Economic Survey 2022: Telecom reforms to infuse liquidity, create enabling environment for 5G

Survey said India's telecommunication sector is one of the most powerful sectors impacting social and economic development of a country, and a  strong and a responsive regulatory framework has kept the service access at reasonable prices. 

New Delhi: India’s telecom sector reforms are poised to boost 4G proliferation, infuse liquidity and create an enabling environment for investment into 5G networks, said the Economic Survey 2021-22 tabled by Union Minister for Finance and Corporate Affairs, Nirmala Sitharaman in Parliament on Monday. It said that in the backdrop of the “outstanding performance” of the telecom sector in meeting COVID-19 challenges and with a huge surge in data consumption due to online education, work from home, interpersonal connect through social media, virtual meetings, the reform measures for the sector will further boost the proliferation and penetration of broadband and telecom connectivity.

Apart from telecom infrastructure expansion, the government has taken a slew of measures to bring about reforms, the survey said and outlined the structural and procedural reforms undertaken in the Indian telecom sector that represents the world’s second-largest telecommunication market.

Structural Reforms

1. Rationalization of Adjusted Gross Revenue: Non-telecom revenue will be excluded on prospective basis from the definition of AGR
2. Bank Guarantees (BGs) against License Fee (LF) have been rationalized. One BGs in different Licensed Service Areas (LSAs) regions in the country has been allowed.
3. Interest rates rationalized/ Penalties removed: From 1st October, 2021, delayed payments of License Fee (LF)/Spectrum Usage Charge (SUC) will attract interest rate of SBI’s MCLR plus 2percent instead of MCLR plus 4percent; interest compounded annually instead of monthly; penalty and interest on penalty removed.
4. For Auctions held henceforth, no BGs will be required to secure instalment payments.
5. Spectrum Tenure: In future auctions, tenure of spectrum increased from 20 to 30 years.
6. Surrender of spectrum will be permitted after 10 years for spectrum acquired in the future auctions.
7. No Spectrum Usage Charge (SUC) for spectrum acquired in future spectrum auctions.
8. Spectrum sharing encouraged- additional SUC of 0.5 percent for spectrum sharing removed.
9. To encourage investment, 100 percent Foreign Direct Investment (FDI) under automatic route has been permitted in Telecom Sector with all safeguards applying.

Procedural Reforms

1. Auction calendar fixed – Spectrum auctions to be normally held in the last quarter of every financial year.
2. Ease of doing business promoted – cumbersome requirement of licenses under Customs Notification for wireless equipment has been removed. This is replaced with self-declaration.
3. Know Your Customers (KYC) reforms: Self-KYC (App based) permitted. E-KYC rate revised to only one rupee. Shifting from prepaid to post-paid and vice-versa does not require fresh KYC.
4. Customer Acquisition Forms (CAF) in physical form will be replaced by digital storage of data. This is a cost saving measure as it would allow the Telecom Service Providers (TSPs) to release several warehouses that was being required to store 300-400 crore paper CAFs. Further, with this measure, warehouse audit of CAF would also not be required.
5. Standing Advisory Committee on Radio Frequency Allocation (SACFA) clearance for telecom towers eased. Department of Telecommunication will accept data on a portal, based on selfdeclaration basis which is to be linked to portals of other Agencies (such as Civil Aviation).

As per the survey, addressing Liquidity requirements of TSPs, the Union government has approved the following for all the TSPs:

1. Moratorium/Deferment of up to four years in annual payments of dues arising out of the AGR judgement, while protecting the Net Present Value (NPV) of the due amounts.
2. Moratorium/Deferment on due payments of spectrum purchased in past auctions (excluding the auction of 2021) for up to four years with NPV protected at the interest rate stipulated in the respective auctions.
3. Option to the TSPs to pay the principal and the interest amount arising due to the said moratorium/ deferment of payment by way of equity.

Survey said India’s telecommunication sector is one of the most powerful sectors impacting social and economic development of a country, and a  strong and a responsive regulatory framework has kept the service access at reasonable prices. It said that the government has taken further measures to ensure fair competition among service providers with the view to benefit the consumers.

Telecom is among the most powerful sectors impacting the social and economic development of a country, the survey said observing that the relevance of the sector has “increased immensely”.

The same is reflected in key metrics, such as growth in total telephone subscriber base, steady increase in internet subscribers, and broadband connections.

In the last few years, the telecom sector in India has become data-driven following reducing costs of data due to the fierce competition in the sector. This has boosted data usage further.

A case in point is the average wireless data usage in a gigabyte (GB) per data user per month that has increased “tremendously” to a whopping 14.1 GB per month in Q1 FY22, from just 1.24 GB per month in Q1 FY18.

The number of mobile towers has risen substantially to reach levels of 6.93 lakhs towers in December 2021, “reflecting that the telecom operators have well realised the potential in the sector and seized the opportunity to build up an infrastructure that will be fundamental in boosting the government’s Digital India campaign”.

Listing out the progress on the connectivity front, it said that under the flagship BharatNet project, 5.46 lakh km optical fibre cable has been laid, a total of 1.73 lakh Gram Panchayats (GP) have been connected by Optical Fiber Cable (OFC) and 1.59 lakh Gram Panchayats are service-ready on OFC, as of September 27, 2021.

A boost to the telecom infrastructure is also being given under the aspirational district scheme while thrust on the provision of submarine optical fibre cable infrastructure will spur high-speed internet and broadband connectivity.

Finance Minister Nirmala Sitharaman tabled the Economic Survey 2021-22 along with Statistical Appendix in the Lok Sabha on the first day of the Budget session of Parliament.