DoT has amended license fee rules to harmonize interest rates on late payment of license fee. This move will reduce the financial burden from the telecom sector and boost ease of doing business.
DoT has amended license fee rules to harmonize interest rates on late payment of license fees. This move will reduce the financial burden from the telecom sector and boost the ease of doing business. The department will now charge interest of two percent over and above the one-year marginal cost of funds (MCLR) of the State Bank of India (SBI) for the delay in payment of license fee or any other statutory dues. The interest will be compounded on an annual basis.
DoT’s New Telecom License Norms
Till now, telcos had to pay an interest of four percent over and above the one-year MCLR of SBI. The interest was compounded on a monthly basis. The amendment states that for the delay in payment of license fee or any other dues, interest will be charged at two percent over and above the one-year MCLR of SBI (from the beginning of the financial year).
“Any delay in payment of license fee or any other dues payable under the license beyond the stipulated period will attract interest at a rate which will be 2 percent above the one-year MCLR of SBI existing as on the beginning of the financial year (namely 1st April) in respect of the license fees or any other dues pertaining to the said financial year,” the amendment said.
The department has also removed the license fee clause under which interest equal to 50 percent of the reduction in payment amount was charged from telecom companies on short payment of license fee. This penalty was imposed if the payment amount of the license fee exceeded 10 percent of the total outstanding.
These amendments have come into effect from October 1. This step has been taken as part of the telecom reforms announced by the government in September 2021. Existing telcos were under pressure due to old rules after the Supreme Court justified the government’s stand on Adjusted Gross Revenue (AGR). The Supreme Court had asked telecom operators to clear dues of Rs 1.47 lakh crore.
The Cellular Operators Association of India (COAI), an association of telecom companies, said the move will ease financial pressure on the sector and encourage ease of doing business.
COAI Director General SP Kochhar said, “We welcome the decision to harmonize interest rates on late payment of license fee.”
The old rules were one of the main reasons for pushing incumbent players into stress after the Supreme Court’s verdict on adjusted gross revenue that upheld the government stand and asked telecom operators to pay Rs 1.47 lakh crore statutory dues.
The basic dues were around 26% while 74% component of the total demand got accumulated on account of interest on this amount, penalty, and interest on the penalty.