Govt panel mulls more time for telcos to pay up AGR dues
04 Nov 2019
A committee of government officials set up to look into the demands of telecom service providers for easing the burden brought about by a recent Supreme Court order directing them to pay up long overdue share of revenue to the government, has suggested deferred payment of the Rs9,20,000 crore dues over a period of 20 years.
The committee of secretaries is considering an initial moratorium on payment of dues based on the net present value (NPV) method to ease the burden on heavily indebted companies, say reports.
“All options are on the table,” said a government official aware of the deliberations. “The government is keen to ensure that the telecom sector remains competitive.”
The panel is also weighing the possibility of a longer payment schedule that will obviate the need to waive interest and penalty on AGR dues that add up to Rs9,20,000 crore.
“All options are on the table,” said a government official aware of the deliberations. “The government is keen to ensure that the telecom sector remains competitive.”
The panel, which met for the first time last week, discussed various options, including providing relief from taxes.
The government constituted the panel to examine the problems faced by telecom operators and suggest ways to revive their financial health, amid plunging industry revenues and mounting debt.
The committee of secretaries (CoS) under the cabinet secretary has been tasked with suggesting ways to alleviate the financial stress of telcos so as to create a favourable investment environment.
The CoS will specifically look into the telcos’ demand for deferment of payment related to spectrum auction for the years 2020-21 and 2021-22 in order to ease cash flow.
It may be noted that Bharti Airtel last month delayed its September quarter results, saying it was awaiting clarity on an SC order that directed telecom operators to pay at least Rs92,000 crore in past dues to the government.
Major telecom companies were already in the red after coming under severe pressure of cheap services by Reliance Jio Infocomm Ltd that entered the market in September 2016.
The Mukesh Ambani-controlled company disrupted the industry, first through free services and later through ultra-cheap data tariffs, triggering a wave of consolidation. Smaller operators either shut shop or sold their assets to bigger telcos.
For an industry sitting on a Rs7,00,000 crore debt pile, the Supreme Court verdict upholding the government definition of Adjusted Gross Revenue (AGR) calculation has come as a severe blow.
While the companies had disputed the government formula for revenue sharing, they have come to a stage of ignoring government demands even at the height of their profitability. The result is a Rs92,000 hit that will hurt Airtel and Idea Voda the most.
The fact that the telecom companies have been underreporting revenues for long is now known to the judiciary as well. In 2017, the Comptroller and Auditor General of India (CAG) had tabled a report in Parliament which observed that six private telecom players understated their revenues by over Rs61,000 crore, causing a loss of Rs7,697.62 crore to the exchequer.
The CAG also questioned the government for not taking adequate action against the companies for understating revenues.
Meanwhile, Reliance Jio has alleged that Bharti Airtel and Vodafone Idea have enough funds to pay their dues and cautioned that offering any relief to rival operators after a Supreme Court judgement put a Rs92,000 crore burden on the telecom industry would go against the judgement and set a wrong precedent for other sectors.
In a 1 November letter to union telecom minister Ravi Shankar Prasad, the telecom arm of Reliance Industries Ltd also alleged that Bharti Airtel Ltd and Vodafone Idea Ltd have enough funds to pay dues.
“Any reduction in the financial liability of the licensees arising from the judgement of the court would in effect be rewarding them for their conduct in initiating frivolous and vexatious proceedings to delay payment of their just dues," Jio said in its letter.
“Any proposal for waiver will be considered as loss to the public exchequer and contrary to the Supreme Court judgement," Jio said.
The fresh salvo from Jio, one of the three core members of the Cellular Operators Association of India (COAI), came just a day after it wrote to the government on 31 October stating that COAI’s plea to the government seeking relief measures does not represent the view of the industry.