Adjusted Gross Revenue: SC ruling deals Rs 70,000 cr blow to Airtel, Vodafone Idea

Our Bureau Mumbai | Updated on November 02, 2019

The decision by the Supreme Court on Adjusted Gross Revenue (AGR) will hit Airtel and Vodafone Idea by about Rs 70,000 crore, according to industry estimates. The additional payout could hurt the prospects of both the operators even as they are struggling to fight the onslaught by Reliance Jio.

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 — 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 apex court on Thursday upheld the DoT view. DoT is demanding interest, penalty and interest on penalty on the outstanding amount. These amount to Rs 92,641 crore (disputed actual demand is Rs 23,189 crore, levy of Interest of Rs 41,650 crore, penalty of Rs 10,923 crore and interest on penalty of Rs 16,878 crore). In addition, the SC has allowed DoT to apply the same formula while collecting spectrum usage charge. This will lead to a pay out of another Rs 50, crore taking the total to Rs 1,40,000 crore.


Of this Airtel and Vodafone Idea have to pay about 50 per cent. The balance is on account of operators like Reliance Communications, Aircel and other now-defunct operators. It is not clear who will pay their dues. Of the16 operators against whom DoT had raised the demand, 11 operators have shut down, 2 are ailing PSUs.

The telecom sector was liberalised 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.

Published on October 24, 2019

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