The Department of Telecommunications (DoT) has returned bank guarantees of close to ₹6,000 crore to telecom service providers Bharti Airtel and Vodafone Idea. Bharti Airtel has received ₹3,500 crore out of the ₹8,000 crore due, while Vodafone Idea is reported to have got ₹2,500 crore out of an estimated ₹12,000 crore. The entire process is expected to be completed by December 31.

The move is part of the decision taken to provide relief to telcos. DoT had notified on October 6 its decision to slash bank guarantee requirements — both financial and performance—by 80% as decided in the Telecom Policy unveiled by communications minister Ashwini Vaishnaw in early September. The guarantees were provided for two years of spectrum moratorium and one year of revenue share.

Under the new rule, telecom firms need to provide a performance bank guarantee of up to ₹44 crore for each licence area — there are 22 licences areas in India, broadly defined by states. The ₹44 crore is now 20% of the earlier performance bank guarantee mandate of ₹220 crore. In the case of financial bank guarantee, operators need to pay 20% of the earlier limit of ₹44 crore per circle, which works out to ₹8.8 crore per circle.

Vodafone India, which ended FY21 with losses of ₹44,233 crore, will be the biggest gainer. The immediate benefit is a reduction in interest burden and compliance cost for telcos. It takes away some strain on the balance sheet and since a lot of guarantees in Vodafone were being given against fixed deposits.

While there is some headway on bank guarantees, the other issue relates to one time spectrum charge (OTSC). The amount involved is ₹40,000 crore for the industry, and for Vodafone it is around ₹18,000 crore. The government has said it does not want to fight the case, and will do an out-of-court settlement.

That should provide more succour to the telecom industry.

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