Indian government makes telecoms investment easier

Indian government makes telecoms investment easier

The Indian government has confirmed that it will be applying two of the reforms to the telecommunications sector that it announced on 15 September.

In a move likely to ease pressure on the sector, the government has said that 100 percent foreign direct investment (FDI) in telecom services in a range of cases will fall under the automatic route of approval. This more than doubles the old rate of 49 percent beyond which investment had first to be cleared by the government.

The government also reduced the level of bank guarantees that needs to be demonstrated during licensing agreements. It is now 20 percent.

The FDI move applies to a category 1 list that the government says includes basic, cellular, united access services, unified license and what it calls “such other services as may be permitted by the Department of Telecommunications (DoT)”.

This does not, however, change the provision that requires any foreign direct investment coming into India from a country it shares its land border with to be first approved by the government.

Bank guarantees had been worrying not just telecoms companies but the banks themselves, in the light of the difficult situation faced by companies like Vi/Vodafone Idea.

Other reforms, such as deferring of adjusted gross revenue and spectrum payments, abolition of spectrum usage charges from future spectrum auctions and permitting telecom companies to surrender unused spectrum to the government, will, it is hoped, boost a sector that has been under a great deal of financial pressure in recent years.

These moves will also inevitably be seen as ways to encourage telecoms investment in India at a time when foreign companies may have been questioning the wisdom of getting involved in the market.

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