AGR Dues: Non-telecom PSUs sail through but telcos’ fate remains unclear

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June 12, 2020 12:01 AM

SC pulls up DoT for raising Rs 4-lakh-crore demand on PSUs; wants telcos to furnish guarantees to avail deferred payment

The judge said that the original order pertained to the telecom operators and did not apply to the PSUs and therefore was “totally impermissible”.The judge said that the original order pertained to the telecom operators and did not apply to the PSUs and therefore was “totally impermissible”.

The non-telecom PSUs got a major relief from the Supreme Court on Thursday but the fate of telecom operators like Bharti Airtel and Vodafone Idea continued to hang in balance in the adjusted gross revenue (AGR) dues matter. Coming down heavily on the department of telecommunications (DoT) for issuing demand notices of around Rs 4-lakh-crore to a clutch of PSUs having telecom licences and spectrum, a bench led by Justice Arun Mishra said that the move was a gross misuse of its earlier ruling on the matter.

The judge said that the original order pertained to the telecom operators and did not apply to the PSUs and therefore was “totally impermissible”. It asked the DoT to withdraw the demand and gave it three days to file a reply. The court also warned of action against the official responsible for issuing demand notices to the PSUs.

“We will request you to withdraw the demand on PSUs otherwise we will take strict action. It’s an outright misuse of our verdict. You are making a demand of Rs 4-lakh-crore. This is wholly and totally impermissible,” Justice Mishra said.

On the plea of the telecom operators who are seeking (and the government is supporting) to pay their dues in instalments spread over a 20-year period as the amount totals a staggering Rs 1.67 lakh crore, the bench sought to know how can they securitise the amount.

It wanted the telcos to furnish bank guarantees or the directors of the companies involved to give personal guarantees. The SC asked them to file their replies by next Thursday (when the matter will be taken up again) on their roadmap to pay the dues – how much time they want and what kind of securities can they provide.

Putting across the government’s plan of allowing the telcos to pay up in a staggered manner over a 20-year period, solicitor general Tushar Mehta said that one-time recovery of the amount would hit the operations of the telcos and even send some into liquidation and the network of the other players is not that robust that it would be able to take the load of subscribers of the bust company thus leading to consumer inconvenience.

Clearly unimpressed and insisting for some form of guarantee, the bench asked, “Who knows what will happen in 20 years?”

Mukul Rohatgi, counsel for Vodafone Idea, said that spectrum and licences were the best guarantee and if the company failed to pay up, the government can cancel its licences and take back the spectrum. On the company’s inability to furnish bank guarantees, Rohatgi said, “The total demand of Rs 50,000 crore plus interest and penalty cannot be furnished in bank guarantees. We do not have enough money to pay our employees and meet our expenses.”

Vodafone Idea is the worst affected company on the AGR dues front as it has total dues of Rs 58,254 crore, of which so far it has paid only Rs 6,854 crore. The company’s promoters – Vodafone Plc and the Kumar Mangalam Birla group – have already said that they can’t put any more equity in the company and if no relief is given they would have no option but to shut down the company.

Abhishek Manu Singhvi, appearing for Bharti Airtel, said that the company has paid 100% of its dues as per its own calculations. He said the company will confirm the remaining dues with the government and clear it.

Bharti’s total dues amount to around Rs 43,980 crore, of which it has so far paid Rs 18,000 crore.

The AGR issue is more than 20 years old where the DoT and the operators have been at loggerheads as to what kind of revenues should be included while calculating it. The telcos felt that only revenues accruing from telecom services should be included while those which are non-telecom like rentals from real estate, treasury income, etc should not be part of it. The government differed and said that the entire revenue of a licensed telco should be part of AGR.

The Supreme Court in October 2019 ruled in favour of the government stating that the entire revenue of a licensed telecom operator should form part of AGR. Using this judgment, the DoT issued notices to a clutch of PSUs also whose core operation was not telecom but had some form of telecom licence and spectrum for a part of their operations. Since the concerned PSUs like Railways, PowerGrid, Oil India, Gail, etc, had taken telecom licences under the name of the flagship company rather than their telecom operations subsidiary, the DoT applied SC’s logic that their entire revenue (including of the flagship firm) should be taken into account for calculating the AGR.

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