Big telecom reform: 100% FDI without govt approval allowed

15th September 2021

15th September 2021

The Modi cabinet today approved 100 percent foreign investment in telecom through automatic route, implying an investor doesn’t need the prior approval from the Reserve Bank or the government. 

The announcement was made this afternoon by telecom minister Ashwini Vaishnaw. It’s part of a package for the telecom sector which also included a four-year moratorium for telcos to pay their AGR (Adjusted Gross Revenue), spectrum and unpaid dues. 

Besides, the spectrum user charges would also be rationalized, said the minister. The definition of AGR is also rationalized by excluding non-telecom dues and cancel the penalty clause—measures which would ease the cash flow issues currently suffocating big telcos. 

"Spectrum duration too has been increased from 20 years to 30 years… Spectrum sharing has been allowed and 100 per cent FDI has been approved in the sector in the automatic route. These steps will bring huge investments in the sector, and we all know investments mean jobs," the minister said.

The new FDI rule will apply to all areas of telecom, including the manufacture of infrastructure. Earlier, while 100 per cent FDI was allowed in telecom equipment manufacturing and provision of IT enabled services, only 49 per cent was under the automatic route.  The rest required government approval in view of security concerns.

The minister also said all Indian firms, including BSNL, MTNL, etc will use India-made technology and infrastructure. "We now aim to not just use it domestically, but become an exporter of these technologies, with an aim for India to be a global player," he added. Till now a large part of the 3G and 4G technologies were imported.

Placing 100 per cent under automatic route has been under consideration since 2017 by the Telecom Commission, the top decision-making body of the Department of Telecom.

Firms from neighbouring countries including Pakistan and China, however, will not be allowed to invest under the automatic route.

In April last year, the government changed the policy and under the new system companies in any country that shares border with India will have to approach the government for investment.

The rules were changed to ensure that no neighbouring country, especially China, takes undue advantage amid the Covid pandemic.

FDI in India is allowed under two modes - either through the automatic route, for which companies don't need government approval, or through the government route, for which companies need a go-ahead from the Centre.


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