DoT moves SC to offer telecom firms 20-year window for payment of AGR dues

Within days of the Union Cabinet taking up a relief proposal for the battered telecom industry, the government has submitted a plea to the Supreme Court seeking significant concessions for telcos, changing the contours of the long-winding dispute over what constitutes adjusted gross revenue (AGR) and the associated liabilities of the operators. The move by the Department of Telecommunications (DoT), seeking a 20-year staggered payment of the operators’ dues linked to AGR along with a waiver of interest and penalty, has brought cheer to the sector, especially Vodafone Idea which has been on the brink of a collapse, executives and analysts said. This also implies that the government would receive a fraction of its earlier estimates of Rs 1.47 trillion as AGR-linked dues from the telecom industry.       

The Cellular Operators Association of India (COAI), representing the telecom industry, has called it a “comprehensive petition”. COAI director general Rajan Mathews told Business Standard, “We are very grateful to DoT for helping us. We continue to seek reduction in the licence fee and spectrum usage charge from the government.’’             

            

A crucial SC hearing, scheduled for March 17 (Tuesday), on a modification petition filed by Bharti Airtel and Vodafone Idea asking for relaxations in AGR payments may, however, be deferred. The court is hearing only a few select cases currently due to the coronavirus threat. The DoT, in its prayer to the SC, has sought recovery of dues from the telecom companies in compliance with the court order of October 24, 2019. Clarifying its position for the first time, the DoT has said that telcos would not be required to pay interest, penalty and interest on penalty as on the date of the SC judgement. 

The petition has also told the court that the companies be allowed to pay the unpaid or remaining dues in annual installments spread over 20 years, ‘’duly protecting the net present value of the said dues using a discount rate of 8 per cent (based on one year marginal cost of lending rate of SBI).’’

“Interest on unpaid amount, penalty and interest on penalty in relation to the past dues as on the date of the judgement of the SC (October 24, 2019) will not be levied beyond the date of the said judgement,” a source said quoting the petition.

However, the DOT’s plea said the telecom service providers shall continue to be liable for interest, penalty and interest on penalty for unpaid dues of licence fee and spectrum usage charges, which arise prospectively after the SC judgement of October 24, 2019.

In the October 2019 verdict, the SC had upheld the government's position on including revenue from non-core businesses in calculating the annual AGR of telecom companies, a share of which is paid as licence and spectrum fee to the exchequer.

Sources said the DoT may have sought a relaxed payment schedule for the companies for as long as 20 years, but there were licences that expire much before that time period.

In all, 16 entities owed the government Rs 1.47 trillion in AGR liabilities -- Rs 92,642 crore in licence fee and another Rs 55,054 crore in outstanding spectrum usage charges—according to earlier DoT estimates. Of the estimated dues that include interest and penalty for late payments, Airtel and Vodafone Idea accounted for about 60 per cent of the total. Many of the 16 entities which were sent notices for payment of AGR dues have either shut their business, sold off to others or gone into bankruptcy.  

Deferring a hearing on the plea (modification petition) by mobile carriers such as Bharti Airtel and Vodafone Idea for extension in the payment schedule, SC on February 14 had asked companies to deposit their past dues for spectrum and licences immediately. The modification plea was scheduled for a hearing on March 17.

Vodafone Idea Ltd, on March 6, had pegged its total dues to the government at Rs 21,533 crore, while the Telecom Department estimated it at over Rs 53,000 crore. The company on Monday announced it had paid Rs 3,354 crore to the DoT, as part payment of its AGR dues. Earlier, it had paid Rs 3,500 crore.

On a self-assessment pattern, Bharti Airtel paid Rs 13,004 crore to the government in two installments. It had also deposited an additional Rs 5,000 crore as an ad-hoc payment to cover any reconciliation differences. Its ‘’full and final payment’’ is far less than the government estimate of Rs 35,500 crore.

Similarly, Tata Teleservices paid Rs 2,197 crore in AGR dues, followed by an additional Rs 2,000 crore to cover reconciliation differences, against the DoT estimate of the company’s liabilities at Rs 14,000 crore.