Telecom Industry & AGR

The telecom industry finds itself highly stressed with a mounting debt and demands under a high Adjusted Gross revenue (AGR). The issue at hand is the Supreme Court’s verdict on the AGR, where a liability of 1.3 lac crore (92,000 crore in license fee and 41,000 crore as spectrum usage charge) was imposed on telecom operators by upholding the definition of AGR.

While only 25% of this amount is actual license fee as present in the definition of AGR, the rest amounts for interest, penalty and interest on penalty. The SC has established a new precedent with penalty and interest of penalty has been distinguished. This has been in the case of Punjab & Sind Bank vs Allied Beverages company.

It requires the need to answer the question on penalising telecos with penalty and interest on penalty with the very definition of AGR on which TRAI backed telecom, has been in question since 2003. The definition of AGR needs to be relooked with items such as dividend, interest on dividend, capital gains, forex gains, property rentals and even fixed assets sales being included. With the introduction of a New Telecom Policy in 1999, TRAI recommended that only activities under license be included in AGR. The government however did not pay a heed to this.

The SC verdict reduce the investable surplus available with the telecom and is bound to dent the balance sheets impacting the implementation of 5G in the country. The government needs to re-look this move with telecos like Vodafone and Idea struggling, while BSNL & MTNL incurring losses and struggling to clear staff salaries.

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