The Department of Telecommunications (DoT) will make auditing of telecom operators’ adjusted gross revenue (AGR) an annual affair and is in the process of coming out with the tender for hiring an auditing agency for the same.  Auditing of AGR is done to ensure that operators do not under report revenues.

“This was decided after DoT started the process to audit telcos’ AGR for seven years beginning FY12 to ensure that no under-reporting happened. The last audit was done around three years ago for FY09-FY11. It was decided that now on, audit should become an annual feature as delay causes inconvenience to the government and the operators,” a senior government official said.

At present, DoT is in the process of sending notices to telecom operators for auditing their accounts for FY12-FY18 and the exercise is expected to be completed in the next two weeks, the official added.

The exercise comes at a time when the industry AGR has declined for two consecutive years, which in turn has dragged down DoT’s non-tax revenue that it collects from operators in the form of spectrum usage charge (SUC) and licence fee (LF). Operators pay 3-5% of AGR as SUC and 8% of AGR as LF.

Industry revenues fell from Rs 1.48 lakh crore in FY16 to Rs 1.40 lakh crore in FY17 and again declined to Rs 1.11 lakh crore in FY18.

Confirming the development, another official said, “The CAG and the finance ministry had asked the DoT to conduct the audit and update its books. DoT will come out with a tender to hire an auditing firm and this will be done in the next two months. The selected firm will complete the auditing exercise in around eight months. The whole exercise will likely take a year.”

The Licensing Finance Assessment (LFA) division of DoT conducts annual assessment of LF paid by the operators based on their AGRs. It also conducts special audits. Under Clause 22.5 of the Universal Access Service Licence (UASL), the department can conduct audits, while it has the power to order special audits under clause 22.6.

Under-reporting of revenues has been a highly litigious affair, with both the operators and the government refusing to budge from their position as to what constitutes AGR. The issue of AGR has been in the courts and tribunal TDSAT on various occasions in the past 15 years and is pending before the Supreme Court.