News Brief

Telcos Vs DoT On AGR: Companies Now Request 'Rectification Of Arithmetical Errors' In Calculation Of Dues; Here's A Recap Of The Entire Issue

Bhaswati Guha Majumder

Jul 21, 2021, 01:08 PM | Updated 03:39 PM IST

Logos of India's telecom - Airtel, Vodafone Idea, Jio and Tata Teleservices
Logos of India's telecom - Airtel, Vodafone Idea, Jio and Tata Teleservices
  • Recently, the Supreme Court announced that it would issue orders on telecom operators Bharti Airtel, Vodafone Idea, and Tata Teleservices' request for rectification of arithmetical errors in the calculation of their AGR dues.
  • The Supreme Court (SC) announced on 19 July that it would issue orders on telecom operators Bharti Airtel, Vodafone Idea, and Tata Teleservices' request for 'rectification of arithmetical errors in the calculation of their adjusted gross revenue or AGR dues', but reminded them that the court had previously ruled out any recalculation of dues.

    A bench led by justices LN Rao, SA Nazeer, and MR Shah observed that the apex court earlier said that the AGR demand could not be recalculated. The judgment of 1 September 2020 had clearly specified that there would be no reconsideration of the dues.

    All the telecom companies operating in India pay a portion of their revenue to the Department of Telecommunications (DoT) as a licence fee and spectrum charges for accessing government-owned airwaves. The DoT stated in its definition of AGR that such corporations must cover all revenue collected, including revenue from non-telecom sources such as deposit interests and asset sales.

    But the telecom corporations were opposed to this and challenged the definition of AGR in multiple courts, including the SC. The companies claimed that AGR should comprise just the revenue accrued from the core services and not dividend, interest income or profit on the sale of any investment or fixed assets. On 24 October 2019, the SC maintained the DoT's definition of AGR, ruling that because the licensee agreed to the migration packages, they were obligated to pay the dues, penalty on dues and penalty interest due to late payments.

    As per previous reports, the actual issue is not the definition of AGR but the length of time it has taken to reach a definitive conclusion on a 16-year-old disagreement. A resolution was dragged through the courts until it reached the SC in 2019. However, in November (the same year), the SC ordered that the telecom players in question were collectively required to pay the government Rs 1.47 lakh crore within three months. At that time, Airtel's total dues were estimated at around Rs 42,000 crore while Vodafone Idea's dues were approximately Rs 40,000 crore—these dues also included the penalties, fines, and interests that have accumulated throughout the legal dispute.

    In 2020, faced with a massive bill of Rs 1.47 lakh crore on account of the SC judgement in the AGR case, India's cash-strapped telecom companies moved to the court again to seek relief from having to pay the entire sum by 24 January. As reported, in this huge sum, the two biggest private sector players, Vodafone and Airtel, owe the largest shares, and 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.

    But the story doesn't end here. In February last year, the SC launched a scathing attack on the DoT for not taking any action or collecting a single rupee from telecom operators such as Airtel and Vodafone on their AGR dues. The telecoms had not paid any of their dues by the 24 January 2020 deadline set by the court in its AGR verdict in October 2019, according to a three-judge panel led by Justice Arun Mishra. Reports stated that Justice Mishra was furious and said that he was "literally shocked" that not a "single penny has been paid till date" and asked for the initiation of contempt proceedings against the telcos. However, at that time, the only telco that has paid up was Reliance Jio.

    Later, the SC also ordered telcos to pay 10 per cent of their total AGR dues—the payment timeline started from 1 April 2021—after which they would be able to make annual instalment payments between 2021 and 2031. Reports said that the telecom businesses would be required to pay on or before 7 February of each year, and non-payment of dues in any year may result in interest accrual, as well as may result in contempt of court proceedings against such businesses. Additionally, the apex court also said the sale of the spectrum should be decided by the National Company Law Tribunal (NCLT) under the Insolvency and Bankruptcy process.

    According to the latest updates, telcos are claiming arithmetic errors in calculation of AGR dues, and pleading that the SC has the authority to correct them. Vodafone counsel Mukul Rohatgi further clarified that no one was blaming DoT for the faulty entries. As reported by Business Standard, Rohatgi said in court "Allow me to place these entries before DoT and let them take a call on this," while making it clear that they were not looking for a time extension.

    A M Singhvi, Airtel's lawyer, stated that there have been instances of duplication as well as payments received but not accounted for in the calculation of AGR dues. As per DoT, Airtel owed 43,980 crores, while the company's own estimate put the dues at 13,004 crores, and similarly, Vodafone estimated 21,533 crore dues.

    Meanwhile, senior attorney Arvind Datar, who is representing Tata Teleservices, said that the SC's decision merely bars reassessment, and not the correction of calculative errors. As per Financial Express, for Tata, DoT has estimated the dues at 16,798 crores, while the company's own calculation says the amount is 2,197 crore.

    However, the SC Bench said that other applications, including those raising the question of whether telcos can transfer or sell airwaves or spectrum as part of their assets, will be heard in two weeks.

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