The government plans to come out with a relief package for the telecom sector, burdened by huge dues in adjusted gross revenues that threaten to turn the industry into a duopoly even as a relief package gives the operators access to funds for investment.

Sources said the department of telecommunications is working out the package and will hold discussions with the finance ministry before it is finalised and sent to the Union cabinet for approval.

They said the package could come out this month itself as delay even by a day will further weaken the sector. Besides, the sops would give the operators enough time to plan out their strategies for the 5G spectrum auction.

The broad contours of the package, sources said, seem to have figured during a meeting of Aditya Birla Group (ABG) chairman Kumar Mangalam Birla and Vodafone Global head Nick Read with the Union minister of telecom Ashwini Vaishnav last week.

Possible measures

The government may reduce the revenue share licence fee to 6 per cent of the operators’ adjusted gross revenue (AGR) from 8 per cent now. This would be done by reducing the component of universal service obligation levy to 3 per cent from 5 per cent.

This reduction in the licence fee by two percentage points will provide a relief of around Rs 3,000 crore annually to the operators.

The moratorium for spectrum payments may also be extended by a year or two. In November 2019, the government had offered the moratorium till 2021-22. Finance minister Nirmala Sitharaman had said the industry was being handed out a Rs 42,000- crore lifeline.

The DoT is likely to recommend changes in the foreign direct investment (FDI) norms. Although 100 per cent FDI is allowed, only up to 49 per cent is via the automatic route, with government approval required for the rest. The level of automatic inflow can be increased to 74 per cent of FDI.

Telecom operators’ association COAI in a letter to the government had urged doubling the tenure of auctioned radio wave holdings, along with a 7-10 year moratorium for spectrum payments.

The association, whose members include Vodafone Idea, Bharti Airtel and Reliance Jio, had suggested reducing the licence fee, the universal service obligation levy and spectrum usage charges to cover administrative and regulatory costs.

The industry wants a licence fee of 1 per cent of AGR against 3 per cent now. It has also advocated a reduction in the universal service obligation levy. Besides, the interest rate on deferred spectrum payment liabilities should be reduced to 4 per cent for all current and future payments, including AGR payments.

Dues to banks

The collapse of Vodafone Idea would have larger implications as banks have a exposure in the telecom player.

As many as eight banks have lent to Vodafone Idea, with SBI the most at Rs 11,000 crore. Other lenders include IDFC First (Rs 3,240 crore), Yes Bank (Rs 4,000 crore), IndusInd Bank (Rs 3,500 crore), Punjab National Bank (Rs 3,000 crore), ICICI Bank (Rs 1,700 crore), Axis Bank (Rs1,300 crore) and HDFC Bank (Rs 1,000 crore).

According to official data, VIL had an adjusted gross revenue (AGR) liability of Rs 58,254 crore out of which the company has paid Rs 7,854.37 crore and Rs 50,399.63 crore is outstanding. The telco has to pay nearly Rs 1,500 crore to the DoT as AGR every quarter over the next 10 financial years between 2021 and 2031.

Vodafone Idea’s gross debt, excluding lease liabilities, stood at Rs 180,310 crore as on March 31, 2021. The amount included deferred spectrum payment obligations of Rs 96,270 crore and debt from banks and financial institutions of Rs 23,080 crore apart from the AGR liability.