SC rejects AGR review plea; telcos have to pay Rs 1.47 trn dues in a week

In a blow to the telecom industry facing severe financial stress, the Supreme Court on Thursday rejected the review petitions moved by Bharti Airtel, Vodafone Idea and Tata Teleservices against its October 2019 order on payment of dues linked to adjusted gross revenue (AGR). Telcos, contemplating a curative plea, will have to together pay an estimated Rs 1.47 trillion in AGR dues that include penalties and interest on penalties by January 23. The order, expected to help the government in plugging its widening fiscal deficit, will also be applicable for many companies which have either sold out or shut their business.

A three-judge bench comprising Justices Arun Mishra, S A Nazeer and M R Shah, in an in-chamber hearing on Thursday, did not find merit in the review plea and dismissed it. A curative plea will be another attempt for the telcos to find relief after the dismissal of a review petition.

It is not immediately clear as to what the latest verdict of the top court would mean for a host of non-telecom companies (with internet service provider or ISP licences) which were told to cough up around Rs 2.97 trillion in AGR dues before the same deadline. The non-telcos facing the huge AGR bill have had a negligible presence in the communication space but their dues have been calculated based on their overall revenues. 

The genesis of the dispute between the industry and DoT was the definition of AGR, which is the revenue used to calculate the licence fee and spectrum charges paid by telecom companies to the government. In the October order, the Supreme Court upheld the government definition of AGR, implying non-core revenues such as rent, dividend and interest would also be part of the calculation. 

Disappointed with the decision, Bharti Airtel, which is facing an estimated AGR demand of Rs 35,586 crore said it was evaluating filing a curative petition, which is the last judicial resort available for redressing grievances. 

“The industry continues to face severe financial stress and the outcome could further erode the viability of the sector as a whole. The industry needs to continue to invest in expanding networks, acquiring spectrum and introducing new technologies like 5G,” Bharti Airtel said.

Vodafone Idea, which has to pay out a total AGR dues of Rs 53,038 crore said, ‘’the company is exploring further options, including filing of a curative petition.’’

Tata Teleservices, which sold its consumer business to Airtel, has to pay Rs 13,823 crore in AGR dues. Around 15 telcos together need to cough up Rs 1.47 trillion in AGR dues.

The Cellular Operators Association of India (COAI) had in 2005 filed the first case, challenging the government’s definition on calculation of AGR. It had contended that the components of AGR, which that the government was trying to include, were contrary to the Telegraph Act and the recommendations made by the Telecom Regulatory Authority of India (TRAI).

While the industry has already paid 85 per cent of the demand raised by the DoT, the remaining 15 per cent has stayed disputed for a very long time with the mobile companies getting favourable judgments in various legal forums, including Telecom Disputes Settlement and Appellate Tribunal (TDSAT), High Courts and even Supreme Court.

"While we respect the Hon’ble Supreme Court’s order dismissing the industry’s review petition of AGR matter, the telecom sector is again deeply disappointed,” Rajan S Mathews, Director General, COAI, said.

Mathews said that the added financial pressure on the sector will also adversely impact Prime Ministeri Narendra Modi’s vision of Digital India.

In December, Vodafone Idea Chairman Kumar Mangalam Birla had said his company will have to “shut shop" if there was no relief from the government following the Supreme Court ruling requiring it to pay statutory dues of Rs 40,000 crore to the DoT.

Vodafone Idea reported a net loss of Rs 50,922 crore, the biggest ever in corporate India’s history, due to outstanding payment related to AGR.

Bharti Airtel posted a net loss of Rs 23,044 crore for the quarter ended September 30, on Rs 28,450 crore provisions towards AGR dues. In November, the government offered Rs 42,000 crore in relief to Bharti Airtel, Vodafone Idea and Reliance Jio by unveiling a two-year moratorium on the yearly instalments they have to pay for spectrum they bought in auction.