AGR dues: Government files plea in SC for staggered payments

NEW DELHI: The government has filed an application in the Supreme Court, requesting that telcos be allowed to spread the payment of adjusted gross revenue (AGR) dues over 20 years or less, at a reduced interest rate of 8%, in a bid to prevent an “adverse impact” on the economy, jobs and millions of consumers.

“…the Centre has taken the decision to seek approval of this court to a formula arrived at for recovery of dues from telecom service providers,” stated the application filed by Solicitor General of India Tushar Mehta.

The application said the formula was arrived at after widespread consultations at government levels including the Cabinet; keeping in mind vital issues related to the financial health and viability of the telecom sector; and the need for maintaining competition and a level playing field in the interest of consumers.


ET first reported that the government will make such a request on Monday.

As ET reported, the government’s formula includes freezing interest and penalty components as of October 24 — the date on which Supreme Court ruled in favour of the Centre’s calculation of AGR — and said the net present value will be “protected using the discount rate.”

Discrepancies between preliminary amounts assessed by the Department of Telecommunications (DoT) and self-assessments by telcos would be reconciled. The balance dues could be adjusted over the payment period, which may go up to 20 years.
The government added that telcos have already started paying up their AGR dues.

“List these matters before the same bench that decided the main matter on October 24, 2019, as soon as the bench is available. As per rules, it has to be heard by the same bench,” ruled a bench of Justices Arun Mishra and MR Shah.

Preventing A Duopoly
Alluding to Vodafone Idea, which serves over 300 million users and directly employs some 11,000, the SG said even one operator going bankrupt would send shock waves through the entire economy and, mindful of that, the government was proposing that the AGR payment be spread.

“The impact on telecom services for a large proportion of customers, adverse impact on the telecom sector, disruption of tax/non-tax revenue to the government on account of licence fee, spectrum usage charge (SUC) and GST, along with loss of revenue on account of deferred spectrum payments” were some of the adverse effects of an operator shutting shop, the government said.

This is the first time the government has officially acknowledged the negative implications of one of the three existing operators going bust.
The government’s proposals would provide immediate relief to primarily cash-strapped Vodafone Idea. It may also help Bharti Airtel and Tata Teleservices in case they face higher AGR demands from DoT than what they have estimated, and if those additional demands are upheld by the court.

The government’s application said the remaining telcos (Bharti Airtel and Reliance Jio Infocomm will not be able to handle the massive porting out requirement if one operator (Vodafone Idea) goes out of business.

Mehta also listed out the major loss of direct and indirect employment, cascading impact on other sectors such as banking and digital connectivity, affecting ecommerce, ebanking and ehealth.

Finally, this would also result in locking up of spectrum in the corporate insolvency resolution process, until the matter concludes.

Overall Relief
Besides these proposals, the government is considering a broad package for the competition-stricken and debt-ridden industry, including providing sovereign guarantee of 15% of AGR dues if an operator were to approach a public sector bank for loan. This is because telcos are having a hard time tapping the banking sector owing to the stress in the industry.

The government is also considering setting up of an empowered group of ministers to oversee implementation of these measures, and even consider the lowering of licence fee, SUC and GST to attract new investment.

The Supreme Court ruling of October 24 — that AGR includes non-core items — left 15 telcos, including many that are now defunct, facing more than Rs 1.43 lakh crore in licence fees, SUC, interest and penalties, and added to the gravity of the sectoral situation. Licence fees and SUC are paid on the basis of AGR.

Earlier in the day, Vodafone Idea paid the balance Rs 3,354 crore, of the Rs 6,854 crore which it had self-assessed as the principal component of AGR dues it owes to DoT. According to the telco’s assessment, its AGR dues stand at Rs 21,533 crore. However, according to DoT’s most recent estimate, filed with the Supreme Court on Monday, the company’s overall dues stand at Rs 58,254 crore.

Bharti Airtel claims to have paid its entire dues to the government of Rs13,004 crore, plus Rs5,000 crore extra. However, the DoT’s estimate shows its dues to be Rs 43,980 crore. Tata Teleservices’ dues have been estimated at Rs 16,798 crore by the DoT whereas the company has paid Rs 4,197 crore, including Rs2,000 crore extra, again claiming that it has paid its entire dues as per its self-assessment.