Govt takes a call to save telecom firms, but no relaxation likely on AGR

After back-to-back parleys this week between the top management of telecom companies and the government, a consensus seems to have emerged on the need to save the financially stressed sector. 

While Vodafone Idea Chairman Kumar Mangalam Birla and Chief Executive Ravinder Takkar did their rounds of the Department of Telecommunications (DoT) and North Block over the last few days, Bharti Airtel Chairman Sunil Mittal joined in as well to seek relief for the telecom industry faced with a bill of Rs 1.47 trillion in pending dues linked to adjusted gross revenue (AGR).       

There’s no official word yet from the DoT on what measures were being planned to offer relief, but a senior official on Thursday said, “We are doing everything to save the health of the sector.” A source said the DoT and the Finance Ministry were looking at many steps to bring back the sector on track and that a ‘’monopoly’’ situation was not desirable. A telecom fund to give loans to operators is among the measures being discussed.       

The Union government is of the view that there can be a debate on the quantum of payment and penalty but not on the fact that the companies have to make the payments.

In fact, Tata Teleservices, which paid Rs 2,197 crore as full and final in AGR dues on Monday, will be issued a notice seeking full payment of dues as per the Union government's calculation. The company’s dues are estimated at around Rs 14,000 crore. To press its point, the DoT is expected to issue notices to all telcos to pay their dues by March 17.  

Mittal, who met Telecom Minister Ravi Shankar Prasad on Thursday, said the sector was heavily taxed and required “rationalisation” in levies. He didn’t comment on AGR dues issue.

To cross-check the AGR dues claims of the telcos, the government has decided to verify their accounts during the last few years in a random fashion. In the case of Tata Teleservices, DoT would ascertain whether the full payment claims made by the company were genuine or not. On the issue of invoking bank guarantees of the companies in case of payment default, DoT is awaiting legal opinion it sought on the AGR issue. The department, under the unified licence agreement, can invoke bank guarantees and convert it into a cash security if the service provider violates any term of the licence. The ministry has sought views on whether the guarantees should be invoked before March 17 (next date of the SC hearing).

“The government has to ensure that the telecom companies comply with the order of the Supreme Court. They have started making payments and have so far paid Rs 15,700 crore,’’ the official said. The government has to ensure that the health of the sector is not impacted and that the Union government meets its obligation towards the customers, according to the official.

It is learnt that during the meetings with the government this week, many telcos conceded they should have paid their dues after 2011, rather than waiting so long. In 2011, the matter was shifted from the SC to the Telecom Disputes Settlement and Appellate Tribunal (TDSAT) for interpretation of the heads and computation thereof.

The AGR dispute started in 2003. On October 24, 2019, the SC ruled that AGR for telcos should include all revenues accrued to carriers, including that from non-core activities, upholding the DoT’s stance. The firms paid 90 per cent of the amount due to the government in 2003. They were supposed to pay the remaining 10 per cent to the government, along with interest, penalty and interest on penalty. 

On February 14, SC had rejected the modification applications of Bharti and Vodafone Idea seeking relaxed payment scheme for the AGR dues. The top court directed the companies to make payments immediately, prompting the DoT to issue letters to telcos last Friday that payments must be made by the same midnight.