The Union Cabinet of India has approved a four-year moratorium on dues for the telecom sector, as well as rationalised the controversial definition of Adjusted Gross Revenue (AGR).

This much-anticipated and awaited move comes as a massive relief to Communications Service Providers (CSPs), particularly Vodafone Idea, which is close to declaring bankruptcy because of huge debt.

In a media briefing, Telecom Minister Ashwani Vaishnaw stated that the reforms will help change the framework of the entire telecom industry.

The key aspects of the relief measures include a four-year moratorium on payment of statutory dues for both AGR and spectrum charges, redefining AGR by excluding non-telecom revenue of telecom companies, and allowing 100% Foreign Direct Investment (FDI) through the automatic route.

Additionally, the way interest and penalty on license fee and other charges were calculated has been reformed. The Government will now follow the annual compounding of interest rates approach instead of the prior practice of monthly compounding.

The announcement added that from now on, spectrum auction would be for a period of 30 years instead of the previous 20 years. After completing the 10-year lock-in period, the telecom player will have the option of surrendering by paying a fee. The Government has also allowed spectrum sharing at no additional charges.

This move will not only provide the much-needed relief to telecom companies such as Vodafone Idea but will also be instrumental in boosting the growth of the industry. Currently, AGR dues on Vodafone Idea are a staggering INR547.5 bn ($7.45bn), Reliance Communications INR241.940 bn ($3.29 bn), Tata Group INR126 bn, and Aircel INR123.89 bn ($1.68 bn). Reliance Jio and Airtel are not liable to pay past AGR dues on Reliance Communications and Aircel, respectively, for using their spectrum. They only owe AGR charges for the period in which the spectrum was used.

The new measures will help ailing telcos salvage their competitive edge, improve global investor confidence and help millions keep their jobs. Most importantly, the relief package is designed to help Vodafone Idea, which was close to bankruptcy and consequently, it prevents India from becoming a duopoly.