Relief for telecom operators: DoT cuts interest rates on late payment of license fees

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Highlights

  • The changes came into effect on October 1.
  • From now on, interest will be compounded annually, unlike the previous practice of monthly compounding.
  • The DoT also removed the clause requiring telecom operators to pay a penalty equivalent to 50% of the royalty payment shortfall.

New Delhi: The Ministry of Telecommunications (DoT) amended the license conditions in line with relief measures announced by the government last month. The DoT reduced the interest rate for deferred payment of license fees and removed items such as penalties and interest on penalty. The move aims to ease the financial burden on the telecommunications sector and maintain the market structure, which currently consists of three private operators and one public, as well as promote the ease of doing business.

According to the statement released by the DoT, the telecommunications department will now charge 2% interest compared to 4% interest previously above the State Bank of India’s one-year marginal cost of the one-year lending rate (MCLR) for late payment of license fees or any other statutory dues, and interest will be compounded annually. Previously, the interest component was billed monthly.

The changes came into effect on October 1.

The government has not yet notified all reform measures

“We appreciate the step of streamlining interest rates on the deferred payment of license fees (LF) and any other license fees, removing penalties and penalty interest. We welcome this step towards alleviating financial stress and promoting the ease of doing business in the telecommunications industry ”, the Economic times IBOC Director General SP Kochhar quoted in a statement.

Earlier in an interview with HEYCommunications and Information Technology Minister Ashwini Vaishnaw called the current practice of compounding interest rates on a monthly basis “unwarranted”. He told the publication that further 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 dues has pushed Vodafone Idea to a loss – with AGR dues of over Rs 58,000 crore – to the brink of collapse. He paid almost Rs 8,000 crore for the claim.

It should be mentioned here that 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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