Telecommunications department cuts interest rates on late royalty payments

The Department of Telecommunications (DoT) amended the license conditions, lowering the interest rate for deferred payment of license fees and removing items such as penalties and interest on penalty. The move is part of broader reforms announced earlier this month aimed at easing the financial burden on the telecommunications sector and retaining the structure of the market, which currently consists of three private operators and a public, as well as promoting the ease of doing business. .

According to the statement released by the DoT, the telecommunications department will now charge 2% interest on top of the one-year marginal cost of the lending rate (MCLR) of

for late payment of license fees or any other statutory fee, and interest will be compounded annually.

Previously, carriers had to pay 4% interest above the SBI’s one-year MCLR. In addition, the interest component which was billed monthly will now be billed annually.

The changes came into effect on October 1.

The Cellular Operators Association of India (COAI) grouping said the move would ease financial stress on the industry and make it easier to do business.

All reform measures remain to be notified

“We appreciate the step of streamlining the interest rates on the deferred payment of license fees (LF) and any other royalties under the license, removing penalties and penalty interest. We welcome this step to alleviate financial stress and promote the ease of doing business in the telecommunications industry, ”IBOC Director General SP Kochhar said in a statement.

Communications and IT Minister Ashwini Vaishnaw called the current practice of compounding interest rates on a monthly basis “unwarranted” in an interview with ET on the day the reforms were announced. . He told ET that other reforms are underway.

Of the total adjusted gross income (AGR) of Rs 1.47 lakh crore imposed on the telecommunications industry, up to 74% was interest and penalties, according to government calculations. The demand for these AGR contributions has pushed Vodafone Idea to a loss – with AGR contributions of over Rs 58,000 crore – to the brink of collapse. He paid almost Rs 8,000 crore for the claim.

The DoT also removed the clause requiring telecom operators to pay a penalty equivalent to 50% of the royalty payment shortfall. The penalty was imposed if it exceeded 10% of the license fees payable. The DoT is still in the process of notifying all telecommunications reforms announced by the government on September 15, including the option to defer payment of the AGR and spectrum fees for four years. Other measures include the ability for telecommunications operators to convert contributions and interest into government equity.

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