In a major setback for the telecom companies, the Supreme Court on 14 February 2020 rejected the plea seeking new schedule of AGR payments. Coming down heavily on the Department of Telecommunications (DoT) for not taking coercive action against telcos for failing to repay, the apex court ordered contempt proceedings against Bharti Airtel and Vodafone Idea. The next hearing has been scheduled for March 17.

 

What

  1. The Apex Court also pulled up the DoT desk officer who wrote to the Attorney General asking him to not insist on payment of dues. The SC issued a contempt notice to the officer to explain why no action should be initiated against him.
  2. The court summoned managing director, director of all telcos including Bharti Airtel, Vodafone Idea and others on March 17 to explain why these dues were not deposited despite orders and why contempt action should not be taken against them for non-compliance of order.
  3. A bench of justices Arun Mishra, S Abdul Nazeer and M R Shah heard a batch of petitions filed by telecom companies in open court.
  4. Earlier on January 16, a bench headed by Justice Arun Mishra had dismissed review petitions of telecom firms seeking review of its earlier order asking them to pay Rs 1.47 trillion in statutory dues by January 23, saying it did not find any "justifiable reason" to entertain them.
  5. The apex court had on October 24 last year ruled that the statutory dues need to be calculated by including non-telecom revenues in AGR of telcos.
  6. It had upheld the AGR definition formulated by the DoT and termed as "frivolous" the nature of objections raised by the telecom service providers.

What is the AGR?

  1. The telecom sector was liberalised under the National Telecom Policy, 1994 after which licenses were issued to companies in return for a fixed license fee. 
  2. To provide relief from the steep fixed license fee, the government in 1999 gave an option to the licensees to migrate to the revenue sharing fee model.
  3. Under this, mobile telephone operators were required to share a percentage of their AGR with the government as annual license fee (LF) and spectrum usage charges (SUC)
  4. License agreements between the Department of Telecommunications (DoT) and the telecom companies define the gross revenues of the latter. 
  5. AGR is then computed after allowing for certain deductions spelt out in these license agreements. The LF and SUC were set at 8 percent and between 3-5 percent of AGR respectively, based on the agreement.
  6. The dispute between DoT and the mobile operators was mainly on the definition of AGR. 
  7. The DoT argued that AGR includes all revenues (before discounts) from both telecom and non-telecom services. 
  8. The companies claimed that AGR should comprise just the revenue accrued from core services and not dividend, interest income or profit on sale of any investment or fixed assets.
  9. In 2005, Cellular Operators Association of India (COAI) challenged the government’s definition for AGR calculation.
  10. In 2015, the TDSAT (Telecom Disputes Settlement and Appellate Tribunal) 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 income.
  11. However, setting aside TDSAT’s order, Supreme Court on October 24, 2019 upheld the definition of AGR as stipulated by the DoT.