The Centre on Wednesday cleared a relief package for the telecom sector. With this new package, it will give relaxation to telecom companies on payment of their long outstanding dues. It also includes a four-year moratorium on spectrum instalment, which is due in April 2022.

This move can also help the telecom companies to get an option to convert interest on their spectrum dues amounting to four-year moratorium, into equity.

In simple words, this package will provide a massive relief to India's three major wireless carriers, such as Reliance Jio, Bharti Airtel and Vodafone Idea.

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How will the new relief package help Vodafone Idea?

With respect to Vodafone Idea, it owes Rs 50,399.63 crore in statutory dues to the government. In 2020, the telecom sector was hit by the Supreme Court ruling, making it mandatory for Bharti Airtel and Vodafone Idea to pay their pending dues to the government.

According to the telecom department, Bharti Airtel, Vodafone Idea and Reliance Communications, owed around Rs 92,000 crore to the government as license fee and Rs 41,000 crore as spectrum usage fees.

With this new relief package, Vodafone Idea and Bharti Airtel will gain the most as the Vodafone Idea's financials are weak and the company is facing bankruptcy if it is not rescued in time.

Airtel has already paid Rs 18,004 crore (out of Rs 43,980 crore demanded), while Vodafone Idea has paid Rs 7,854 crore (out of Rs 58,254 crore). Airtel has self-assessed its dues at Rs 18,004 crore, just 41 per cent of DoT estimates whereas Vodafone Idea self-assessed its dues at Rs 25,000 crore, about 43 per cent of DoT's demand.

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The scheme will provide incentives for the manufacturing of network equipment, routers, broadband transmission equipment, 5G equipment and consumer premise devices, electronics items required for providing optical fibre-based connections, among others.

The AGR-related benefit will surely provide it with the much-needed breathing space, which will help it come up with new strategy and run its business again, clearing the pending dues in a longer period.

What is Adjusted Gross Revenue (AGR)?

Adjusted Gross Revenue or AGR is the usage and licensing fee that the Department of Telecommunications (DoT) charge telecom operators. It is divided into spectrum usage charges and licensing fees, pegged between 3-5 percent and 8 percent, respectively.

According to the DoT, the charges are calculated based on all revenues earned by a telco – including non-telecom related sources such as deposit interests and asset sales.