Telcos Demand Soft Loans and GST Reduction For Financial Liquidity

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Telcos Demand Soft Loans and GST Reduction For Financial Liquidity

Telecom operators Bharti Airtel, Reliance Jio and Vodafone Idea, are facing heavy financial distress amid the Covid-19 crisis. All the telcos have urged the finance minister of India to increase the liquidity of telecom operators by offering soft loans and waiving taxes imposed on spectrum fees and usage charges. As reported by ET Telecom, COAI director general Rajan Mathews penned a letter to Nirmala Sitharaman and stated that since the COVID-19 created an adverse impact on the economy and operations of the telecom industry, telecom companies should be offered soft loans at a marginal cost lending rate using GST input credits as collateral security. Not only this, but companies should also be provided with a reduction in license fees and SUC payouts immediately.

Government Should Reduce License Fees to 3% of Revenue

The spread of COVID-19 has disrupted the entire telecom industry. Due to various restrictions and financial distress, the liquidity of telcos has taken a hit. To ensure that liquidity is maintained, telecom operators have urged the FM of India to reduce SUC to 3% of the total AGR dues. Not only this, but license fees should also be reduced to 3%, which is currently 8% of the revenue of telecom operators. All the telcos also stated that telecom payments towards SUC, license fees and more should not be considered as services and attract GST levies.

Telcos Are Facing Massive Financial Burden Due to AGR Dues

All the telecom operators are already facing heavy financial distress due to the massive AGR dues. The supreme court of India has still not shared the final verdict whether telcos will be allowed deferred payment mechanism for AGR dues over 20 years. However, the supreme court earlier directed the telcos to submit an affidavit regarding the payment of AGR dues. Telco giant Vodafone Idea stated that it does not have the adequate cash flow to pay employees salary and it cannot secure bank guarantees at this moment.

Geopolitical Situations Might Add External Pressure on Telecom Operators

The ongoing tensions between India and China might affect the financial status of telecom operators. The government of India is already planning to ban Chinese gear makers from supplying network equipment to state-owned and private telecom operators. If the Chinese telecom gear makers are barred from supplying networks, telecom operators will have to incur massive payouts due to contract termination before time.

Original article: Telcos Demand Soft Loans and GST Reduction For Financial Liquidity

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