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Monday, October 18, 2021

Amended licence norms: Penalty axed, interest on delayed payment rationalised

As per the new norms, the DoT will now charge 2 per cent interest above the one-year marginal cost of lending rate (MCLR) of State Bank of India (SBI) for delay in payment of licence fees or any other statutory dues instead of the 4 per cent that was being levied.

By: ENS Economic Bureau | New Delhi |
October 3, 2021 3:11:51 am
Additionally, the interest will also be now compounded annually and not monthly, as was the norm.

Setting in motion the reforms announced for the telecom sector, the Department of Telecommunications (DoT) has amended licence norms to clarify and rationalise the interest rates for delayed payments of licence fee and done away entirely with the penalty on late payment of the dues.

As per the new norms, the DoT will now charge 2 per cent interest above the one-year marginal cost of lending rate (MCLR) of State Bank of India (SBI) for delay in payment of licence fees or any other statutory dues instead of the 4 per cent that was being levied.

Additionally, the interest will also be now compounded annually and not monthly, as was the norm.

“Any delay in payment of licence fee or any other dues payable under the licence beyond the stipulated period will attract interest at a rate which will be 2 per cent above the one- year MCLR of SBI existing as on the beginning of the financial year (namely 1st April) in respect of the licence fees or any other dues pertaining to the said financial year,” the DoT said. These amendments have come into effect from October 1.

Industry body Cellular Operators Association of India (COAI) welcomed the rationalisation of interest rates, saying it would promote ease of doing business. “We appreciate the step of rationalisation of interest rates on delayed payment of license fee (LF) and any other dues under the licence, removal of penalty and interest on penalty. We welcome this step towards easing the financial stress and promoting ease of doing business in the telecom sector,” COAI director general SP Kochhar said.

Last month, the Union Cabinet approved reform proposals for the telecom sector, entailing nine structural and procedural measures that are aimed at alleviating sectoral stress by addressing near-term liquidity concerns.

Among the steps approved for the telecom sector, the one that is likely to provide immediate relief to debt-laden companies such as Vodafone Idea was the decision to provide a four-year moratorium on payment of all dues arising due to the Supreme Court’s September 1, 2020, judgment on adjusted gross revenue (AGR). A moratorium of four years on payment of spectrum purchased in past auctions, barring the auction of 2021, has also been offered to the telcos. All these measures are prospective in nature.

The telecom sector will also be able to receive 100 per cent foreign direct investment (FDI) through the automatic route, up from the 49 per cent permitted right now.

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