Oil India advanced after the oil explorer moved to the Supreme Court seeking modification of Department of Telecommunication (DoT)'s demand for AGR dues worth Rs 48000 crore.
The scrip was currently trading 2.32% higher at Rs 140.90. It traded in the range of Rs 138.40 and Rs 142.15 so far during the day.
In an exchange filing made after market hours yesterday, Oil India informed that it has filed a clarification/modification petition before the Supreme Court explaining the non-applicability of interpretation of adjusted gross revenue (AGR) to non telecom companies.
Based on the recent Supreme Court judgement on dispute raised by telecom service providers (TSPs), whereby, the country's apex court decided that entire revenue of licensee should be considered for determining AGR, the DoT had issued demand notices to the company seeking payment of licence fee on total reported revenue including revenue from sale of crude oil, natural gas etc., which neither relate to the national long distance service (NLD) licence nor can be treated as supplementary/ value added services related to the NLD licence.
Till date, OIL has received Demand notices for the period from FY 2007-08 to FY 2018-19 amounting to over Rs 48,000 crore including licence fee, penalties and interest.
Oil India had obtained a NLD licence to establish Supervisory Control and Data Acquisition System (SCADA System) for control, management and protection of its pipeline network used for transportation of crude oil, natural gas and petroleum products. The NLD license is predominantly used for SCADA system and only the spare bandwidth capacity is leased-out to other telecom operators.
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As per the license terms, license fee is to be paid on gross total revenue from services provided under the NLD license. Since the award of NLD licence, the cumulative revenue of Rs.1.47 crore is earned by Oil India from leasing of spare bandwidth capacity on which all applicable licence fee and other statutory dues as per license terms have been paid by the company regularly.
The company has taken up this matter with the DoT & Ministry of Petroleum & Natural Gas along with other affected central public sector enterprises (CPSEs) and explained the non-applicability of interpretation of AGR to non telecom companies.
"The demand for payment by DoT is a credit negative for the company and highlights the risks associated with an unpredictable regulatory environment in India where a number of companies in the telecom as well as other sectors have been impacted by demands for tax and dividends as the government tries to shore up its revenue," Moody's Investors Service has said.
Moody's added that in a scenario where Oil India has to pay the dues, any payment would immediately pressure OIL's ratings and take its leverage to unprecedented levels as the company does not have sufficient liquidity to pay the amount required through reserves and internal cash flow and would have to raise additional capital to fund the payment.
Oil India is the second largest hydrocarbon exploration and production Indian public sector company.
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