SC gives telcos 10 years to pay AGR dues, starting April 2021

Delivering the order in the case pertaining to payment of adjusted gross revenue (AGR) dues by telecom companies, a bench of Justice Arun Mishra, S Abdul Nazeer and MR Shah fixed 7 February for payment of annual instalment of AGR dues. 

The SC also clarified that there will be no revaluation of the dues.

The SC had in October 2019 upheld the expanded definition of AGR as given by the DoT, which placed a demand of over Rs1.19 lakh crore on telecom companies.

While telecom companies had sought a longer period of at least 15 years for payment of AGR dues to the government, 10 years seems to be a reasonably long enough period for them to shore up finances.

The order, however, could work in favour of financially sound entities like Reliance Jio and Bharti Airtel, but may not work in favour of Vodafone Idea, which sits on the largest pile of AGR dues.

As per the DoT assessment, total amount was Rs 1.19 lakh crore — Vodafone Idea owed Rs 58,254 crore, Bharti Airtel Rs 43,989 crore and Tata Teleservices owed Rs 16,798 crore to the government.

Vodafone Idea had sought 15 years to pay its AGR dues, including spectrum usage charge, licence fee, interest, penalty, and interest on penalty. 

For Vodafone Idea to survive, factors such as higher tariff, reduction in fixed costs, divestments, and fundraising should also come in the telco’s favour.

Vodafone Idea will need a healthy dose of equity infusion as well as tariff hikes to continue as a going concern. It will also need some help from the government in terms of a further deferment of spectrum liabilities

As per Bharti Airtel’s assessment, it owes Rs13,004 crore to DoT which it has already paid along with Rs5,000 crore in ad-hoc payment. DoT, however, has assessed Bharti’s dues at Rs43,780 crore.

Bharti Airtel had also sought 15 years, despite “fully providing for the losses on account of the AGR dues”. Airtel has adequate liquidity to clear its dues, according to the management of the Sunil Mittal-led firm. 

Tata Teleservices Ltd, a Tata group company acquired by Airtel on a debt-free and cash-free basis, has requested 7-10 years to clear its AGR dues of Rs16,798 crore.

Airtel rallied 5.5 per cent to Rs542.40 and Reliance Communications gained 3.32 per cent at Rs2.49, whereas Vodafone Idea plunged 14.92 per cent to Rs8.67 on the BSE at 12:03 hours.