The legal dispute between the Department of Telecom (DoT) and the telecom companies has been happening for over 14 years, over the definition of AGR. The Apex Court on June 11, 2020 adjourned the hearing of the case till June 18, 2020.
WHAT DOES AGR STAND FOR? WHY IS IT DISPUTED?
The Adjusted Gross Revenue (AGR) is a fee-sharing mechanism between the government and the service providers. In accounting terms, it is related to revenue. The dispute between DoT and the companies was on the definition of AGR.
The fundamental issue before the court was whether DoT could charge AGR to non-telecom services as well. The contentions raised by the telecom providers were that AGR only includes revenue from core operations and not dividend, interest income or profit on the sale of any investment or fixed assets, while DoT contended that AGR also included revenue from operations, other than core ones.
The decision over the definition has a huge impact on the financial standing of both governments as well as the service providers. The estimated amount to be paid by the companies is around Rs. 92,000 crores in bank charges, interest and penalties on license fee alone. This revenue shared by service providers with the government goes into the consolidated fund of India and is used for public welfare.
Given below is a detailed timeline on the events that took place :
|
Event |
|
|
1994 |
The telecom sector was liberalized under the National Telecom Policy, 1994 after which licenses were issued to companies in return for a fixed license fee. |
|
1999 |
The NDA government announced the National Telecom Policy, which gave these companies an option to migrate from fixed license fee to revenue sharing fee. As per the new policy, AGR was fixed at 15% (this was later reduced to 8% in 2013) as a license fee under the revenue-sharing model. |
|
2003 |
The validity of AGR’s definition in the license agreement was questioned by the Association of Unified Telecom Service Providers of India (Auspi) in the Telecom Disputes Settlement and Appellate Tribunal (TDSAT) |
|
2005 |
The government’s definition for AGR calculation was challenged by Cellular Operators Association of India (COAI). |
|
July 7, 2006 |
TDSAT held that service providers needed to pay as license fee a portion of their revenue from those activities that were related to the telecom license, not other activities. Thereby, narrowing the scope of AGR. They also sought Telecom Regulatory Authority of India’s (TRAI) recommendation with respect to the items to be included in the definition of AGR. |
|
January 19,2007 |
DoT challenged TSDAT’s jurisdiction in Supreme Court. DoT's appeal was dismissed bythe SupremeCourt and directed to raise its contentions before the TDSAT. |
|
August 30,2007 |
Recommendations given by TRAI was accepted by TDSAT and passed an order that would be applicable to those AUSPI members that had moved the TDSAT with effect from the date when they filed their petitions. |
|
October 11, 2011 |
SC set aside the order given by TDSAT on August 30,2007. Furthermore,licensees were allowed to challenge any demand before TDSAT, which would have to go into the merits of the claim and decide whether it was in accordance with the license agreement and in consonance with the AGR definition. Telecom licenseeswent on challenging the basis of DoT's license fee demand to TDSAT. |
|
April 23, 2015 |
TDSAT stayed the case in favor of telecom companies It was held that AGR includes all receipts except capital receipts and revenue from non-core sources such as rent, profit on the sale of fixed assets, dividend, interest and miscellaneous income. |
|
October 24, 2019 |
TDSAT’s order was set aside by the Supreme Court and upheld the definition of AGR as contended by the DoT. Thereby, widening the definition of AGR. The court held that it includes all revenues, except for termination fee and roaming charges, as a part of the AGR. |
|
January 17,2020 |
SC rejected pleas by Vodafone India, Bharati Airtel and Tata Teleservices to review the October 24,2109 decision. |
|
February 14,2020 |
SC criticized telecom companies for not paying dues worth thousands of crores to the government and summoned their top executives to provide reasoning for the same. The court also slammed on the order released by the government stating the recovery order of the AGR won't be operational. |
|
June 11,2020 |
The court adjourned the hearing to June 18,2020. The court asked the telecom providers to prepare a road map to clear their dues and the DoT to not levy the same charges to the state-owned companies |
THE PRESENT SCENARIO:
The Apex Court on June 11,2020, adjourned the hearing in the AGR case till June 18,2020. The three- judge bench, headed by Justice Mishra, in a virtual hearing,asked telecom operators, including Vodafone Idea, to file affidavits within five days regarding the roadmap they are proposing to clear the dues. But Vodafone Idea, given its financial state, told to the Court that they would not be able to file the affidavit in the mentioned time-frame as they do not have the required money to even paysalaries to employees and meet up with the expenses.
With respect to the actions of DoT imposing similar AGR demands from the PSUs (public sector undertakings) such as Oil India, Delhi Metro Rail Corporation and Power Grid Corporation., was struck down and added that the DoT should consider such actions. The court warned of contempt proceedings against officers involved in the move and asked the government to reconsider charging dues from the state-run companies.
THE FUTURE:
The judgement of the Supreme Court has predominantly created a burden on the financial capacity of the telecom service providers. The impact of this decision could affect the customers on the availability of cheap data and free voice calls offered by the providers as this amount charged upon them creates a financial burden on their accounts. How this can be made easier for the service providers could be through making the terms of the payment easier or by bringing down the taxes levied upon the telecom companies. It is also important to ensure that this decision should not create a burden for the general public as most of them rely on the services offered, specifically amidst the coronavirus condition.
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