans, Jio pushed many rivals out of the market and led to the merger of Vodafone’s India unit and Birla’s Idea Cellular into Vodafone Idea.
4. Kumar Mangalam Birla, former chairman of Vodafone Idea, wrote to the cabinet secretary in July, offering his stake in Vodafone Idea to the government or any company approved by the government for free. And on August 4, Mr Birla resigned as the chairman of Vodafone Idea.
5. Earlier this week, banks led by State Bank of India called on the government to give Vodafone Idea more time to clear its tax dues.