PSUs that have little to do with telecom are facing demands of lakhs of crores, so govt should also be challenging the SC order.
Even under normal circumstances, given how the Supreme Court’s (SC) Adjusted Gross Revenue (AGR) judgment threatens the existence of big private telecom players like Bharti Airtel and Vodafone Idea—they have to pay the government Rs 43,318 crore and Rs 49,155 crore, respectively, within 90 days—you would expect any responsible government to intervene, and try and find a solution; what was offered, though, was a farce, a mere moratorium on paying spectrum-purchase-dues for two years—Rs 11,476 crore for Airtel and Rs 23,920 crore for Vodafone Idea.
Apart from the lakhs of jobs that will be lost if any of these telcos shuts down, and the chilling impact this will have on investments in India—Vodafone alone has invested $30billion in India—as FE has pointed out earlier (bit.ly/2pOtzM1), the government stands to lose around `1.7 lakh crore over the next decade if Vodafone Idea shuts down. If government owned banks find it prudent to reduce the penalties and interest-upon-interest component when they are negotiating settlements with firms that owe them money, surely the government should be doing the same?
Indeed, the government approached the matter in bad faith since, apart from it wanting to include non-telecom revenues—like the interest on telco profits that were deposited in banks!—the definition of AGR was never really examined by a neutral body like the Telecom Dispute Settlement and Appellate Tribunal (TDSAT). TDSAT ruled in favour of the telcos on various occasions, but didn’t get to make a final ruling on the matter when SC said in 2011, after the government petitioned it, that the AGR was a licence condition and so TDSAT couldn’t rule on it. If this isn’t bad faith, it is not clear what is.
Airtel’s review petition in the SC, in fact, argues that all AGR orders given by the government were set aside by various courts in 2006, 2007, 2011, and 2015; so, if the SC judgment was the first time the government’s AGR definition was upheld by court, how could it levy penalties and interest upon this? This has resulted in what Airtel calls ‘unjust enrichment’ since the government is now getting more than 300% of what it would have got had it won the original appeals.
And, while the government has gone to town saying that private telcos like Bharti Airtel and Vodafone Idea always knew they had to pay the AGR dues, so it is shocking that they did not make provisions for this in their accounts, how does the government explain that the two telecom PSUs—MTNL and BSNL—also followed the same policy? Why didn’t they pay the dues each time the government sent them a notice, and why didn’t they provide for this? After all, they were not profit-maximisers in the way the private sector is.
If this isn’t enough to get the government to shed its why-should-I-intervene approach, surely it should be worried that several PSUs can shut down if the SC’s AGR ruling is fully implemented. When the matter was being discussed in the government over the last few weeks, an internal committee of the telecom ministry gave the group of secretaries examining the issue a break-up of the notices that have been sent to PSUs like GAIL, or Powergrid, or even the Delhi Metro. The numbers are shocking, to say the least.
Take the case of Powergrid, which had a national long distance (NLD) licence as well as an internet provider licence. While Powergrid reported AGR revenues of Rs 3,566 crore from these licences since 2006-07, the government said its revenues were Rs 1.3 lakh crore! As a result, Powergrid has to pay Rs 22,168 crore of AGR dues. It has been getting notices on the dues regularly since 2009 itself, and, quite worryingly for the government, like the private sector telcos, it never made provisions for this either. If a firm, a PSU at that, has to pay seven times its telecom revenues as AGR, this is a huge travesty; as per the government’s understanding of AGR that SC reaffirmed last month, even several items of non-telecom revenues have to be added to the AGR.
It gets worse in the case of GAIL, which had an internet licence and a mobile licence. The company declared its telecom revenues as Rs 35 crore since 2001-02; so, it is fair to assume no one senior in the PSU ever looked at the telecom business since it wasn’t even a serious revenue-generator, let alone a profit-source. Well, the management must be ruing this since the notices it has been getting for the last two years put the AGR at Rs 249,788 crore! And, once you include the penalty, the interest upon interest, etc, the AGR dues add up to Rs 1.72 lakh crore.
So, even if the government wasn’t moved by the plight of the private telecom players—though it should have been, given what was at stake—it must surely wake up now that several PSUs could find themselves in deep trouble. Or, is it that the government doesn’t plan to collect the money the PSUs owe, or, perhaps it feels that it doesn’t really matter since, essentially, one arm of the government will be paying money to another. But, if the money is given to the PSUs as a loan—and then used to pay the AGR dues—this will add to the PSU debt; so, is the government planning a cash-infusion of some sort? And, surely, the AGR demands must be reported in the interest of full transparency?
Indeed, the matter is so grave that not just the telecom minister, even the law minister (both ministries are held by the same person), the power minister, the petroleum minister, and the finance minister—and possibly even the prime minister—needed to have been in a huddle to find a solution. It is not clear why the government wasn’t the first party to implead itself in the review of the Supreme Court order. Perhaps it will do this once its preoccupation with forming a government in Maharashtra—and the resultant Supreme Court case—is complete.