Giving a huge relief to the telecom sector in the country, the union cabinet today redefined the Adjusted Gross Revenue, which will effectively bring down the liabilities of the telecom companies to the govt. The union cabinet today decided to exclude non-telecom revenues of the telecom companies while calculating the Adjusted Gross Revenue (AGR). As per the revenue sharing regime in the sector, the telecom companies pay a portion of this AGR to the govt as tax liability.
While announcing the decision to rationalise the definition of AGR, telecom minister Ashwini Vaishnaw said that PM Modi has taken a bold decision by removing the non-telecom revenue from AGR calculation. He said a very old and contentious litigated issue has been resolved today with this change.
However, this decision will be applied prospectively only, and the companies will be required to pay the existing AGR dues according to the old calculation. However, the government today announced a 4-year moratorium on payment of this due, giving some relief to the companies which are facing huge burdens of AGR dues. The companies will have pay interest on the due amount during the moratorium period.
Apart from the telecom companies, which will not have to pay revenue share as license fee on non-telecom companies from now on, today’s rationalisation of AGR will also benefit several PSUs which run captive telecom networks for their internal uses. As entities like GAIL, Oil India, Power Grid, Railways etc have their own captive networks, for which they had taken telecom licences, the earlier AGR definition meant that they were asked to pay telecom licence fee on their entire revenue from their main operations.
This had resulted in absurd demands raised by the DoT on such AGR calculations, where GAIL was asked to pay ₹1.72 lakh crore, four times its net worth. Similarly, Power Grid was asked to pay ₹ 1.72 lakh crore, Oil India ₹40,108 crore as pending AGR dues.
The debates on AGR had started after the telecom sector was moved from fixed licence fee to revenue share model in 1999. To calculate the revenue share the telecom companies were to pay the government, the Adjusted Gross Revenue (AGR) of the companies were to be calculated, and a portion of this will be paid to the govt.
But dispute started when the Department of Telecom (DoT) started including non-telecom revenues of the telecom companies in the AGR. This means, the companies were asked to pay telecom licence fee on revenue from various sources like rent, dividend, interest, profit on the sale of fixed assets etc. The companies opposed it in the court in 2005, saying that only telecom related revenues should be included in the AGR.
In 2015, the TDSAT had agreed with the telecom companies, saying non-telecom revenues should not be part of AGR. But the Supreme Court disagreed, and upheld the DoT definition in 2019, asking the companies to pay the dues as per DoT calculation. Since the matter was under litigation for so many years, the companies had not paid their revenue share dues anticipating a favourable verdict, which had meant that now they had to may huge amounts towards AGR dues, as they were given only 3 months to clear the dues totalling around ₹1.56 lakh crore by all the companies.
However, in September last year, the Supreme Court had allowed the companies to pay the dues over a period of 10 years. Vodafone Idea has the highest AGR due of around ₹58,254 crore, followed by Airtel with ₹43,980 crore, Tata Teleservices with ₹16,798 crore and Reliance Jio with ₹70.53 crore. The Supreme Court had agreed to deferred payment after its verdict could have resulted in the collapse of the industry, and the country’s banking sector would also be adversely impacted.
Apart from the rationalisation of AGR definition and moratorium on payment of dues, the cabinet today announced several other reforms for the sector. The govt has decided to decrease the interest on delayed payment of licence fee, which will now be compounded annually instead of compounding monthly as per the current practice. Moreover, the penalty for delayed payment has been eliminated altogether.
Spectrum will be allocated for 30 years in future auctions, against 20 years as of now. The govt has also decided to allow spectrum licence holders to surrender spectrum after 10 years by paying a surrender charge. The govt has removed all the restrictions on spectrum sharing among companies, and the process has been simplified.
In another major reform, the telecom consumers will not have to fill paper forms to take new connections. All customer acquisition and KYC will be done through digital forms. Along with that, the existing forms for all the telecom connections issued in India so far will be digitised. This will help in reduction in cost for telecom companies as they have to keep the forms in large warehouses.
Moreover, there will be no requirement of KYC for switching from postpaid to prepaid or prepaid to postpaid.
There will be a calendar of spectrum auction, so that companies will know about it well in advance. Similarly, the process of setting of mobile towers have also been simplified and all bureaucratic hurdles have been removed.
Ashwini Vaishnaw also announced that the core network technology for 4G and 5G telecom will be developed in India, and the country will use locally developed technology in future.