DoT may seek legal view on bank guarantees against AGR dues

The Department of Telecommunications (DoT) may take legal opinion on whether bank guarantees (BGs) can be asked from the telcos against adjusted gross revenue (AGR) dues. Senior officials say just as BGs are asked against quarterly statutory dues such as licence fees and spectrum usage charges (SUC), the interests of the government must be protected against any delays and uncertainty around AGR-related payments.

“But there are no BGs mentioned in the Supreme Court's AGR order and telcos have been directed to give just an undertaking,” an official, aware of the development, told ET. “So, discussions are on to seek legal opinion on whether BGs can be sought, and if so, does DoT have to approach the SC for clarity on the matter."

As of now, if a telco misses its quarterly licence or spectrum-related dues, then the BGs that are with DoT are encashed. The BGs are also periodically replenished.

Telcos though have previously refused to pay BGs against AGR dues, and would automatically challenge any such move in the top court, pointing out that the earlier apex court bench had sought only an undertaking.

In fact, in June last year, Vi had told the apex court that it cannot provide any BGs against AGR dues given its financial state. The telco said licences and its spectrum resources were the best form of security against AGR dues.

"Given the sector's health, where will these additional BGs come from and which bank will agree," said a senior telecom industry executive.

Senior officers in the department though want to secure their ground, just in case of any future grilling by courts or national investigation agencies on steps taken till date to protect the government's interests and pre-empt any losses to the central exchequer.

"All government departments are bound by the General Financial Rules, issued by the finance ministry, and need to show that they have taken adequate steps to ensure contract enforceability and that government money isn’t lost, especially when we are dealing with disputed dues,” a second official said.

He added that if the dispute over AGR dues opens up a fresh can of worms and is probed by national agencies such as the Central Vigilance Commission (CVC) or Comptroller & Auditor General of India (CAG), the concerned bureaucrats in DoT may face another round of tough questions.

The DoT officials’ views come even as the likes of Bharti Airtel chairman Sunil Mittal have pushed for doing away with the concept of BGs altogether. Mittal had recently told ET that the concept of BGs was from historical times, which should be dispensed with since telcos are already shelling out tens of thousands of crores in spectrum payments to the government without any such instruments.