AGR ruling may hit any company with telecom licence
SC order on the definition of adjusted gross revenue may not only impact telecom companies but it can also have an impact on any entity that has taken telecom service licence, such as internet service providers, satellite communications providers,...
People familiar with the matter said that the Department of Telecommunications (DoT) is examining the wider ambit of the apex court’s judgement, which backed the government’s stance of including non-core revenue under AGR. Discussions have started on whether the DoT can send demand notices to such companies. Under the Supreme Court order, telecom companies may need to pay over Rs 1.3 lakh crore in three months in AGR-based dues.
“A licence which has the words ‘gross revenue,’ be it ISP or telecom or any other similar licence, will have to share a part of its gross revenue with the government, by applying the principles of the SC judgement,” said senior advocate Gopal Jain. “DoT’s argument in the telecom case was that gross revenue would include income & revenue from all streams.” Telcos pay licence fee to the government on the basis of AGR.
About 40 Licence Holders
DoT could demand licence fees, interest, penalties and interest on penalties from about 40 licence holders. A rough calculation puts this amount at more than Rs 94,000 crore in dues over the past five years and more than Rs 2.8 lakh crore for the past decade, including interest and penalties, an executive added.
This could have a broader impact amid slowing economic growth.
“The ruling may have wider impact including a domino or cascading effect, given the fragile state of the economy,” Jain said. “Key sectors must be strengthened that will give a fillip and a boost. Economic sentiment is crucial at this juncture and it is important that industry is in a position to raise resources and discharge debt, so that (they) fire on all cylinders as India is looking to grow to become a $5 trillion economy.”
In its October 24 judgement, the Supreme Court said gross revenue for arriving at AGR would be the “total revenue of licensee company.” Further, revenue arising out of non-telecom activities, with certain exceptions, will have to be included in gross revenue, which would be the total revenue of the company.
As per DoT’s website, about 40 entities in power, steel, metro rail, oil and gas, cable television and other sectors have taken licences to provide national long distance (NLD), international long distance (INLD) and very small aperture terminal (VSAT) services, as well as a unified licence, which includes all of these categories and more.
All of them could be liable to pay AGR dues even though they were not party to the case or the migration package that telecom companies like Bharti Airtel and Vodafone Idea took to move from a licence fee regime to revenue sharing in 1999.
Telecom service providers such as Bharti Airtel and Vodafone Idea, party to the case since 2003, have to pay licence fees, interest, penalties and interest on penalties amounting to over Rs 92,000 crore on revenue that has accrued to them from all activities. The carriers would also have to pay spectrum usage charges (SUC) amounting to nearly Rs 41,000 crore for a period of about 16 years.
The carriers have urged the government for some relief, given the sector’s financial condition, with debt of over Rs 7 lakh crore amid increasing competition and eroding revenues and profits due to rock bottom tariffs. A government panel is exploring ways of providing some relief to restore the health of the sector.