With the government remaining firm on getting telecom companies to pay up the hefty AGR dues, both Bharti Airtel and Vodafone Idea put together will need to cough up over Rs 88,000 crore by 17 March 2020.
With the government remaining firm on getting telecom companies to pay up the hefty AGR dues, both Bharti Airtel and Vodafone Idea put together will need to cough up over Rs 88,000 crore by 17 March 2020. Bharti Airtel has accepted its fate, with chairman Sunil Bharti Mittal recently saying that the company will pay up the dues much before the deadline. On the other hand, Aditya Birla group’s joint venture Vodafone-Idea maintained that the firm will have to shut shop if its bank guarantees are encashed. Vodafone-Idea is seeking to be allowed to pay only whatever it can for the time being, while paying the remainder later.
“The idea today is that we pay whatever we can, show our bonafides and engage with the government and ask them not to rock the boat by encashing bank guarantees because the moment you do that then obviously you have to shut shop the next day and which does not help anybody,” Vodafone-Idea’s legal counsel Mukul Rohatgi told CNBC TV-18 this week.
Bharti Airtel and Vodafone-Idea are set to emerge as the biggest losers after the AGR debacle as their chief rival Reliance Jio has already settled its comparatively miniscule dues of Rs 195 crore. Mukesh Ambani’s telecom company has accumulated lesser dues and penalty due to being only a recent entrant. Vodafone-Idea owed Rs 53,000 crore to the DoT (Department of Telecom), and Bharti Airtel owed Rs 35,500 crore. Out of this, Vodafone-Idea and Bharti Airtel have already made part payments of Rs 3,500 crore and Rs 10,000 crore respectively.
What is AGR?
All telecom companies in India have to pay spectrum charges to the government, which is taken as a portion of the company’s Adjusted Gross Revenue. While telecom companies were paying charges from revenues on their actual telecom operations, the Supreme Court recently ruled that the companies should pay a part of their aggregate revenues, including rent etc. In fact, aggravating the woes of the telecom sector, the apex court also said that companies should pay up interest plus penalties that have accrued over the past 14 years.
Telecom companies in India have been facing severe stress for sometime now as with the entry of Mukesh Ambani’s Reliance Jio, there has been a dramatic fall in tariff rates. Further, both Airtel and Vodafone-Idea, which were once the top two telecom in the country by subscriber base, have ceded space to Reliance Jio and have lost massive number of users.