The Department of Telecommunications (DoT) has drafted a cabinet note proposing to waive the requirement for bank guarantees (BGs) on deferred spectrum payments under certain conditions, responding to a request from Vodafone Idea (Vi). If approved, telecom companies would be exempt from providing BGs but would need to make an additional three months’ instalment annually, raising the total yearly payment to 15 months. These extra payments would act as security for the following year’s payments, according to the report.
Impact on Telecom Companies
The waiver is contingent on telcos agreeing to the new terms. “The BG waiver for the next instalment can only be considered if the telco agrees to pay an additional three months’ amount with the annual payment,” an official said. The waiver would cover spectrum auctions from 2012, 2014, 2015, 2016, and 2021 for companies that agree to the new conditions.
Vi, facing financial difficulties, missed a Rs 4,300 crore BG payment in September 2023 for the 2016 auction and has requested this waiver as it faces BG obligations amounting to Rs 24,700 crore. The proposal could also benefit Reliance Jio and Bharti Airtel, reducing their BG requirements by Rs 4,000 crore and Rs 3,000 crore, respectively.
Government’s Review Process
The DoT has circulated the draft note to the law and finance ministries for review. This proposal comes ahead of the end of a four-year moratorium on spectrum and adjusted gross revenue (AGR) dues, part of the 2021 telecom reforms. BG requirements have already been waived for auctions held in 2022 and 2024 under the same reforms package, prompting this reconsideration.
