There is quite a buzz about telecom operators and the industry going through AGR dues. Let's look at what it is. Under the National Telecom policy, 1994 the telecom sector was liberalized after which spectrum licenses were issued to private players in return for a fixed fee.
To provide relief from this high fixed cost model the government in 1999 gave an option to the licensees to move to revenue sharing fee model
Under this model, the telecom operators need to provide a part of their AGR (Adjusted Gross Revenue) as an annual LF (License fee) and SUC (spectrum usage charges) to the government.
The LF and SUC were set at 8% and 3-5% of AGR respectively, according to a license agreement with the DoT (Department of Telecommunications). The agreement defines the AGR of the telecom operators and is computed after certain deductions as per the license agreement.
Now the definition of the AGR is the main reason of the dispute between the Telecom companies and the DoT. The DoT argues that the AGR includes all the revenues from both the telecom and non-telecom services.
While the companies claimed that the AGR should compromise of just the revenue from their main services and not from dividend income, interest income, or any income generated from the sale of any investments or fixed assets.
What has happened till now?
In 2005, COAI (Cellular Operators Association of India) challenged the definition of AGR which is used for calculation. In 2015, the TDSAT (Telecom Dispute Settlement and Appellate Tribunal) vouched in the favour of Telecom companies. However, Supreme court on October 24, 2019, rejected the definition of AGR by telecom companies and made them liable to pay the dues, the penalty on dues, and the interest on penalty due to delay in payments. Telecom companies were given just three months to clear all the dues.TThis was not possible for the companies and thus they asked to review the mandate. On September 1, 2020, Supreme Court ordered Telecom companies to pay 10% of their dues by March 31, 2021. And the remaining dues in installments over a 10-year period.
Why is this a huge setback for telecom companies?
The dues that telecom operators need to pay are exorbitant. The private players owe over 1 lakh crore in AGR dues to the government. And mostly all of it is just spread over 2 players. VI (Vodafone-Idea) & Airtel.
According to DoT, Vodafone owes INR 58,254 Cr in AGR dues while Airtel owes INR 43,980 Cr. But the telecom operators say it is miscalculated, according to VI it owes the government INR 21,533 Cr while Airtel estimates INR 13,004 Cr in dues.VI has paid INR 7854 Cr while Airtel has paid INR 18,004 Cr till now. Tata teleservices even owes the government INR 16,798 Cr in dues which is much higher than the company’s assessment of INR 2,197 Cr. These amounts are huge and can leave the telecom operators crippled, which is why a 10-year period has been given to the operators to pay their dues divided in each quarter. For the March quarter, telecom operators including Jio have paid INR 5,000 Cr.
Recent Dispute
After the judgment of the supreme court on paying 10% of the payment on AGR dues, the telecom operators and the DoT have come out with a different interpretation of the judgment.
While the telecom operators are saying that they have already paid 10% of their total AGR dues, the DoT opined that they have to pay 10% of total dues irrespective of what they have paid. There has been no update from the supreme court as of now