Companies

AGR risk remains for GAIL, Oil India and Power Grid, says Fitch Ratings

Our Bureau Mumbai | Updated on February 19, 2020 Published on February 19, 2020

Speedy solution to telecom row important to prevent disruption to companies’ investment plans

The three non-telecom companies — GAIL (India) Ltd, Oil India Ltd and Power Grid Corporation of India Ltd — are planning to appeal against the Supreme Court’s verdict on the adjusted gross revenue (AGR) issue, according to a brokerage report.

India’s telecom-related regulatory dispute is still event risk for GAIL, OIL and Power Grid, Fitch Ratings said on Wednesday.

The Supreme Court of India has allowed the companies to withdraw their clarification applications on February 14 and resolve their dispute with the Department of Telecommunications outside the court. This is in stark contrast to the court’s decision to demand immediate payments from the telecom companies that are also involved in the dispute, it said.

“We expect the three companies to eventually resolve the dispute, although resolution timing is uncertain. A speedy solution is important to prevent disrupting the companies’ investment plans and damaging their performance.”

“We understand that they have the option to resolve the matter through alternate dispute-resolution mechanisms available to State-owned enterprises. This is in addition to the legal options available to telecom licence holders in general,” it said.

The DoT has issued demand notices to GAIL, Oil India Ltd and Power Grid seeking dues of ₹1.83-lakh crore, ₹48,000 crore and ₹22,000 crore, respectively.

The notices include licence fees on non-telecom revenue and additional interest and penalties on the licence fees.

However, the three companies’ telecom-related revenue is insignificant, at around ₹50 crore, ₹1 crore and ₹2,300 crore, respectively, for the same time period of the demand notices, it added.

The three companies have created telecom infrastructure for internal use and have obtained National Long Distance and Internet Service Provider licences to rent out spare capacity. They maintain that their licences differ from the Unified Access Licence held by telecom companies, hence, the court’s decision on the AGR for telecom companies does not apply to them.

Follow us on Telegram, Facebook, Twitter, Instagram, YouTube and Linkedin. You can also download our Android App or IOS App.

Published on February 19, 2020
This article is closed for comments.
Please Email the Editor