Union govt permits 100% FDI in telecom via automatic route
The government on Wednesday allowed 100 per cent foreign direct investment in the telecom sector through automatic route to promote ease of doing business in the industry. The telecom department has also reduced performance and financial bank guarantee requirements of telecom operators by 80 per cent. Earlier, 100 per cent of FDI was allowed, of which 49 per cent of investment was permitted through automatic route.
According to the DPIIT's press note, 100 per cent FDI is permitted across all kinds of telecom services and infrastructure providers. In the Press Note 4 (2021 series), the government has amended the 100 per cent FDI cap in the sector to "Automatic Route".
The move will provide relief for Vodafone Idea, as it has been looking to raise funds from overseas to support its business. The Department of Telecom (DoT) slashed performance and financial bank guarantee requirements of telecom operators by 80 per cent.
The amendment has been made in both old telecom licences in the UASL (Unified Access Services licences) category and new licences that were started in 2012- Unified Licence (UL) category.
The move will unblock cash reserves of Bharti Airtel, Reliance Jio, Vodafone Idea, BSNL internet licence holders like Tata Communications, Atria Convergence Technologies etc that they have kept with banks for securing bank guarantees (BGs).
Under the amended norms in UL, telecom operators will be required to provide a performance bank guarantee (PBG) of up to Rs 44 crore for each service for the telecom licence compared to Rs 220 crore mandated under the old rule.
Similarly, telecom operators will need to provide a financial bank guarantee (FBG) of maximum Rs 8.8 crore per circle now, against the previous requirement of Rs 44 crore.
The rule will not be applicable in cases where bank guarantees (BG) have been furnished due to any court order or are subject to any litigation, the licence amendment note said.
In the case of UASL, there were three different amounts of FBGs that were charged - Rs 50 crore for each A category telecom circle, Rs 25 crore for B service area and Rs 5 crore for C category circles - that has been reduced to 20 per cent through the amendment, which has been issued with immediate effect.
"The PBGs and FBGs of existing licensees shall be revised to 20 per cent of the current total amount held by the licensor...," the amendment note for UASL said.
The new rules will not apply to telecom operators, who are currently going through the liquidation process. These developments are part of the telecom reforms announced by the government in mid-September.
The DoT has also eased rules for clearing mobile tower installations in the country. Now, the clearance of mobile tower installation will be done through self-declaration and in an automated time-bound manner through the Saral Sanchar portal.
"System will clear cases automatically and applicants can download the system generated SACFA clearance from Saral Sanchar Portal of DoT. Cases not meeting auto-settled criteria ...will be processed by members through their integrated systems and will be cleared /rejected within 30 days," an official memorandum said.
The new rules have been issued along with the department amending norms to reduce performance and financial bank guarantee requirement of telecom operators by 80 per cent, according to the licence amendment note issued on Wednesday.
Telecom industry body Cellular Operators Association of India (COAI) said the FDI approval will help the industry to build a robust telecom sector for new India.
"Through the amendment in License agreements, telecom service providers will be eased off the huge burdens of Bank Guarantees and will enable the availability of more funding for the expansion of the Telecom Network and build a Digitally Connected India.
Further, SACFA clearance based self-declaration will facilitate ease of doing business & will help in the faster rollout of services to the citizens," COAI director general SP Kochhar said.