The already struggling telecom sector is facing a gigantic task of paying Rs 1.48 lakh crore worth of pending AGR (Adjusted Gross Revenue) dues to the Department of Telecom (DoT). The issue that initially started over the definition of AGR has now reached a point where it could even lead to shutting down of operations for one of telcos. So what are these AGR dues? Let's try to understand the issue:
How AGR came into being
The Indian government liberalised the telecom sector as per the National Telecom Policy in 1994, under which licences were given in accordance to the Indian Telegraph Act, 1885. Under this century-old law, telcos are required to pay a fixed annual licence fee for licences granted to them. Since fixed licence fee was high, telcos often defaulted on their payments. The government in 1999 announced the National Telecom Policy, which gave these companies an option to migrate from fixed licence fee to revenue sharing fee. As per the new policy, 15 per cent AGR was fixed as a licence fee under the revenue-sharing model, which was later reduced to 13 per cent and then 8 per cent in 2013.
Also read: AGR-hit telcos set for another jolt; must pay additional service tax, GST on unpaid dues
What's the dispute
The DoT claimed revenue share from all earnings under the AGR from the telecom companies, but they objected and filed a case in 2003 alleging DoT had illegally included new elements in the definition of AGR, including installation charges, value-added services, interest income, dividend, profit on the sale of assets, insurance claim and forex gain.
The issue has even divided the government agencies, with both TRAI (Telecom Regulatory Authority of India) and TDSAT (Telecom Disputes Settlement and Appellate Tribunal) supporting the telecom companies. In 2015, TRAI excluded non-telecom revenue from AGR definition but DoT challenged TRAI's recommendations.
Also read: Infographic: How Vodafone Idea, Airtel got into trouble
What's next for telcos
Vodafone Idea has said it won't be able to continue operations if it doesn't get relief on AGR dues. Airtel is better placed and its stock has touched an all-time high in anticipation of the duopoly. Airtel and Vodafone have already paid Rs 10,000 crore and Rs 2,500 crore, respectively, on February 17, 2020. SC rejected Vodafone's plea seeking "no coercive action" to recover the pending dues. As per the latest SC ruling, telcos have to pay up the pending dues by March 17.
Who has to pay how much
Telecom companies owe Rs 1.47 lakh crore to the DoT, including Rs 92,600 crore as licence fee and Rs 55,100 crore as spectrum usage charges. Bharti Airtel owes Rs 35,600 crore, while Vodafone Idea has to pay Rs 53,000 crore. Reliance Communication has pending dues worth Rs 21,200 crore and Tata Group has to pay Rs 13,800 crore. Of the total pending amount, Vodafone Idea and Airtel have to pay Rs 88,600 crore.
Also read: AGR case: What the telcos wanted vs what they got
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