Waiver provisions scrapped, new telecom bill may derail Voda Idea recovery: Experts

The removal of a provision offering waivers of licence fees, penalties, and charges, etc in the Telecommunications Bill, 2023 has come as a damper for financially-struggling telecom operator Vodafone Idea (Vi), as it may make it tough for the company to raise funds, lawyers and analysts said.

The waiver provisions in the original draft contemplated a framework that would have allowed financially stressed firms like Vodafone Idea to be revived with fresh investment with any potential investor also factoring in a waiver of significant statutory dues.

“The proposed powers to waive off or defer payment of fees, penalty and other charges have been removed from the final bill. This would have a negative revenue implication and has likely been removed due to that reason,” Manmeet Kaur, Partner, Karanjawala & Co told ET. “This reduces hope for entities like Vodafone Idea to have any concession with regard to payment of dues.”

A government official said the provisions were removed from the final Bill because it could have given discretionary powers to the government, which could have created problems in future.

In the original draft, it was contemplated that such charges could be waived off in certain situations in the interest of consumers, ensuring competition, reliability and continued supply of telecom services, or availability of telecom network or telecom infrastructure in India.

Abhay Chattopadhyay, partner, Economic Laws Practice, said the provisions in the draft Bill had contemplated a framework that would have allowed struggling telcos to be revived with fresh investment with any potential entity being entitled to see waiver of large sums of accumulated debt, allowing them to start afresh.

“Indeed, this appeared to be an attempt to sidestep the rigors of the Supreme Court of India’s judgment in the AGR (adjusted gross revenue) matters. However, the Bill that has been tabled in Parliament does not contain such provisions, and ergo, will make it harder for Vodafone Idea to attract the desperate infusion of funds that they need to revive and compete in the Indian market,” Chattopadhyay said.

Further, the final Bill has removed provisions around insolvency. The draft bill had proposed that a company undergoing insolvency must clear its dues, including licence fees, otherwise the spectrum allocated to the company could be taken back. However, the final bill has done away with the provision.

“This is likely because taking away spectrum, which is the most valuable asset, from a licensee company will hamper the insolvency resolution process. This has been the bone of contention in Aircel and Rcom (Reliance Communications) corporate insolvency resolution process wherein Department of Telecommunications has been opposing the resolution process until its dues are cleared,” Kaur said.