Modi government extends Rs 42,000 crore lifeline to bleeding telecom operators

Elon Musk's Starlink could bring faster, more affordable internet to India's rural areas, but spectrum allocation is a key hurdle.

The Union cabinet on Wednesday offered some relief to the ailing telecom sector by approving a two-year moratorium on the payment of spectrum fees dues. This will offer a Rs 42,000 crore lifeline to struggling telecom service providers Airtel and Vodafone Idea, which will get an option to defer payment of installments for financial years 2020-21 and 2021-22. They can pay the deferred amounts and interest along with the remaining installments. But the cabinet did not offer any relief on the Rs 1.47 lakh crore tax demand on the Adjusted Gross Revenues upheld by the Supreme Court in a October 24 ruling. The telcos had said they will challenge the judgement.

The cabinet decision will be implemented in two weeks. Vodafone idea with a spectrum payment liability of Rs 23,920 crore will be biggest beneficiary of the decision. Airtel will get relief on Rs 11,746 crore and Reliance Jio on Rs 6,670 crore. The deferment of spectrum payment will ease the cash outflow situation of the telcos and help them maintain the quality of services.

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The telecom industry has debt to the tune of Rs 7 lakh crore. The sector is facing a big crisis with two large service providers reporting record losses for the second quarter of the financial year. While Vodafone idea recorded a loss of Rs 50,922 crore, the highest quarterly loss by an Indian company, Airtel reported a Rs 22,830 crore loss. The operators have clarified that their financial position is untenable and their very survival is dependent on help from the government.

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The industry is facing a precarious position where close to a third of revenues goes to the government in the form of spectrum fees and taxes. The government also charges them a spectrum allocation fee upfront.