Cabinet to decide on telecom package on Tuesday

JUNE 24: The Union Cabinet will decide on the new telecom bailout package on Tuesday. Meetings were held between officials of the Departm...

JUNE 24: The Union Cabinet will decide on the new telecom bailout package on Tuesday. Meetings were held between officials of the Department of Telecommunications DoT, finance ministry officials as well as representatives of various financial institutions which have lent money to telecom operators. A series of meetings were held both at the DoT offices as well as the Ministry of Finance today.

It is understood that the Ministry of Finance has more or less agreed to go along with the Cabinet Note prepared on the basis of the advice given by the Attorney General last week 8212; that the existing telecom operators be allowed to migrate from the fixed-license-fee regime to one based on revenue-sharing.

Earlier, the finance ministry had been opposing any moves to do this, as it would result in a huge revenue loss 8212; a six to 9 month extension in the effective date of commencing of the telecom licenses itself means a loss of around Rs 1,500 crore. The Prime Minister8217;s Office PMO which is pushing the proposal, however, has been arguing that a bailout was in the larger interest of the revival and growth of the telecom industry 8212; this has been reiterated by the AG in his opinion The Indian Express, June 23. Today, ministry officials agreed to go along with the PMO8217;s view.

It is believed that the Law Minister has informally been approached, and has consented to the AG8217;s package. No file has been formally moved to the ministry though, nor has a copy of the AG8217;s opinion been sent to the ministry.

Under the package, telecom operators will have to clear all dues, including interest, till the date that the new package becomes operational. Thereafter, they will have to contribute a fixed percentage of their annual revenue stream to the government 8212; though this is to be fixed by the TRAI, a figure of around 8 per cent is being mentioned in telecom circles. Operators will have to pay 15 per cent of their dues by August 15, and the full amount by December 31 8212; both dates, however, can be extended by the government. Existing licenses will be extended by a period of 10 years, taking the effective license period to 20 years. Operators will have to freeze their equity holdings for a period of 5 years from the date of their license.