The government is preparing a long-term aid package for the telecommunications sector as some telecommunications companies run into financial difficulties. The recent Supreme Court ruling on the Adjusted Gross Revenue (AGR) case has made matters difficult for two major telecommunications companies – Vodafone Idea and Bharti Airtel.
It was a few days ago reports that the government is planning a long-term aid package for the telecommunications sector. The aid package is expected to provide relief from many of the controversial issues plaguing telecommunications companies.
Several government officials have shared details of the telecommunications sector aid package, which will include a plan to redefine AGR fees and eliminate “non-telecom items”.
RELIEF PACKAGE UNTIL THE END OF AUGUST?
The aid package is expected to provide massive relief to the legacy telecommunications companies that have to repay a large amount of AGR fees and frequency fees.
The proposal for the telecommunications sector aid package will be sent to the Treasury Department next week, reported The economic time. If the package is approved, an announcement is likely by the end of the month.
An official confirmed to the release that the telecommunications department’s aid package will allow telecommunications companies to divest unused spectrum, reduce bank guarantees and phase out levies.
The biggest relief for the sector, however, will be to redefine AGR fees to exclude non-telecom items. All of these changes are expected to provide long-term relief for the telecommunications sector, especially the heavily stressed telecommunications providers like Vodafone Idea.
VODAFONE IDEA CALL FOR HELP
Vodafone Idea, the telecommunications company with the largest share of AGR contributions, is on the verge of collapse as it failed to raise sufficient capital after receiving approval from shareholders last year.
The debt-laden telecommunications company has already stated that it is not generating the operating profit required to pay the AGR contributions by March 31, 2031.
Also read | Vodafone Idea records the highest loss ever by an Indian company in FY20 at Rs 73,878 cr
Vodafone Idea, along with Bharti Airtel and Tata Teleservices, had previously approached the Supreme Court to request a recalculation of their outstanding AGR fees, which were set by the Department of Telecommunication (DoT). But the supreme court declined the request and made it clear that the telcos must pay their outstanding AGR fees on time.
With nothing to be said for Vodafone Idea, Aditya Birla Group chairman Kumar Mangalam Birla wrote a letter to Cabinet Secretary Rajiv Gauba in June offering to hand over his 27 percent stake in the ailing telecommunications company to the government or another company, the the government may consider.
In the June 7 letter, Birla said investors were unwilling to invest in the telecommunications company as several issues, including AGR liability, remain unclear. He also said Vodafone Idea will face an “irreversible collapse” without immediate active government support.
“Out of a sense of duty to the 27 million Indians connected by VIL, I am more than willing to share my stake in the company with any corporation – the public sector / government / domestic financial entity or any other that the government may contemplate. to hand over.” worthy of keeping the company going, “said Kumar Mangalam Birla in the letter.
However, senior government officials have told ET that no proposal has yet been considered. As a result, the government continues to focus on providing aid only through the aid package.
On July 23, the CEO of the Vodafone Group, Nick Read, also admitted that the situation in his Indian telecommunications joint venture is “extremely tense”. He also added that the UK company Vodafone Idea will not bring in “additional equity”.
Read also made clear that its profitability depends on refinancing the debt due to pay, monetizing assets, government support on issues such as AGR, minimum prices and fundraising.
It should be noted that Vodafone Idea has not yet had to report a quarterly profit since the merger of Vodafone India and Idea Cellular on August 31, 2018.
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