DoT, FinMin Discussions on Telecom Relief In Advanced Stages

The DoT doesn’t only have to prepare a package Cabinet note, but it also needs to find a precedent for it. The Centre has never used its budget to save private companies before and it puts the plans of the DoT for a relief package into a confusing fix.

Highlights

  • The Centre has never used its budget to save private companies before and it puts the plans of the DoT for a relief package into a confusing fix
  • Vodafone Idea has the kind of debt that can take the whole company down if its cash flow position doesn’t improve immediately
  • There isn’t a precedent of the government stepping in to save a private company before, it is hard to assume that it will happen this time

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The Department of Telecommunications (DoT) and the Finance Ministry (FinMin) are in advanced stage discussions about the relief package that is to be provided to the telecom sector of India. Last week, the Cabinet had refused to hear the DoT’s proposal for a relief package for the telecom industry. But that doesn’t mean the relief package won’t come at all. Sooner or later, the Cabinet will have to hear it, and that is why telcos, especially Vodafone Idea (Vi), will be eagerly waiting to hear from the government. But there’s a huge issue lurking in the corner for Vi and the other operators who need relief.

Telecom Sector Relief Package Isn’t Backed By Any Precedent

The DoT doesn’t only have to prepare a package Cabinet note, but it also needs to find a precedent for it. A Business Standard report highlights that a senior government official said since there isn’t a precedent of the government stepping in to save a private company before, it is hard to assume that it will happen this time.

The Centre has never used its budget to save private companies before, and it puts the plans of the DoT for a relief package into a confusing fix. Everything that’s being considered, including the moratorium in adjusted gross revenue (AGR) dues and a reduction in the spectrum usage charges (SUC), and more, don’t have any precedence.

This isn’t something comforting to hear for the fans of the private operators and even the people working in the sector. Vodafone Idea has the kind of debt that can take the whole company down if its cash flow position doesn’t improve immediately. This will not be good for the industry in the long run, and it is an argument that can take precedence when presented to the Cabinet. If Vodafone Idea has to exit the market (speculation), it will result in a duopoly in the sector since Bharat Sanchar Nigam Limited (BSNL) doesn’t seem to make large strides with 4G either.

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