DoT’s revised payment plan for AGR dues must be ratified quickly

The Department of Telecom has finally woken up to the financial crisis faced by the telecom sector, by proposing a relief package under which operators will be allowed to pay their dues related to Adjusted Gross Revenue (AGR) over the next 20 years. In an application to the Supreme Court, the DoT has admitted that any adverse impact on telecom services will have repercussions on both consumers and the economy. Incumbent telecom companies, particularly Vodafone Idea, have been crying hoarse for the last several months that the Supreme Court’s ruling on the AGR issue would force the closure of operations if the Centre did not intervene with a relief package. Vodafone Idea’s exit would not only reduce competition in the telecom sector but also put tremendous strain on the surviving two operators as nearly 300 million users would be forced to shift out.

Telecom networks are at the heart of our digital future and affordable services are a key factor to enable the democratisation of data. The ongoing global crisis due to Covid-19 has only re-emphasised the importance of the Internet and communication networks. Millions have been able to buy essential commodities, do financial transactions and work from the comforts of home only because of digital access. One of the hallmarks of India’s telecom market so far has been intense competition, which hitherto ensured consumers got the best deals when it came to tariffs. The telecom sector has proven to be the graveyard for over 20 companies over the last two decades leading to massive erosion of value and job losses. Another exit now would sound the death knell for the sector. The Supreme Court’s ruling in October on AGR plunged the telecom sector into a severe financial crisis. Incumbent operators are already reeling under a debt of nearly ₹4 lakh crore and need to invest more into rolling out next-generation 5G networks by early next year. In this context, the DoT’s proposal to offer fiscal relief should be ratified by the top court. This along with the earlier decision to give a two-year moratorium to telecom operators on pending spectrum payment should help in reviving the sector. However, to avoid any further complications DoT should quickly determine how much each operator has to pay towards AGR dues. Bharti Airtel, Vodafone Idea and Tata Teleservices have come out with their respective calculations on how much they have to pay. But this is nearly 50-70 per cent lower than the initial estimate made by the DoT. While the operators should disclose their self-assessment calculations highlighting the areas of difference vis-a-vis the DoT estimate, there is a need for an independent audit.

Going forward, the very concept of AGR should also be done away with. When operators are buying spectrum through an auction mechanism there is no logic for collecting revenue share by the Centre.

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