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Cabinet approves relief package for telecom sector; Vodafone Idea, Airtel to benefit

Cabinet approves relief package for telecom sector; Vodafone Idea, Airtel to benefit

Main highlights of the relief package are expected to be a four-year moratorium on the AGR dues. It could also allow telcos to surrender spectrums that have not been used

Cabinet has announced key decisions for the telecom sector Cabinet has announced key decisions for the telecom sector

The Union Cabinet has approved a much-needed relief package for the stressed telecom sector, a Cabinet briefing regarding which will be held at 3 PM. The relief package is likely to benefit the telecom companies, which are struggling to contain losses amid tariff war between the three biggest players in the sector -- Reliance Jio,  Bharti Airtel and Vodafone Idea.

The government will likely make it official at today's press briefing, which will be held to announce the decisions taken during the Cabinet meeting chaired by Prime Minister Narendra Modi. An official, requesting anonymity, told the global news agency Reuters that the government has approved the relief package.

The main highlights of the telecom sector relief package are expected to be a four-year moratorium on the adjusted gross revenue (AGR) dues. It could also allow the telcos to surrender their spectrums that have not been used so far. Other major features of the package will be made public during the press conference.

Both Vodafone Idea and Bharti Airtel will gain the most from the telecom relief package. Vodafone Idea's financials are weak and the company is facing bankruptcy if it's not rescued in time. The AGR-related benefit will surely provide it with the much-needed breathing space, which will help it restrategise its business and clear the pending dues in a longer period.

Just like Vodafone Idea, Airtel also needs to pay pending AGR dues to the government. The breather from the government will provide it firearm to compete with Mukesh Ambani-led Reliance Jio. Bharti Airtel Chairman Sunil Mittal has several times in the past warned that duopoly in the telecom sector will ultimately hurt the customers.

Airtel has already paid Rs 18,004 crore (out of Rs 43,980 crore demanded), while Vodafone Idea has paid Rs 7,854 crore (out of Rs 58,254 crore). Airtel has self-assessed its dues at Rs 18,004 crore, just 41 per cent of DoT estimates whereas Vodafone Idea self-assessed its dues at Rs 25,000 crore, about 43 per cent of DoT's demand.

Reports also suggest the government could also come up with a production linked incentive (PLI) scheme for the telecom sector and networking equipment firms. The scheme could be aimed at boosting local production of telecom equipment. It will also reduce dependency on imports by making India a global manufacturing hub.

The scheme will provide incentives for the manufacturing of network equipment, routers, broadband transmission equipment, 5G equipment and consumer premise devices, electronics items required for providing optical fibre-based connections, among others.