100 percent FDI through Automatic Route cleared in Telecom Sector

The Union Cabinet of India approved 100 percent FDI through automatic route in the Telecom sector

September 15, 2021

Announcement a part of the comprehensive package for Telecom sector reforms

Cabinet also approved a four-year moratorium on payment of statutory dues by telecom companies

Telecos to pay interest on the moratorium period

Cabinet also rationalizing aggregated gross revenue (AGR) definition, excluding non-telecom revenue of telecos from payment of statutory levies

The Union Cabinet of India, on 15 September 2021, announced approval for 100 percent foreign direct investment (FDI) in the telecom sector with safeguards. The announcement is a part of the comprehensive package for Telecom sector reforms. As a part of this, the Cabinet also announced a four-year moratorium on unpaid statutory dues by telecom companies. The telecos will, however, pay interest on the moratorium period. In addition to these, the Union Cabinet also approved rationalizing of the definition of aggregated gross revenue (AGR), excluding non-telecom revenue of telecos from payment of statutory levies. 

Till date, only 49 percent investment was allowed through the automatic route, while beyond that had to be routed through the government. The 100 percent automatic route will, however, not be applicable to investments from India’s neighboring countries, sharing land borders with India, subject to the FDI regulations of 2020.

The rationalizing of AGR  was an area of contention between the telecom companies and department, which was causing major stress in the telecom sector. This move is expected to provide much needed relief to telecom companies such as Vodafone Idea and Airtel which owe large sums to the government, according to experts. It is also expected to ease cash flow issues that are being faced by the companies in the telecom sector.