The Centre on Wednesday formally notified 100 per cent inflow of foreign direct investment into the telecom industry via the automatic route, following the Cabinet approval last month, resulting in a positive push for telecom sector shares.
The Department for Promotion of Industry and Internal Trade said the Centre reviewed the extant of FDI policy on telecom sector and made amendment under the Consolidated FDI Policy Circular of 2020.
Under the amendment, 100 per cent FDI via the automatic route will be allowed into telecom services including telecom infrastructure providers 'Category-I'. In financial parlance, under this route no prior permission from the Centre or RBI is required by a foreign entity before making an investment.
Last month, the Union Cabinet allowed for 100 per cent FDI under the automatic route. On its part, India Inc welcomed the move and market reacted with a considerable push for telecom sector shares in the week.
According to Lt Gen Dr S.P. Kochhar, DG, COAI: "The FDI approval will help the industry to build a robust telecom sector for new India. Through the amendment in license agreements, telecom service providers will be eased off the huge burdens of bank guarantees and will enable the availability of more funding for the expansion of the telecom network and build a 'Digitally Connected India'."
"Further, 'SACFA' clearance based self-declaration will facilitate ease of doing business and will help in the faster rollout of services to the citizens."
In a decision that could be a life-saving development for the beleaguered telecom sector, the Union Cabinet today approved a relief package. The Union Cabinet made a series of changes for the sector.
The most important amongst all the issues was the amendments in the definition of Adjusted Gross Revenue (AGR). The center has now removed all the non-telecom revenue from AGR. Moreover, it has also imposed a four-year moratorium on AGR-related dues, giving cash-strapped telcos more time to strengthen their businesses and pay off their debts.
Another significant announcement includes the rationalization of spectrum pricing that telecom companies must pay. Monthly compounding of interest on spectrum usage charges will be replaced with annual compounding, resulting in a lower interest rate based on the formula MCLR + 2%.
In an official note, the cabinet announced, "These are expected to protect and generate employment opportunities, promote healthy competition, protect interests of consumers, infuse liquidity, encourage investment and reduce the regulatory burden on Telecom Service Providers (TSPs)."
100% FDI in Telecom
As part of its complete package for the telecom sector, the Centre has also declared 100 percent foreign direct investment (FDI) through the automatic route in the telecom sector. Up to 49 percent has been allowed to go through the automatic way so far, with everything after that having to go through the government channel. These initiatives are intended to help some industry companies with their cash flow problems.