Telecom Reforms Continue as DoT Relaxes Penal Provisions

The telecom department, DoT, has continued the string of telecom sector reforms by rationalizing interest rate on delayed payment of license fees and penal provisions.

Telecom Department Relaxed MCLR Interest Rate, Penal Provisions

The department hopes that this will increase the Ease of Doing Business in the sector, while also reducing some of the financial burden. Earlier, the telcos had to pay 4% interest above the one-year marginal cost of lending rate (MCLR) of SBI, if they delayed the payment of any statutory dues. Furthermore, and perhaps more irrationally, the interest rate compounded monthly.

However, following the said relaxations, the DoT will only charge 2% interest, and it will compound the interest annually.

The DoT amendment read, "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 per cent 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 has already come into effect starting October 1.

Along with this, the DoT has also scrapped penal provisions license clause which heavily penalized telcos for any short payments they made. Notably, the clause allowed DoT to charge 50% of the short payment they made for any short payments. The DoT could impose those penalties if the the telco made a payment short by more than 10% of the applicable fees.

COAI DG Dr. SP Kochhar said, "we appreciate the step of rationalization of interest rates on delayed payment of License Fee (LF) and any other dues under the license, removal of penalty and interest on penalty. We welcome this step towards easing the financial stress and promoting ease of doing business in the telecom sector".