From the Viewsroom

DoT’s AGR overreach

Anand Kalyanaraman | Updated on January 26, 2020

The move to levy fees on non-telecom players will hurt them badly

In the din around the Adjusted Gross Revenue (AGR) imbroglio that threatens to force Vodafone Idea into bankruptcy and turn India’s telecom market into a duopoly or a near-monopoly, the law of unintended consequences on several non-telecom players has largely gone under the radar. And if this problem hits the roof, several non-telecom companies might have to kiss goodbye to their businesses.

Consider this. As a result of the Supreme Court ruling ruling on the AGR dispute between the Department of Telecom (DoT) and telecom companies, the latter have to cough about ₹1.5 lakh crore to the former. But non-telecom companies, who were not even part of the original dispute, might end up paying double that — more than ₹3 lakh crore — to the DoT. Among the biggest payers in the non-telecom category will be public sector entities including GAIL (about ₹1.7 lakh crore) and Oil India (about ₹48,000 crore), PowerGrid (about ₹22,000 crore), Gujarat Narmada Valley Fertilizers and Chemicals (about ₹15,000 crore) and Delhi Metro (about ₹5,800 crore). These sums, in many cases, are far higher than the annual revenues, net worth and market capitalisation of these companies. Many of them have now approached the Supreme Court for relief while discussing the matter with the DoT.

The grievance is genuine. The core business of these companies is not telecom, and their telecom network was primarily used for internal communications. Revenue, if any, from leasing out surplus network capacity was meagre compared with the overall revenue of these companies. So, the DoT using the Supreme Court’s ruling on AGR — that essentially allows levy of fees on all telecom and non-telecom revenue — and demanding humongous dues from these non-telecom companies is a case of misinterpretation and overreach.

The irony is that an arm of the government (DoT) has raised demands that could bring about the financial ruin of many government-controlled entities. Money from these entities might help the Centre reduce its fiscal deficit but it will harm in many other ways, including compromising the energy security. The various arms of the government should co-ordinate seamlessly with each other to sort out the matter.

Published on January 26, 2020

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