News: The Cabinet on Wednesday approved several measures to extend a lifeline to the cash-strapped telecom sector, including a redefinition of the much-litigated concept of adjusted gross revenue (AGR) to exclude non-telecom revenue and a four-year moratorium on players’ dues to the government.
The telecom sector was liberalised under the National Telecom Policy, 1994 after which licenses were issued to companies in return for a fixed license fee. To provide relief from the steep fixed license fee, the government in 1999 gave an option to the licensees to migrate to the revenue sharing fee model.
Under this, mobile telephone operators were required to share a percentage of their AGR with the government as annual license fee (LF) and spectrum usage charges (SUC). License agreements between the Department of Telecommunications (DoT) and the telecom companies define the gross revenues of the latter. AGR is then computed after allowing for certain deductions spelt out in these license agreements. The LF and SUC were set at 8 per cent and between 3-5 per cent of AGR respectively, based on the agreement.
The dispute between DoT and the mobile operators was mainly on the definition of AGR. The DoT argued that AGR includes all revenues (before discounts) from both telecom and non-telecom services. The companies claimed that AGR should comprise just the revenue accrued from core services and not dividend, interest income or profit on sale of any investment or fixed assets.
In 2005, Cellular Operators Association of India (COAI) challenged the government’s definition for AGR calculation.
In 2015, the TDSAT (Telecom Disputes Settlement and Appellate Tribunal) stayed the case in favour of telecom companies and held that AGR includes all receipts except capital receipts and revenue from non-core sources such as rent, profit on the sale of fixed assets, dividend, interest and miscellaneous income.
However, setting aside TDSAT’s order, Supreme Court on October 24, 2019 upheld the definition of AGR as stipulated by the DoT.
Nine structural reforms and five procedural reforms for the sector, including a fixed calendar for spectrum auctions with an extended tenure of 30 years for future spectrum allocations, and a mechanism to surrender and share spectrum.
Foreign direct investment (FDI) in the sector has also been allowed up to 100% under the automatic route, from the existing limit of 49%.
Together, these measures would pave the way for largescale investments, including for 5G technology deployment, and generate more jobs.
About Marginal Cost of Funds Based Lending Rate (MCLR):
The Reserve Bank of India (RBI) sets a fixed internal reference rate for banks. This interest rate is, then, used by banks and lending institutions that come under RBI to define the minimum interest rate applicable to different loan types.
This rate is updated by RBI every once in a while when there is a drastic change in the country’s economic activities. Banks are usually not allowed to lend money at a rate below this reference rate called the MCLR.
Marginal Cost of Funds based Lending Rate (MCLR) is the minimum lending rate below which a bank is not permitted to lend. MCLR replaced the earlier base rate system to determine the lending rates for commercial banks.
RBI implemented MCLR on 1 April 2016 to determine rates of interests for loans. It is an internal reference rate for banks to determine the interest they can levy on loans. For this, they take into account the additional or incremental cost of arranging an additional rupee for a prospective buyer.
After the implementation of MCLR, the interest rates are determined as per the relative risk factor of individual customers. Previously, when RBI reduced the repo rate, banks took a long time to reflect it in the lending rates for the borrowers.
Under the MCLR regime, banks must adjust their interest rates as soon as the repo rate changes. The implementation aims at improving the openness in the structure followed by the banks to calculate the interest rate on advances.
It also ensures the prospect of bank credits at the interest that is true to the consumers as well as the banks.
MCLR is calculated based on the loan tenor, i.e., the amount of time a borrower has to repay the loan. This tenor-linked benchmark is internal in nature. The bank determines the actual lending rates by adding the elements spread to this tool.
The banks, then, publish their MCLR after careful inspection. The same process applies for loans of different maturities – monthly or as per a pre-announced cycle.
News: The storage, sale and use of all types of firecrackers is banned with immediate effect in the Capital, Chief Minister Arvind Kejriwal.
A firecracker (cracker, noise maker, banger) is a small explosive device primarily designed to produce a large amount of noise, especially in the form of a loud bang, usually for celebration or entertainment; any visual effect is incidental to this goal.
They have fuses, and are wrapped in a heavy paper casing to contain the explosive compound. Firecrackers, along with fireworks, originated in China.
Firecrackers are easily available in India and are used to mark a celebratory event.
They are legal, and anyone 18 and over can buy them without a licence.
India’s first fireworks factory was established in Calcutta during the 19th century.
After Indian independence, Sivakasi in Tamil Nadu has emerged as India’s fireworks hub.