The government plans to request the Reserve Bank of India to review new overseas borrowing norms for infrastructure companies and revert to earlier rules that allowed such firms to raise short-term foreign debt, people familiar with the matter said.
Such a move would be crucial for financially stressed telcos to raise funds for the upcoming spectrum auctions expected in June or July at a time when rising bad loans have impacted Indian banks' appetite for lending, sources said.
"Financing of infra is becoming increasingly difficult even in India with asset-quality issues in commercial banks," one of the sources said. "The new ECB (external commercial borrowing) framework could further hurt the already crippled sector. Therefore, the RBI should review new ECB framework for infra companies and restore status prevailing before November 30," the person told ET, adding that the government's thoughts will be communicated to the central bank.
The RBI had in a November 30 notification redefined ECB rules and disallowed infrastructure companies from short-term foreign borrowing - typically those maturing in three to five years. Instead, it mandated access to those with 10-year maturity timelines and also Indian rupee-denomination borrowings for three to five years.
The people quoted earlier said various carrier and telecom infrastructure lobby groups have argued that the new rules would hit telcos - especially smaller ones that are more leveraged - the most, as foreign lenders typically lend up to a maximum of five years.
Borrowing from overseas, even after fully hedging the exchange risk, there is no option to pre-pay," said Vishal Malhotra, tax partner, telecom practice, at EY. "Rupee-denominated ECBs, though for three-tofive years, would carry substantial costs, thus making borrowing an expensive proposition," he said.
Sources said telecom companies had been previously allowed to raise short-term overseas debt for auctions and the need now is far more imperative considering the largest ever auctions around the corner.
As per the telecom sector regulator's proposals on base price for 2G, 3G and 4G airwaves, the government could well raise upwards of.`5,44,000 crore from the auctions, over five times the amount it raised in March 2015 auctions. Most of this is expected from the sale of 4G airwaves in the 700 MHz band, the starting prices of which have been termed as "very expensive" by industry and analysts.
The telecom department is yet to take a view on the Telecom Regulatory Authority of India (Trai) proposals but the government has already budgeted .`98,994.93 crore revenue from auctions and other charges for the next financial year starting April, 76% higher than present fiscal.