AGR fallout: Jio's payment likely to put non-telcos in a fix

Last week, Reliance Jio became the first telecom operator to pay its dues arising out of the Supreme Court's October ruling on the controversial adjusted gross revenues (AGR) issue. The telco reportedly paid Rs 195 crore to the Department of Telecommunications (DoT) on the last day of the January 23 deadline. Although the DoT's internal estimates suggested that Jio is liable to pay Rs 60.43 crore for license fee outstanding up to 2016/17, and SUC (spectrum usage charge) up to 2018/19. Jio, however, ended up paying AGR dues till January 31 this year. As per sources, Jio paid its AGR dues for four licenses that it holds, which includes ISP (Internet service provider), NLD (national long distance), ILD (international long distance) and UL (unified license). Jio provides services in all these areas, and as per its own calculations, it has paid more than three times of the dues estimated by DoT.

Jio's payment is likely to put non-telecom companies in a fix. How? So far, the DoT has made AGR demands from PowerGrid Corporation, Oil India, GAIL, and Gujarat Narmada Valley Fertilisers & Chemicals. These entities have to cumulatively pay a whopping Rs 4.39 lakh crore to DoT for the different licenses that they had obtained from the department. Ironically, the AGR demand from non-telecom entities is nearly three times of the demand from telcos (Rs 1.47 lakh crore), and it seems absurd that only telcos were fighting the AGR dispute for 14 years - not even a single non-telecom company was party to the case.

Meanwhile, in its petition filed to the apex court seeking clarification on its dues, Oil India has said that it's not liable to pay the Rs 40,000 crore demand since the NLD license that it holds is out of purview of the Supreme Court ruling. "The DoT has relied on the interpretation of AGR as upheld by the Supreme Court, and arbitrarily issued demand notices from 2007/08 to 2016/17 demanding a sum of Rs 40,108.42 crore by including the revenues of the Oil India from oil and gas business as miscellaneous revenues completely ignoring the fact that the definition of AGR under UAS [universal access service] license agreement is materially different from definition of revenue under NLD license agreement," says the Oil India application reviewed by Business Today.

It further says that Oil India is not even a telecom service provider to which the Supremet Court judgement is applicable. "A substantial portion of the Oil India's revenues are not related to telecom services in any manner, and if the Supreme Court judgement is applicable to the Oil India, then the license fee liability will be calculated by taking into account the total revenue of Oil India. Oil India believes that such a demand would be wholly misconceived and unconscionable apart from being arbitrary, unreasonable and excessive," the Oil India petition says.

Oil India's argument is in contrast to the Reliance Jio's stance which has cleared its dues for NLD license as well. Last week, the Supreme Court agreed to hear modification plea by these non-telecom PSUs (public sector units), along with telcos like Vodafone Idea, Bharti Airtel and Tata Teleservices who have been asking for easier payment terms. The decision on the matter is likely to come this week. The moot point is that if the court decides to take Jio's recent AGR payment as a precedent, then all the affected non-telecom entities will have to pay the entire amount sought by DoT, including for NLD licenses.

The demand raised by DoT is far higher than the market cap, net worth, revenues and net profits of these PSUs. For instance, Oil India has been asked to pay up Rs 40,108.42 crore whereas its networth was just Rs 28,000 crore as on March 2019. In case these entities are forced to pay the entire amount, they would most probably become insolvent.

That's not all! The AGR scare is also likely to spread to other non-telecom entities such as Delhi Metro Rail Corporation (DMRC) and RailTel who would join the list of entities impacted by the apex court ruling. These companies reportedly owe money to DoT for different types of licences - basic, UASL, cellular, ILD, VSAT, NLD, IP-I,PMRTS - that they have acquired for carrying out their businesses and sell services to end consumers.

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