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AGR issue and Telecos

AGR issue and Telecos

UPSC CSE Mains Syllabus: GS-3- Effects of liberalization on the economy, changes in industrial policy and their effects on industrial
growth.

AGR issue and Telecos

What is Adjusted Gross Revenue:

  • The definition of AGR has been under litigation for 14 years.
  • As per telecom companies – it should comprise revenue from telecom services alone.
  • As per the DoT- it includes all revenue from both core and non-core telecom operations.
  • The AGR directly impacts the outgo from the pockets of telcos to the DoT as it is used to calculate the levies payable by operators.
  • Currently, telecom operators pay 8% of the AGR as licence fee, while spectrum usage charges (SUC) vary between 3-5% of AGR.
  • Telecoms now owe the government – shortfall in AGR for the past 14 years; an interest on that amount; penalty and interest on the penalty.

AGR case and verdict:

  • All the telecom companies that operate in India pay a part of their revenues as licence fee and spectrum charges to the Department of Telecommunications (DoT) for using the spectrum owned by the government.
  • In its definition of AGR, the DoT had said that telcos must cover all the revenue earned by them, including from non-telecom sources such as deposit interests and sale of assets.
  • The telecom companies were opposed to this and had challenged this definition of AGR in several forums, including the Supreme Court.
  • On October 24, 2019, the SC had upheld the DoT’s definition of AGR and said since the licensee had agreed to the migration packages, they were liable to
  • 1.   pay the dues
  • 2.   the penalty on dues
  • 3.   the interest on penalty.
  • The top court had then given the telcos three months to clear their AGR dues.
  • Though the telcos sought a review of the judgment, it was dismissed by the top court which had then insisted that telcos clear all the dues by January 23, 2020.

Recent decision of the SC:

  • The top court gave all telcos a 10-year timeline to complete the payments of AGR dues, instead of the old 20-year schedule suggested by the DoT.
  • The top court also directed telcos to pay 10 per cent of the total AGR dues by March 31, 2020, following which they can make payments in annual installments between 2021 and 2031.
  • Telecom companies would also have to make payments on or before February 7 every year.
  • The non-payment of dues in any year would lead to accrual of interest and invite contempt of court proceedings against such companies.
  • The managing directors of the telcos which are required to pay AGR will deposit a personal guarantee within four weeks from today.
  • A crucial issue of whether the spectrum could be sold under Insolvency and Bankruptcy Code will now be decided by the National Company Law Tribunal, the Supreme Court said.

What does the AGR ruling mean for telcos?

  • For Bharti Airtel, which faced an AGR payment of Rs 36,000 crore, a payment timeline of 10 year will come as a breather.
  • The company has already paid close to 40 per cent or Rs 14,400 crore AGR dues until now.
  • It still has to pay Rs 21,600 crore in total, of which Rs 2,160 crore will have to be paid by March 31.
  • The remaining amount of Rs 19,440 crore will have to be paid in 10 yearly installments, which comes to roughly Rs 480 crore being shelled out by Bharti Airtel as AGR to the DoT every quarter for the next 40 quarters.
  • For Vodafone Idea, which faces a payment of more than Rs 58,000 crore, the situation is grim as it has paid Rs 7850 crore AGR dues till date.
  • The telco will have to pay nearly Rs 1128.4 crore as AGR dues every quarter for the next 10 years.
  • Both the companies had sought 15 years for making the AGR payment.

Source:”Indian Express”.


POSSIBLE MAINS UPSC QUESTION:

Assess the recent decision of the supreme court to extend the payment timeline for Adjusted Gross Revenue. How will it affect the prospects of the telecos?