Telcos' self-assessment of AGR dues may at least take 6 months: Report

A full evaluation of the self-assessment done by telcos' for AGR dues could take at least six months, given the multiple years and numerous documents that have to be checked, according to a telecom department source.

The government, last week, had asked Bharti Airtel, Vodafone Idea and other telecom companies to pay remaining AGR dues as per the Supreme Court order without further delay. It had written to all telcos asking them to pay balance dues "without delay" and submit detailed bifurcation of payments (explanation of self-assessed amounts), which it said are necessary for proper reconciliation of legitimate AGR dues.

A senior telecom department official said that a complete evaluation of the self-assessment done by telecom companies for their AGR dues could take six months as it will require checking scores of documents spread over multiple years.

"Comptroller and Auditor General of India (CAG) has done a detailed audit for the years 2006-07 to 2014-15...Overall, DoT's complete evaluation of the self assessment by telecom companies will take six months," the official said.

In all, 16 entities had owed the government Rs 1.47 trillion in AGR liabilities -- Rs 92,642 crore in licence fee and another Rs 55,054 crore in outstanding spectrum usage charges. Of the estimated dues that include interest and penalty for late payments, Airtel and Vodafone Idea accounted for about 60 per cent.

These dues arose after the Supreme Court, in October last year, upheld the government's position on including revenue from non-core businesses in calculating the annual Adjusted Gross Revenue (AGR) of telecom companies, a share of which is paid as licence and spectrum fee to the exchequer.

The Supreme Court last month rejected a plea by mobile carriers such as Bharti Airtel and Vodafone Idea for extension in the payment schedule and asked companies to deposit their past dues for spectrum and licences.

Since the February 14 tongue lashing that the Supreme Court gave telecom companies for missing its previous deadline of January 23 to pay past dues as well as the DoT for failing to enforce it, firms and the telecom ministry had been doing separate maths on the actual dues.

Beleaguered Vodafone Idea Ltd, on March 6, pegged its total dues to the government at Rs 21,533 crore -- less than half of what the telecom department has estimated, even as the Vodafone CEO indicated keenness to make a "new, good beginning" in India. The company has so far paid Rs 3,500 crore out of the "self-assessed" liability of Rs 21,533 crore, while the Department of Telecommunications estimated its dues to be over Rs 53,000 crore.

On a similar self-assessment pattern, Bharti Airtel paid Rs 13,004 crore to the government in two installments. It had also deposited an additional Rs 5,000 crore as an ad-hoc payment to cover any reconciliation differences. Still, its payment is far less than over Rs 35,000 crore that the government estimates the company owes it.

Similarly, Tata Teleservices has paid Rs 2,197 crore in AGR dues, and more recently additional Rs 2,000 crore to cover reconciliation differences, while the DoT estimates the liabilities to be about Rs 14,000 crore.

Govt asks telcos to submit supporting documents on AGR self-assessment

The government has asked telecom companies including Vodafone Idea, Bharti Airtel and Tata Teleservices to submit supporting documents on AGR self-assessment that formed the basis of their statutory dues calculation, according to a DoT source.

The source, who did not wish to be named, said the exercise will help the Department of Telecom (DoT) examine the AGR calculations being made by the telecom players.

All three telecom companies Bharti Airtel, Vodafone Idea and Tata Teleservices have been asked to provide substantiating documents to support their claims on AGR arithmetic, the DoT official added. However, no deadline has been given to companies to submit the supporting documents.

Once substantiating documents are filed by the companies, the telecom department will initiate random test checks on the AGR calculation in a time-bound manner. The 'test check' will be done for any one year (of telcos' dues) to examine the deviation between telecom companies' assessment and the government calculation of AGR liabilities.

Asked what prompted the department to seek supporting documents to verify AGR-math done by companies through self-assessment, the source equated the exercise to filing of income tax returns where the assessing authority examines the calculations/claims made.

Moreover, the DoT wants to ensure that the court-mandated criteria is being followed by companies in computing their AGR dues, the source added.

While the three operators - Bharti Airtel, Vodafone Idea and Tata Teleservices - are first off the block, the DoT will also follow the same procedure for all other AGR-hit companies including internet service providers.

"For those who are saying we are giving dues by self-assessment, we will seek supporting documents. If some companies say they are going by DoT's calculation, then we don't need to do it," the source added.

In all, 15 entities owe the government Rs 1.47 lakh crore in unpaid statutory dues -- Rs 92,642 crore in unpaid licence fee and another Rs 55,054 crore in outstanding spectrum usage charges. Of the estimated dues that include interest and penalty for late payments, Airtel and Vodafone Idea account for about 60 per cent.

These dues arose after the Supreme Court, in October last year, upheld the government's position on including revenue from non-core businesses in calculating the annual Adjusted Gross Revenue (AGR) of telecom companies, a share of which is paid as licence and spectrum fee to the exchequer.

The Supreme Court earlier this month rejected a plea by mobile carriers such as Bharti Airtel and Vodafone Idea for extension in the payment schedule and asked companies to deposit their past dues for spectrum and licences.

Since the February 14 tongue-lashing Supreme Court gave telecom companies for missing its previous deadline of January 23 to pay past dues as well as the Department of Telecommunication for failing to enforce it, firms and Telecom Ministry are busy doing separate maths on the actual dues.

Vodafone Idea, which is confronted with Rs 53,000 crore in statutory dues as per DoT's calculation, has so far paid only seven per cent of those dues in two tranches.

Airtel has paid Rs 10,000 crore out of its DoT estimated liability of over Rs 35,000 crore.

Airtel on February 17 had said that the company "is in a process of completing the self-assessment exercise expeditiously and will make the balance payment upon completion of the same, before the next date of hearing in the Supreme Court".

Tata Teleservices has paid Rs 2,197 crore, the entire outstanding it believes to have arisen after the October ruling of the apex court for calculating dues.

Amid a deepening crisis in the telecom sector, the government is looking to strike a balance between complying with the Supreme Court order on AGR dues, ensuring the health of the sector and safeguarding consumer interest.

Both Bharti Airtel Chairman Sunil Mittal and Vodafone Idea Chairman Kumar Mangalam Birla continued to meet top government functionaries throughout last week to seek prompt measures that would offer a breather to the troubled sector.

Mittal has urged the government for reduction in levies and taxes, as he termed the AGR "an unprecedented crisis for industry".

AGR verdict: Data could be the new Onion, Mr Ravi Shankar Prasad

The Hon. Supreme Court on Friday rapped the telecom operators and ordered them to pay the adjusted gross revenue (AGR) dues by the stroke of midnight on Friday. This is akin to a “Death Warrant” for Vodafone-Idea. The legal system has to follow the rule book and is bound by law. However, it’s the executive which has to “think on its feet” and figure out the best solution for this situation from a holistic viewpoint, vis-à-vis nailing a “culprit”.

All eyes would be on the Telecom Minister, Mr. Ravi Shankar Prasad, who will need to think “out-of-the-box” than take the easy path of toeing the Hon. Court’s directive. Before shutting Vodafone-Idea, the Telecom Minister should figure out how to recover AGR dues from the corpses of telecom sector, viz. Reliance Communication (RCom), Aircel, Telenor, Sistema and Videocon. Not everybody comes with a rich pedigree like the Tatas, who are paying-off dues of Tata Teleservices through the parent Tata Sons.

Now, here is what would happen if Vodafone-Idea were to shut shop:

- Non-recovery of dues: It will defeat the very purpose of AGR, turning this imbroglio into a long-drawn process without any clarity on closure.

-Job losses: About 14,000 employees, along with numerous others who are directly dependent on Vodafone-Idea as casual workers, dealers, service providers etc. will suffer.

- Non-performing assets (NPAs): Nearly Rs 1.15 trillion could turn NPA. This could be another IL&FS-type event. Unlike other NPAs, the so called “assets” of a telecom company can disappear in thin air the day it shuts down. Additionally, who would shoulder the responsibility paying-off home loans, personal loans etc of the employees?

- Telecom tariffs: Most telecom players have already increased tariffs by about 40 per cent recently and should double to about Rs 300, as per CEO of Airtel, Gopal Vittal, for the sector to remain sustainable. However, in the event of demise of Vodafone-Idea, the tariffs can shoot up further within a short span.

- Porting: Some 30 crore Vodafone-Idea customers will need to the ported out of the network, leading to possible disruption of services and inconvenience. Porting customers are normally given a red carpet welcome, but the Vodafone-Idea customers may be treated as refugees.

Going back three decades, soaring onion prices brought down governments. Similarly, soaring telecom tariffs now can create issues for the incumbent Government, as more people consume data these days than they ever consumed onions.

The need of the hour could be to let Vodafone-Idea continue with the business providing them an extended rope to make the payments over a period of time, than to kill the “goose”. Even at an average revenue per user (ARPU) of Rs 200, it’s a win-win situation for all concerned. This is about Rs 100 higher than the ARPU seen in the second quarter of financial year 2019-20 (Q2FY20) and would result in additional annual revenue of about Rs 1.2 trillion for the top three players, including Vodafone-Idea. Besides, it will also yield an additional Rs 18,000 crore as goods and services tax (GST) since Sushil Modi, head of GoM on IGST, has declined to consider any set off. Vodafone-Idea would not only be in a position to pay off the AGR dues in the next two years, but also generate enough cash flow to clear the debt over the next five-six years.

Letting Vodafone-Idea wither away will lead to just two gainers and a whole lot of losers. Among the only gainers with windfall profits would be the promoters/ shareholders of Bharti Airtel and Reliance Jio, whilst the general public will end up footing it. The Government may need to deal with additional unemployment, NPAs and worsening investment climate. Above all, the Government may discover it the hard way that data is the new Onion.

Airtel, Voda Idea, Tata Tele likely to pay AGR dues on Monday: DoT sources

Telecom operators Bharti Airtel, Vodafone Idea and Tata Teleservices are likely to make payment for adjusted gross revenue (AGR) dues on Monday to avoid stringent punitive action from the Telecom Department, according to official sources.

The three companies are jointly liable to pay dues of over Rs 1 trillion, but they have informed the Department of Telecom (DoT) of making only partial payment, as per their representatives.

"Airtel, Vodafone Idea and Tata Teleservices have said that they will make payments on Monday. DoT will take action after evaluating the amount paid by them," an official source told PTI.

Earlier on Friday, Bharti Airtel offered the DoT to pay Rs 10,000 crore by February 20, but a DoT official said that the department can't grant any extension.

Vodafone Idea on Saturday said that it is assessing the amount that can be paid towards AGR dues, even as it flagged concerns over the continuation of its business.

Telecom operators are collectively liable to pay Rs 1.47 trillion in AGR dues as per the Supreme Court order dated October 24, 2019. The deadline to pay the amount ended on January 23, but none of the telecom operators, except Reliance Jio, paid the amount.

Even state-owned BSNL and MTNL did not pay the dues.

As per the last available estimates, Airtel owes nearly Rs 35,586 crore, including licence fee and spectrum usage charges, to the government.

Vodafone Idea is staring at dues worth Rs 53,000 crore, which includes up to Rs 24,729 crore of spectrum dues and another Rs 28,309 crore in licence fee. Tata Teleservices owes around Rs 13,800 crore, BSNL Rs 4,989 crore and MTNL Rs 3,122 crore.

Out of Rs 1.47 trillion , around Rs 1.13 trillion  is likely to be recovered, as other companies, which are liable to pay AGR dues, have folded up their businesses.

Reliance Communications and Aircel are going through insolvency proceedings.

The apex court on Friday came down heavily on the Telecom Department for not taking steps to recover statutory dues, estimated to be around Rs 1.47 trillion  from operators.

The DoT issued fifth and final notice to telecom operators on February 14 for making payment on the same day, but none of the companies paid the dues.

When asked about telecom operators having sought time to assess the amount they have to pay, the DoT official said that the court gave them three months to do so and even after missing January 23 deadline telecom operators had sufficient time to calculate their dues.

"Before the due date, DoT has sent telecom operators 4 notices and reminders to pay to avoid punitive action under license condition. After court order on modification plea, telecom players are not left with any excuse to delay the payment and the DoT can take action against them without serving any further notice," the source said.

The apex court pulled up telecom operators and the government on non-payment of AGR dues despite its order. It has asked managing directors and directors of the company to be present in person before court on the next hearing, scheduled for March 17, in case there is violation of its order in the AGR case.

Public sector companies, that do not sell telecom services, owe DoT around Rs 2.65 trillion, with GAIL India alone owing around 65 per cent of the total amount. However, these PSUs have the option to approach court for a legal recourse.

Dispute between DoT and telcos over AGR definition took turn in 2007

The dispute over the definition of adjusted gross revenue (AGR) between the Department of Telecommunications and telecom operators took an eventful turn in 2007-08.

In 2007-8, Telecom Disputes Settlement and Appelate Tribunal (TDSAT) had narrowed the scope of AGR. Following this, the then UPA government went into an appeal.

The Department of Telecommunications (DoT) challenged in the Supreme Court TDSAT's jurisdiction over the terms of the telecom licences that had earlier been accepted unconditionally by telcos.

In an order dated January 19, the apex court dismissed DoT's appeal and directed it to raise its contentions before the TDSAT.

At that time, A. Raja was the Union Telecom Minister, who was later involved in several controversies. The TDSAT again reiterated its earlier findings.

On August 30, TDSAT accepted most of TRAI's recommendations 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.

Industry body AUSPI and the Cellular Operators Association of India (COAI) filed a review petition urging that the TDSAT order be made applicable to all members of the two bodies from the date of filing of their petition.

Following this, DoT again went into an appeal on the advice of the law ministry which was headed at that time by Kapil Sibal.

DoT again moved the Supreme Court against the August 30 TDSAT order. Even as the DoT appeal was pending before the apex court, some telcos filed petitions before TDSAT requesting to be included in the tribunal's August 30 order.

The dispute between DoT and the mobile operators was mainly on the definition of AGR. The DoT argued that AGR includes all revenues (before discounts) from both telecom and non-telecom services.

The companies claimed that AGR should comprise just the revenue accrued from the core services and not dividend, interest income or profit on sale of any investment or fixed assets.

The Supreme Court on October 11, 2011, held that TDSAT's August 30, 2007, order should be set aside. It allowed licencees 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 licence agreement and in consonance with the AGR definition. All telecom licencees moved the TDSAT challenging the basis of DoT's licence fee demand.

In 2015, the TDSAT stayed the case in favour of telecom companies and 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.

As a matter of reference, the case would be akin to say that of an aluminium plant. The excise could have claimed that the cost of a fan and lake ought to be part of the assessable value. The cost of land, workers, etc. all be part of the final cost of each kg of aluminium.

 

AGR dues: DoT asks telecom operators to pay up as SC breathes fire

In a blow to Bharti Airtel and Vodafone Idea, the Supreme Court on Friday rejected their plea seeking a staggered option for paying dues linked to adjusted gross revenue (AGR). The apex court has directed the companies to make the payments in accordance with its order issued on October 24 last year. With the court refusing to grant any relief, Bharti will have to shell out around Rs 35,500 crore and Vodafone Idea Rs 54,000 crore immediately, out of the total telecom industry AGR dues estimated at Rs 1.47 trillion.

Coming down heavily on both the Department of Telecommunications (DoT) and the telcos, a three-judge bench of Justices Arun Mishra, Abdul Nazeer, and MR Shah said “it appears the way in which things are happening, they have scant respect to the directions issued by this court”. on the telcos not depositing any amount so far, the bench observed that the companies had violated the order “in pith and substance’’. The court has drawn up contempt proceedings against a desk officer in the DoT for issuing a circular last month that no coercive action would be taken against the telcos for missing the payment deadline of January 23, 2020, set by the court .

“A desk officer of the DoT has the temerity to pass the order to the effect of issuing a direction to the accountant general, another constitutional authority, not to insist for any payment pursuant to the order passed by this court and not to take any coercive steps till further orders,” it said.

Soon after the strongly worded SC order, the DoT swung into action, trying to take corrective measures. First, it withdrew its January circular that no coercive action would be taken against telcos for delaying the AGR payment, and then in a se¬¬parate communication, said the firms must submit all their AGR dues by midnight — 11:59 pm on Friday to be specific.

It’s another matter that no telco rushed to meet the midnight deadline announced by the DoT just a few hours earlier on Friday. Bharti issued a statement saying it would pay Rs 10,000 crore by February 20 and the remaining dues before the next SC hearing on March 17. Vodafone Idea, which had earlier said it would be hard to do business in India if the AGR court ruling was not relaxed, remained quiet till the time of going to press.

Sources said the firm was waiting to hear from the UK headquarters of Vodafone on the road ahead. Vodafone Idea, which announced losses of Rs 6,439 crore for the December quarter, put off the post-result earnings call, scheduled for Friday, indefinitely.

Public sector undertakings (PSUs) such as GAIL India, RailTel, PowerGrid and others, with an AGR bill of around Rs 2.65 trillion, have been asked to come separately for a hearing. Bharti Airtel, wanting to make amends, said in a statement that it had agreed to pay Rs 10,000 crore on a “self-assessment” basis to the central government. In a letter, addressed to the Member (Finance) of the DoT, Bharti said, “In compliance with the judgement of the Supreme Court and their direction today, we shall deposit a sum of Rs 10,000 crore by February 20 on behalf of the Bharti Group companies (Bharti Airtel, Bharti Hexacom and Telenor India).”

The firm is doing the self-assessment in all 22 circles and has assured the Centre that it would make the balance payments “shortly”. The SC order said if the dues were not paid by the next hearing (March 17), MDs of the telcos would have to be present in court.

Even as Vodafone Idea remained silent on its payment strategy, analysts are of the view that the telecom sector stares at a duopoly with Bharti and Reliance Jio as the two likely private players to remain in fray. Reliance Jio is the only telco to have paid up its AGR dues of around Rs 170 crore by the deadline. “Both the review petition and the modification petition have not been favorable to Vodafone Idea and in our view is pushing India towards a two-player market. That may not be an ideal situation as the networks of Bharti Airtel and Reliance Jio may not withstand the load of 300 million users,” BOfA Securites said in its report. Banks have a huge exposure to Vodafone Idea debt and there may be a cascading effect, economic impact on GDP and job losses, the report said.

BofA Securities is currently acting as financial adviser to Vodafone Idea in connection with the merger of Indus Towers Limited (in which Idea Cellular Limited has 11.15% equity stake) with Bharti Infratel Limited.

The top court had on October 24 upheld the DoT definition of AGR that meant all revenue accrued to carriers, including that from non-core activities, must be taken into account, giving a fresh twist to the nearly two-decade old case.

DoT examining if deadline for AGR payment applies to non-telecom PSUs

The telecom department is examining the legal applicability of January 23 deadline for payment of over Rs 2.4 trillion statutory dues in the case of non-telecom PSUs which were not originally party to AGR matter in the Supreme Court, according to sources.

Sources in the Department of Telecom (DoT) told PTI that while the PSUs too have been asked to make payments related to statutory liabilities (after the SC in October upheld government's position on calculation of non-core revenue for AGR dues), the larger question is whether the January 23 deadline is legally enforceable on state-owned companies that were not direct party to the dispute.

The current view that is emerging in the DoT appears to be that the court-imposed timeline may not apply to PSUs, but the matter is being legally examined for clarity.

"Of course, the court has decided the issue of principle of what is AGR, so they (PSUs) have to pay but if they do not pay by January 23 it will not be contempt as it will be in case of the parties to the case. So PSUs have to pay and we have raised demands, but if they do not pay by January 23 it will not amount to contempt of court on their part because they were not party to the case, but they have to pay," a source added.

Another official also said that the issue of deadline for PSUs is being examined legally. Telecom companies Bharti Airtel and Vodafone Idea, on the other hand, are legally bound to comply with the payment timelines stipulated by the apex court.

ALSO READ: After SC rejects AGR plea, telcos brainstorm on paying up to 20% dues

Following the Supreme Court order of October last year, the DoT estimated that the total liability of 15 telecom companies, including penalties and interest, would be Rs 1.47 trillion.

These AGR liabilities arose after the Supreme Court in October last year upheld the government's position on including revenue from non-telecommunication businesses for calculating the annual AGR of telecom companies, a share of which is paid as licence and spectrum fees to the exchequer.

It has estimated another over Rs 2.4 trillion in liability for non-telecom companies, including state-owned gas utility GAIL India Ltd and power transmission firm PowerGrid, which had taken licences to trade broadband on optic fibre running along their pipelines and transmission lines.

The DoT has sought Rs 1.72 trillion in past statutory dues from state-owned gas utility GAIL India Ltd following the Supreme Court's AGR ruling. The DoT sent a letter to GAIL last month seeking these dues on IP-1 and IP-2 licences as well as Internet Service Provider (ISP) licence, in response to which, GAIL has told DoT that it owes nothing more than what it has already paid to the government.

The assessment puts PowerGrid liability at Rs 21,000 crore, and another Rs 40,000 crore liability was assessed of Oil India Ltd. However, a demand notice was served in case of Gujarat Narmada Valley Fertilizers & Chemicals Ltd for Rs 15,019 crore.