DoT may get less than 50% of ₹92,000 cr AGR dues from telcos

Our Bureau Mumbai | Updated on August 01, 2019

11 of the 16 operators have shut down, 2 are ailing PSUs

The Department of Telecom may find it difficult to recover more than 50 per cent of the dues from telecom operators as majority of the companies have either shut down or are on the verge of closure.

According to submissions made by the DoT with the Supreme Court, 16 operators owe nearly ₹92,000 crore to the national exchequer, of which only three private operators are currently in operation in addition to BSNL and MTNL.

Related news: BSNL, MTNL fail to pay July salary to 1.98 lakh employees

The dues are on account of penalty and interest on licence fee unpaid by the operators. Operators have to pay 8 per cent of their annual revenues — called Adjusted Gross Revenue (AGR) — as licence fee. The crux of the entire dispute is what constitutes the operator’s AGR. While DoT has taken a view that revenues earned by operators from interest earned from bank deposits or forex gains will be considered as operator’s revenue while calculating the licence fee, the industry opposes the view.

“The concept of revenue share was introduced in lieu of the upfront payment of spectrum. Therefore, whatever income an operator generates from the use of spectrum should be considered to calculate the licence fee. Other income should not be considered,” said a Mumbai-based operator on the condition of anonymity since the matter is sub judice.

“The telecom industry is in deep financial distress and any arbitrary demand/penalty imposed on it will prove to be catastrophic. Operators like RCom, Aircel, Telenor and Tata Tele have already closed down or are in IBC, so recovery of the said sums from them will never happen,” said another industry executive.

The telecom sector was liberalized under the National Telecom Policy, 1994 the licenses granted to service providers stipulated a fixed license fee. However, there was no definition of GR/AGR stated therein.

The NTP 1999, migrated service providers from a fixed fee regime to revenue sharing regime, wherein license fee was to be paid on revenue share basis. According to DoT, the definition of what constitutes AGR was made clear to the operators under the amended licence conditions.

“The migration package clearly stated that the Government will have the powers to determine what constitutes AGR. Therefore, in 2001 the DoT had stated what components of revenue will be included and what will be excluded. The operators had signed on the package then and are now reneging on that agreement,” said a senior DoT official.

While the actual balance due from telcos is around ₹23,000 crore, DoT has slapped penalty, interest on the original amount and interest on penalty amount to take the total to ₹92,000 crore.

“Of the original amount, 15 per cent is on account of revenues earned by sale of investment, 15 per cent is on account of forex gains and 12 per cent due to dividend income. The issue is being heard by the Supreme Court as the operators have disputed the original amount itself so where is the question of penalty and interest ,” said an industry executive.

The Cellular Operators Association of India had in 2003 challenged the DoT’s position on the issue after which the Telecom Dispute Settlement Appellate Tribunal (TDSAT) in its order dated July 7, 2006 had also directed the TRAI to provide its recommendations on the components of AGR.

The TRAI more or less agreed with the operators and excluded components like income from dividend and capital gains on account of profit on sale of assets and securities. Following this, the TDSAT also upheld the operators’ view.

The DoT then filed an appeal before the Supreme Court on the grounds that TDSAT had no jurisdiction to go into the validity of the terms and conditions of the licence which had been accepted and acted upon by licensees. The apex court is expected to give its verdict on the issue soon.

Published on August 01, 2019

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