The government has amended the telecom licence rules to rationalise the interest rate for delayed payment of licence fees.

The amendment comes into effect from October 1. The move is expected to ease the financial burden on the telecom sector.

The department of telecommunications (DoT) will now charge 2 per cent interest above the one-year marginal cost of lending rate (MCLR) of State Bank of India for any delay in the payment of licence fees or any other statutory dues and the interest will be compounded annually.

Earlier, telecom firms were required to pay 4 per cent interest above the one-year MCLR of the SBI and the interest was compounded monthly.

The reduction in the telecom fees had been announced when the government unveiled its reforms for the sector last month.

The DoT has also removed the licence clause under which telcos were charged a penalty equivalent to 50 per cent of the short payment they made for licence fee. The penalty was imposed if short payment was more than 10 per cent of the payable licence fees.

The earlier levies were one of the main reasons why a legacy telecom player like Vodafone was forced to the brink of collapse because of a mountain of dues for which it made no provisions while pursuing a two decade-old lawsuit against the authorities that it eventually lost in October 2019.

The Supreme Court had upheld the government’s claim of Rs 1.47 lakh crore against 16 telecom players, many of which have since shuttered operations.

The basic dues were around 26 per cent while 74 per cent component of the total demand got accumulated on account of interest on this amount, penalty and interest on penalty.

Meanwhile, the DoT has cancelled letters of intent (LoIs) issued to 71 firms for providing internet service as virtual network operators. The virtual network operator permit allows firms to resell internet services of telecom companies under their own brand.

The LoIs had been issued to the firms but they had failed to initiate further action even after the extension of deadlines.

The applicant companies were required to submit the compliance status within a period of 60 days.