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Relief Package for Telcos, Other Key Measures Union Cabinet Likely to Announce Today

The Union Cabinet is likely to discuss a relief package for the financially stressed telecom sector on Wednesday, sources told News18. In addition to this, one can expect news from PLI to minimum support price of Rabi crop. However, all eyes are on the relief package for the telecom sector who all are reeling under stress and is struggling to come out of the gloom. On the relief front, the telecom sector can expect a relaxation on payment of levies to the government including a one-year moratorium on spectrum installment due in April 2022.

There is an expectation that the government will help the cash-strapped telcos to raise funds with the help of letters of comfort provided by the government. These telcos can explore the innovative method of InvIT and REIT, which works like mutual funds. And in case of raising funds, this letter of comfort would help the telcos. Apart from these measures, in a bid to provide more relief to the telcos is considering the option of allowing the license fee to be paid by the companies annually, which is currently paid in four quarterly investments. This step by the government, if passed, will be a gamechanger for the telecom sector as this will reduce the debt of the companies in the long run.

According to rating agency ICRA, Telecom companies in India are likely to witness a rise in their debt levels to Rs 4.7 lakh crore by March 2022 despite tariff hike. The ratings firm also stated that the tariff increase is expected to drive revenue growth in FY2022, touching Rs 220 ARPU (Average Revenue Per User) in the medium term. ARPU is an important metric to track the performance of the telecom operators. It is the amount of money the average user contributes to revenue.

“Debt continues to remain the Achilles’ heel of the industry. Although sizeable deleveraging was done in FY2020, which along with moderation in capex intensity has resulted in a decline in debt to Rs. 4.4 lakh crore as on March 31, 2020; and though improvement in cash flow generation is anticipated, the debt levels are expected to increase further to Rs. 4.7 lakh crore as on March 31, 2022,” ICRA said in a report.

The reason behind the rise in debt levels is because of the accumulation of AGR (Adjusted Gross Revenue) liabilities in debt, besides the proposed spectrum auctions, the report noted. According to data released by the Telecom Regulatory Authority of India (TRAI), the industry revenues in the first half of FY21 surged 25 per cent on-year, while the ARPU rose from Rs 74 to Rs 90.

The Supreme Court had last September allowed telcos 10 years for staggered payment of the AGR (adjusted gross revenue) money while reaffirming the dues raised by DoT. But earlier this year, Bharti Airtel and Vodafone Idea had moved the court pointing out anomalies in the calculation of the total AGR dues which stood at Rs 43,000 crore for Bharti Airtel and Rs 58,000 crore for Vodafone Idea.

Apart from a big relief for telcos, the Union Cabinet is likely to approve a production linked incentive (PLI) scheme for man-made fibre segment and technical textiles with a financial outlay of Rs 10,683 crore over five years to boost domestic manufacturing and exports from the sector, an official said. The Cabinet had earlier approved PLI schemes in 13 key sectors for enhancing India’s manufacturing capabilities and exports.

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