The government on Wednesday authorized 100 percent foreign direct investment in the telecommunications sector automatically to promote the ease of doing business in the industry.
The telecommunications department also reduced the performance and financial bank guarantee requirements of telecommunications operators by 80 percent.
Previously, 100 percent of FDI was authorized, of which 49 percent was automatic investment. According to the DPIIT press note, 100% FDI is allowed in all types of telecom services and infrastructure providers. In Press Note 4 (2021 series), the government changed the 100 percent FDI cap in the sector to “Auto Route”.
The move will bring relief to Vodafone Idea, which was seeking to raise funds abroad to support its activities.
The Department of Telecommunications (DoT) has reduced the performance and financial bank guarantee requirements of telecommunications operators by 80 percent. The change was made to both the old telecommunications licenses in the UASL (Unified Access Services Licenses) category and the new licenses that were released in 2012 – Unified Licenses (UL) category.
This decision will release the cash reserves of Bharti Airtel, Reliance Jio, Vodafone Idea, BSNL Internet licensees like Tata Communications, Atria Convergence Technologies, etc. which they kept with the banks to obtain bank guarantees (BG). Under UL’s amended standards, telecom operators will be required to provide a performance bank guarantee (PBG) of up to Rs 44 crore for each service for the telecom license, against Rs 220 crore mandated under of the old rule.
Likewise, telecom operators will now be required to provide a financial bank guarantee (FBG) of up to Rs 8.8 crore per circle, against the previous requirement of Rs 44 crore.
The rule will not apply in cases where bank guarantees (BG) have been provided due to a court decision or are the subject of a dispute, the license amendment note states.
In the case of UASL, three different amounts of FBG were charged – Rs 50 crore for each category A telecommunications circle, Rs 25 crore for service area B and Rs 5 crore for category C circles – which were reduced to 20 per cent by the amendment, which was issued with immediate effect.
“The existing licensees’ PBGs and FBGs will be revised to 20% of the current total amount held by the licensor…” the amendment note for UASL reads. The new rules will not apply to telecommunications operators, which are currently in the process of liquidation. These developments are part of the telecoms reforms announced by the government in mid-September. The DoT has also relaxed the rules for the customs clearance of mobile tower facilities in the country. From now on, the authorization of the installation of the mobile tower will be done by self-declaration and in an automated and time-limited manner via the Saral Sanchar portal. The system will clear cases automatically and applicants can download the system-generated SACFA authorization from the DoT’s Saral Sanchar portal. Cases not meeting the criteria for automatic settlement… will be handled by members through their integrated systems and will be cleared / rejected within 30 days, ”an official memorandum said. The new rules were released alongside the department’s amended standards to reduce telecommunications operators’ performance and financial bank guarantee requirements by 80%, according to the license amendment note released Wednesday.
The Indian Association of Mobile Phone Operators (COAI) said approval of the FDI would help the industry build a strong telecommunications sector for the new India. ” Amended licensing agreements will ease telecom service providers’ huge bank guarantee charges and allow more funding to be available for telecom network expansion and building a connected India numerically.
“In addition, the self-declaration based on the SACFA authorization will facilitate the conduct of business and contribute to a faster deployment of services to citizens,” said COAI Director General SP Kochhar.
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