DoT Sets Deadline to opt for 4-Year Moratorium under Telecom Relief Package

The DoT has told the telcos that 29 October will be the deadline to opt for the 4-year moratorium on statutory dues under the telecom relief package.

Deadline Set for Moratorium

The DoT, along with setting the deadline, has also given the telcos three months to decide if they will convert the interest incurred so far on dues, to equity. Furthermore, the telecom department said that telcos who want to opt for the moratorium have to present audited financial statements.

Notably, the moratorium will apply from 1st October, 2021; during the time period, telcos opting for it will only pay interest at marginal cost of funds-based lending rate, or MCLR, plus 2%. The moratorium will allow the sector to have some breathing space as it has been under great financial stress.

At the end of the moratorium, companies will have the option to pay the dues in instalments, or convert the said debt to equity. The Finance Ministry will finalize a framework for that; it will make the government a stakeholder in the telco that goes for this option.

Companies such as Vodafone Idea have come close to bankruptcy over the past few months. However, after the telecom relief package, first announced on September 15th, the mood around the industry has brightened.

What's more, the moratorium will also protect the net present value of the dues. It means that the telcos will have to pay only what they have due now. The government looks keen on making the telecom sector the basis of the widespread digital transformation. As such, it has also allowed 100% FDI in the sector, with all safeguards, via the automatic route. What's more, the government had also reduced the need for BGs for licensing agreements, and ditched them altogether should a telco need to pay for spectrum it buys at future auctions in instalments.

Analysts have hoped for a better second half performance from the telcos, since the telecom relief package.

Till now, no telco has expressed its interest in going for the moratorium. However, Vodafone Idea is widely being tipped to go for it after the precarious position it finds itself in.