The Department of Telecommunications (DoT) has reportedly prepared a draft cabinet note seeking to waive the requirement for bank guarantees (BGs) related to deferred spectrum payments, subject to certain conditions. This move comes in response to a request by Vodafone Idea (Vi), as reported by The Economic Times.
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If the draft receives cabinet approval, telcos would be exempt from providing BGs but would need to pay an additional three months’ instalments annually, increasing the total yearly payment to 15 months. These instalments for the additional three months would serve as security for the following year’s payments, the report said.
Impact on Telecom Companies
“The BG waiver for next instalment, however, can only be considered if the telco agrees to pay an additional three months’ amount along with the annual payment,” the report quoted one of the officials, who wished to remain anonymous.
The waiver would apply to spectrum auctions conducted in 2012, 2014, 2015, 2016, and 2021, provided the companies agree to the new terms, the report said.
Vi, which failed to submit a Rs 4,300 crore BG due in September 2023 for the 2016 auction, has sought the waiver as it struggles to manage its financial crisis. Overall, the telco is required to submit BGs amounting to Rs 24,700 crore in the coming months.
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Government’s Review Process
“The DoT has already circulated the draft cabinet note among the law and finance ministries, and their comments are awaited,” the report noted.
The DoT’s proposal comes ahead of the end of a four-year moratorium on spectrum and adjusted gross revenue (AGR) dues, granted in the 2021 telecom reforms. If cleared, it would also benefit Reliance Jio and Bharti Airtel, reducing their BG requirements by Rs 4,000 crore and Rs 3,000 crore, respectively.
The Cellular Operators Association of India (COAI) had previously requested the removal of BG requirements for auctions held before 2022, but the DoT initially rejected the idea.
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However, Vi’s financial situation and the reforms package announced in 2021 prompted a reconsideration. BG requirements have already been eliminated for auctions held in 2022 and 2024 based on this package.
