Telecom department returns ₹9,000 crore worth of BGs to ease telcos' burden

The government has returned about Rs 9,000 crore worth of bank guarantees to Bharti Airtel, Reliance Jio Infocomm (Jio) and Vodafone Idea (Vi), in keeping with its decision to reduce the need for such guarantees against statutory dues as part of its relief package for the debt laden telecom sector.

The bank guarantees are submitted to the Department of Telecommunications (DoT) and in case statutory dues like license fees and spectrum usage charges (SUCs) are not paid on time, then the government has the option of invoking them.

“Airtel has received about Rs 4,000 crore over the last few days,” a person aware of the developments said. Vi has received about Rs 2,500 crore.


The move to cut bank guarantee requirements by 80% against statutory dues such as license fee will benefit Vi the most.

Their return will add to the banks’ capital pool, allowing a cash-strapped telco like Vi to access more loans as it seeks to invest in its 4G network to better compete with stronger rivals Jio and Airtel and stem subscriber losses.

The telcos had asked for this requirement to be scrapped since they add to the financial stress in the sector, since banks have to be convinced to replenish them as they eat into the capital pool.

“Last month, Jio got Rs 2,700 crore of bank guarantees which was paid against license fee,” another senior telecom executive said.

All three telcos did not respond to ET's queries.

Vi’s stock closed about 13% higher at Rs 14.44 on the BSE, while shares of Airtel ended 1.9% lower at Rs 718.35.

The telecom department’s move to return the bank guarantees will bolster lenders' faith in the sector and they can provide more loans to the telcos.

Besides license fee and SUC, the department also holds bank guarantees that are under litigation and there are discussions within the government on how even those could be returned.

Between Vi and Airtel, the department holds some Rs 35,000 crore in such guarantees, out of which around Rs 13,000 crore are related to matters that are presently before the courts, as per industry estimates.

A case involving one-time spectrum charge dues is the most high-profile example of bank guarantees being furnished for matters that are currently under litigation.

Bank guarantees held on behalf of Jio are relatively lower.