India announces major telecoms reforms to boost industry

The Union Cabinet approved on Wednesday several structural and process reforms in a relief package targeting the telecom sector to ensure its healthy growth in a digital era.

In a move lauded by industry players as a positive step towards promoting the industry and addressing long-standing concerns, the reforms are expected to foster healthy competition, protect the interests of consumers, infuse liquidity, encourage foreign investment and reduce regulatory burden on telecom service providers (TSPs).

These reformatory measures will fuel the proliferation and penetration of broadband and telecom connectivity, which has witnessed heightened demand against a pandemic backdrop, where activities such as work from home and remote learning have driven an unprecedented surge in data consumption.

The measures comprise nine structural reforms and five procedural reforms plus relief measures for TSPs. Bringing respite to the industry, all TSPs have a four-year moratorium for payment of adjusted gross revenue (AGR) due. According to minister Ashwini Vaishaw, the moratorium will ensure significant cash flow for telecoms without affecting the government’s revenue. This will help India’s telecom giants address prevailing cash flow issues, enabling them to conserve capital to fund capital expenditure and invest in 5G. Vodafone Idea, for instance, will be able to defer payments of about Rs 96,000 crore.

To encourage foreign investment, another structural reform includes 100% foreign direct investment (FDI) under automatic route permitted in the telecom sector, though neighbouring countries including Pakistan and China will not be allowed to invest under the automatic route. Previously, only 49% was under the automatic route.

In addition, spectrum sharing will also be made free, with an additional spectrum usage charge (SUC) of 0.5% for spectrum sharing being scrapped. There will also be no SUC for spectrum required in future spectrum auctions.

The Cabinet also announced that there is no need for separate KYC to switch from postpaid to prepaid, or vice versa.

Currently, India is the world’s second-largest telecommunications market with a subscriber base of 1.16 billion. These reforms demonstrate the government’s commitment towards building the nation’s digital future.