Five telcos underpaid exchequer by Rs1,527 cr: CAG

Five private telecom firms have understated their adjusted gross revenue (AGR) by over Rs14,800 crore, leading to a shortfall of Rs1,526.70 crore in payment of revenue share to the exchequer till March 2016, the Comptroller and Auditor General of India says.

When interest is added on the amount, the total works out to Rs2,578.83 crore, the CAG said in a report tabled in parliament today.

According to the Compliance Audit Report on Sharing of Revenue by Private Telecom Service Providers up to 2014-2015, the five errant telecom players are Tata Teleservices, Telenor, Videocon Telecom, Quadrant Televentures and Reliance Jio Infocomm.

Tata Teleservices Ltd and Tata Teleservices (Maharashtra) Ltd together accounted for the largest share of the total at Rs1,893.60 crore, the government auditor said.

The others on the list are Telenor a shortfall of Rs603.75 crore between 2009-10 and 2014-15, followed by Videocon Telecom at Rs48.08 crore in the same period, and Quadrant Televentures at Rs26.62 crore (2006-07 to 2014-15) and Reliance Jio at Rs 6.78 crore (2012-13 to 2014-15).

Of the five companies named in the CAG report, only Reliance Jio now runs full-scale operations. The company began commercial operations in September 2016.

In January 2013, RIL's telecom subsidiary, Infotel Broadband Services Ltd, was renamed as Reliance Jio Infocomm. According to the report, Reliance Jio's share of the short-payment was at Rs6.78 crore.

While the company did not start commercial operations in the period mentioned in the report, the government estimates AGR as 5 per cent of the bid value of the spectrum for which it collects spectrum usage charges and licence fee.

Giving further details, the CAG said the government was paid Rs1,015.17 crore less in licence fees and Rs511.53 crore less in spectrum usage charges (SUC). As per rules, mobile service operators have to pay 8 per cent of their AGR to the government as licence fee along with 3-5 per cent SUC for using air waves allotted to them.

The auditor added that telcos also understated revenue collections through accounting adjustments for commissions or discounts paid to distributors, promotional schemes like free talk time and discounts to postpaid subscribers, netting of discounts from revenue pertaining to roaming services, non-inclusion of foreign exchange gains and interest income, and netting of revenue from infrastructure sharing.

Reacting to the CAG report, a Reliance Jio spokesperson said, "The charge against Reliance Jio is related to 'revenue share on realised forex gain'. This is an industry issue and was referred to the Telecom Disputes Settlement and Appellate Tribunal (TDSAT), which ruled in favour of telecom operators. However, the TDSAT decision was appealed against by the Department of Telecommunications and this matter is sub judice in the Supreme Court."

This is not the first time that the CAG has hauled up private telcos for underreporting revenues. In June this year, it had tabled a report on six other private players - Bharti Airtel, Vodafone, Idea Cellular, Aircel, Sistema Shyam Teleservices and Reliance Communications - shortchanging the exchequer by nearly Rs7,700 crore, not including interest dues amounting to Rs4,531.62 crore.

Previously, in March 2016, the CAG had indicated a loss of Rs12,489 crore to the exchequer for the period from 2006-07 to 2009-10.

The reason for this repeated difference in the telcos revenue calculation and the CAG's calculations is a difference in opinion in the very definition of AGR. The telcos in the country have been involved in protracted litigation challenging the government's stand on AGR. In May this year, the Tripura High Court had ruled that revenue earned by telecom operators from activities unrelated to their licence could not be included in the AGR. The court had also ruled that the Department of Telecommunications change the definition of AGR for working out the revenue share of telecom operators. This ongoing battle is unlikely to end soon.