India further Reforms the Telecom Sector – 100% FDI permitted under automatic route

With a view to protect and generate employment opportunities, promote healthy competition, protect interests of the consumers, infuse liquidity, encourage investment, boost the proliferation and penetration of broadband and telecom connectivity (including 4G and 5G networks), and reduce regulatory burden on the Telecom Service Providers (TSP), the Indian Union Cabinet approved 9 (nine) structural reforms and 5 (five) procedural reforms in addition to certain relief measures for the Telecom Sector on 15 September 2021.

The key highlights from the press release issued in this regard are as follows:

  • 100% foreign direct investment (FDI) under the automatic route is now permitted in the Telecom Sector. A detailed press note with ancillary conditions is expected soon.
  • Adjusted Gross Revenue (AGR) has been rationalized as the non-telecom revenue would be excluded on prospective basis from the definition of AGR.
  • For spectrum acquired in future spectrum auctions:

No Spectrum Usage Charge (SUC) would be applicable;

Surrender of spectrum to be permitted after 10 (ten) years;

Tenure of spectrum has been increased from 20 (twenty) years to 30 (thirty) years.

  • With effect from 1 October 2021:

The delayed payments of the license fee/ SUC would attract interest at the rate of State Bank of India’s Marginal Cost of Funds Based Lending Rate (SBI MCLR) plus 2% and not 4%;

The interest component would be compounded annually and not monthly;

The penalty and the interest on the penalty have been removed.

  • To further promote the ease of doing business in India:

The cumbersome requirement of licenses under a 1953 customs notification for wireless equipment has been removed and has been replaced with a self-declaration.

The requirement of clearance for telecom towers from the Standing Advisory Committee on Radio Frequency Allocation (SACFA) has been eased and now the Department of Telecommunications, Government of India would accept relevant data on a portal on a self-declaration basis.

An app-based self know your customer (KYC) compliance has been permitted and the paper customer acquisition forms (CAF) would be replaced by digital storage of data whereby approx. 3-4 (three to four) billion paper CAFs lying in various warehouses of the TSPs would no longer be required and consequently, warehouse audits of CAFs would not be required.

  • To address the liquidity requirements of the TSPs:

A moratorium/ deferment of up to 4 (four) years has been permitted in the annual payments of dues arising out of the Indian Supreme Court’s AGR judgement, with protection to the net present value of the due amounts being protected;

An option would be given to the TSPs to pay the interest amount arising due to the deferment of payment by way of equity.

The press release may be accessed at: