Ordinance plan for telecommunications reform

The Center is expected to issue an ordinance to implement some of the reforms announced in the telecom package last week.

The four-year moratorium on the reimbursement of Adjusted Gross Income (AGR) contributions cannot come into effect without the Ordinance in light of the Supreme Court’s verdict which imposed their payment in 10 installments until 2031.

Officials from the Department of Telecommunications (DoT) said the spirit of the Supreme Court’s order had been the guiding principle of Cabinet relief last week. Officials said the reliefs would not affect revenue collection.

They stressed that the interest that had to be paid if an operator opted for the moratorium would be such that the net present value of contributions would remain unchanged.

The legislative route is envisaged because it would deal not only with the moratorium but also with the new definition of the AGR to be taken into account prospectively for the calculation.

Officials said talks were at an early stage and nothing was finalized.

There were a few potential elements in the package: Late payment of license fees and spectrum usage fees will result in interest to be charged at 2% above the marginal cost of the funds-based lending rate (MCLR ) of the State Bank of India, which is currently indexed at 7 percent. Previously, interest was charged at 4 percent above the MCLR rate. In addition, there will be full exemption from penalties and interest on penalties – the two charges that have led to the increase in contributions from telecommunications companies.

Since these will be implemented prospectively, there may not be a need to pass an order on them at this time, as they do not violate the terms of the Supreme Court’s verdict.

But the government can also choose to include these elements in the ordinance and then hope to pass the appropriate legislative amendments during the budget session.

The cabinet had given the possibility to operators to convert the interest of the moratorium into equity.

In addition, the government will have the option of converting moratorium contributions into equity. The guidelines on these counts will be finalized by the Ministry of Finance.

However, analysts said it was not clear whether the government would have the option of converting only principal or even interest into shares after the moratorium ends.