Business

Telecom’s AGR Dues Crisis: Neither SC Nor Government Come Off Smelling Of Roses

Prime Minister Narendra Modi and Telecom Minister Ravi Shankar Prasad.
Snapshot
  • The crisis over AGR is telling, and both the Supreme Court and the government need to act to resolve the issue.

    Policy must shift from rent-seeking now to seeking a share of future business growth after telcos achieve sound bottom lines.

Faced with a massive bill of Rs 1.47 lakh crore on account of the Supreme Court judgement in the adjusted gross revenues (AGR) case, India’s cash-strapped telecom companies have moved the court again to seek relief from having to pay the entire sum by 24 January.

In this huge sum, the two biggest private sector players, Vodafone Idea and Bharti Airtel, owe the largest shares of Rs 53,000 crore and Rs 35,000 crore respectively. This is perhaps why Reliance Jio, which owes far lower sums due to its late entry into the business, is watching the fun from the sidelines.

Two comments need to be made.

Advertisement

One, it does not reflect well on a Supreme Court that imposes a short three-month deadline for the repayment when the amounts can sink at least one of them, if not both. It is one thing to interpret the AGR in favour of the revenue department, quite another to make it unimplementable since most of the companies apart from Airtel, Vodafone Idea and Jio are either already shut or in the insolvency courts.

Two, quite apart from the short deadlines, one wonders why the court did not consider the wider impact of its judgement, since it apparently applies even to some public sector companies like GAIL, PowerGrid and Oil India, which lease out optic fibre to telecom operators. If they have to pay up, the bill goes up by another Rs 3 lakh crore.

This is because the main import of the AGR judgement is that all revenues should be taken into account while calculating the share payable by telcos to the government. While this may make some sense for telecom companies whose major business is indeed telephony and data, for an oil pipeline company which runs a side business in optic fibres this is murder.

Advertisement

The Supreme Court needs to put its thinking cap on while offering final clarifications on its verdict.

However, one cannot but comment on the pusillanimity of the government, which has tried to lob the ball back to the Supreme Court by staying out of the review petitions. It is entirely up to the government to rethink its AGR definition and work out a payback period for telecom dues that does not kill the sector.

Even if it is assumed that the Supreme Court deadline for coughing up such huge sums cannot be violated by the government, what stops it from stretching the payment period for other dues over a longer timeframe or reducing its regular telecom spectrum payments where it is easier for the industry to survive?

Advertisement

Even assuming the Supreme Court does provide more time for the payment of AGR dues and penalties, the government can do three things.

One, it can bring down other spectrum usage charges and future payment schedules so that cash flows are eased.

Two, it can impose minimum tariffs for a couple of years to enable the industry to generate the cash for paying its dues.

Advertisement

Three, it can make all future spectrum charges lower and payable in proportion to business growth — or any such convenient formula.

The business of charging extortionate fees for spectrum is no longer sustainable. Policy must shift from rent-seeking now to seeking a share of future business growth after telcos achieve sound bottom lines.

Advertisement
Get Swarajya in your inbox everyday. Subscribe here.
Comments
Be a Partner, Reader.
Support a media platform that will bring you ground reports that other platforms will try every bit to avoid.
Partner with us, be a patron. Your backing is important to us.

Become A Patron
Become A Subscriber