Cabinet approves 4-year moratorium for telecom companies

In a much-awaited relief, the Union Cabinet on Wednesday approved a relief package for the country's cash-strapped telecom sector, along with several structural reforms to strengthen the sector. All those who will avail of the moratorium will have to pay some interest, minister Ashwini Vaishnaw announced. The moratorium will start from October 1, the Cabinet said.

The package comes six weeks after Kumar Mangalam Birla resigned from teh chairman post of Vodafone Idea Limited on August 4. Vodafone, which was created from the merger of British telecom giant Vodafone's India unit and Birla's Idea Cellular Ltd, has to pay about ₹50,399.63 crore in statutory dues dating back over past many years.

The relief package will include a moratorium on payments for airwaves and is aimed at helping Bharti Airtel, Reliance Jio and Vodafone Idea. Shares in wireless carriers Bharti Airtel rose 5.4% and Vodafone Idea went up 2.9% after the news surfaced.

The relief package for the ailing sector, which might have the option for the telecom firms to convert interest on spectrum dues of the four-year moratorium period into government equity, was long due.

Last year, the Supreme Court passed a ruling asking Bharti Airtel and Vodafone Idea to clear the government dues which hit the sector hard. Banks led by theState Bank of India have called on the government to give Vodafone Idea more time to clear its tax dues.

Overall, the telecom relief package is likely to outline reforms for the sector by way of granting a moratorium on unpaid dues, redefining AGR (Adjusted Gross Revenue) prospectively and cutting Spectrum Usage Charges, a source said to PTI.

Bharti Airtel chairman Sunil Mittal recently pitched for a hike in tariffs and a cut in government levies to save the industry. Mittal had said while 35 per cent of the industry's revenue goes to the government in taxes and levies, telcos are loaded with an extraordinary debt of AGR (Adjusted Gross Revenue) dues and spectrum payments.