SC in AGR verdict: Hello, Please pay your dues!
While Indian Telecom Industry is at the cusp of a potential digital transformation, a policy overhang is trying to render the business quite precarious. The Supreme Court gave a verdict that the telecom companies have to pay dues of Rs. 92,000 Crores with Vodafone and Airtel paying almost 20,000 crores each and this verdict has left the industry raving bonkers.
Why pay 92,000 Crore?
Telecom operators pay levies such as license fees and spectrum usage charge (SUC) as a share of their revenue to the government. These payouts are calculated as a percentage of the adjusted gross revenue (AGR). The telecom industry is even ready to pay these levies, but the issue is that what the telecom operators perceive the AGR to be is different from what the Government wants them to perceive.
According to telecom operators, it should be a percentage of the revenue that they earn from the telecom business only. While for the Government, it should include revenue from even the non-core business such as deposit interest, dividends, handset sales, rent and profit from the sale of scrap.
Why isn’t Reliance Jio affected?
We have always heard of first movers’ advantage but here we see a late-comer advantage. Since it started so late, Reliance Jio will only have to pay Rs. 13 Crores. Lucky, aren’t they?
Is the time for this judgment correct?
With the telecom sector plagued by falling revenue, dwindling cash flows and debt of over Rs 7 lakh crore, amid an intense price war, the recent court order doesn’t augur well for the sector. If the government doesn’t review the impact of this decision and finds suitable ways to mitigate the financial burden, it might also lead to the withdrawal of these companies from the market, making the Telecom industry a monopoly.