No recalculation of AGR dues, says Supreme Court in setback for telcos

By: |
July 24, 2021 4:30 AM

The ruling is a setback for the operators, especially the financially stretched Vodafone Idea, which needs to pay the highest amount as dues as per the calculation of the DoT.

Ahead of Wednesday’s announcement and ahead of any tariff hikes, analysts estimate Voda-Idea’s annualised shortfall in cash-flows at a minimum of Rs 23,000 crore.Ahead of Wednesday’s announcement and ahead of any tariff hikes, analysts estimate Voda-Idea’s annualised shortfall in cash-flows at a minimum of Rs 23,000 crore.

Sticking to its original order and oft-repeated stance, the Supreme Court on Friday dismissed the individual pleas of telcos – Bharti Airtel, Vodafone Idea, and Tata Teleservices – seeking rectification of arithmetical errors in calculation of their adjusted gross revenue (AGR) dues made by the department of telecommunications (DoT).

The ruling is a setback for the operators, especially the financially stretched Vodafone Idea, which needs to pay the highest amount as dues as per the calculation of the DoT.

The three operators in their individual pleas had taken pains to put across to the court that they were not seeking any reassessment of the dues but merely correction in arithmetical errors, which means double counting, overlooking entries, certain payments not being reflected, etc.

Though Friday’s order once again clarifies that there can be no reassessment or rectification of the errors, what’s still not clear is whether the companies need to pay an upfront 10% of their balance dues or total dues. The interpretation of the operators and DoT differs on the matter.

Last year in September, the Supreme Court had ordered that the companies need to pay their dues over a 10-year period, after paying 10% of the dues upfront by March 31, 2021. Thereafter, the deferred payment cycle would run till 2031 with the 10% amount to be paid by March 31 every year.

However, none of the three companies paid the 10% of the due amount on March 31, 2021. The reasoning of the companies was that whatever they have paid so far is more than 10% so they were not required to pay anything extra by the March 31 deadline. For instance, the total dues of Bharti as per the DoT are Rs 43,980 crore and before the SC’s final order, it had paid Rs 18,004 crore. Similarly, the total dues of Vodafone stood at Rs 58,254 crore and it had paid Rs 7,854 crore. In the case of Tata Teleservices, the total amount is Rs 16,798 crore and it had paid Rs 4,197 crore.

However, the DoT’s interpretation of the order is different. It has held that the apex court did not mean 10% of the total dues but 10% of the balance dues, so the operators were required to shell out additional amounts. Since the companies have not paid any additional amounts, the DoT was expected to seek further directions from the apex court.

On the dismissal of the pleas for rectification of errors, legal experts said the SC could not have rewritten the judgment which was closed last year. Once the judgment is delivered, the new bench could not have changed it. The telcos failed to raise the arithmetical errors in the beginning, lawyers closely watching the development said, adding that the operators still have an option to file for review, but the chances of success are remote.

There’s a huge difference between the amounts calculated by the DoT and the self-assessment by the operators. For instance, according to DoT, Bharti Airtel’s dues stands at Rs 43,980 crore, against its own assessment of Rs 13,004 crore. In case of Vodafone Idea, the DoT’s number is Rs 58,254 crore, while its self-assessed amount is Rs 21,533 crore. Similarly, for Tata Teleservices, DoT’s demand is of Rs 16,798 crore against the company’s own calculation of Rs 2,197 crore.

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