India Department of Telecom gets into app financing

Posted on May 2, 2014  /  0 Comments

I was a little surprised by the report in the Hindu Business Line that the Department of Telecom is planning to set up a testing and payment infrastructure for mobile apps, along with a subsidy/investment scheme funded from the Universal Service Fund. I was surprised about the DoT taking the lead when apps seem to be more within DEITY’s subject area. I was also surprised that funds from the USF were being used, when one would think that converting the universal service fund into an investment vehicle is an unusual choice.

I was also surprised that many of the topics had been discussed in great detail by Rajat Kathuria and Sughanda Srivastva at the Expert Forum we conducted in Delhi on March 12th, 2014. DoT senior officials were present, but it seems that a month and half is little too short a time for policy recommendations to be transformed into actual policy in India. But I could be wrong on this. Or it’s possible that our dissemination was just the last, well-timed step in a complex process.

According to the scheme being worked out financing will be limited to ₹2 crore per proposer and a single entity will not be given support for more than two projects. Financing will be considered only if the bank appraising the project agrees to finance the requirements initially up to 9 times the contribution of the proposer.

USO fund will reimburse up to four times the project cost. The payment will be made as equity participation.

The proposing entity will have the option to buy back 75 per cent of the equity anytime up to 5 years from disbursement at double the cost.

There will be a two-year moratorium on repayment and interest payment.

Payment of interest during the moratorium period will be borne by the USO fund.

USO fund plans to earmark an outlay of ₹50 crore, ₹200 core and ₹1,000 crore over the first 3 years.

To be called Application Development Infrastructure (ADI), the centre will provide testing facilities, support for launch and commercial run and storage capacities to selected entrepreneurs. The ADI will be connected with all telecom service providers and a payment gateway that will enable application developers to get access to customers across the country from day one of the launch.

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