SC questions DoT's AGR demand on PSUs
The Supreme Court on 10 June 2020 said the Department of Telecommunications' (DoT's) demand for Rs 4 trillion worth of adjusted gross revenue (AGR) dues from public-sector undertakings (PSUs) was "totally impermissible". The court said DoT must consider withdrawing it. A Bench of Justices Arun Mishra, S Abdul Nazeer and M R Shah raised questions on the demand raised by the government from the PSUs and said its verdict in the case was misinterpreted, as the apex court had not been dealt with the issue of their dues based on AGR.
- This is wholly and totally impermissible, the bench said, while referring to the demand raised against the PSUs.
- Solicitor General Tushar Mehta, appearing for DoT, told the bench that it would file the affidavit explaining as to why the AGR demands were raised against the PSUs.
- The Bench also asked private telecom operators to file affidavits giving details as to how they will pay the AGR dues.
- On May 18, the top court had lashed out at Bharti Airtel, Vodafone Idea and other mobile phone operators for self-assessing their outstanding telecom dues, saying they need to pay past dues with interest and penalty -- an estimated amount of Rs 1.6 lakh crore.
- The apex court had also come down heavily on the DoT for allowing companies to re-assess what they owed to the government, and said its order -- passed on October 24, 2019 -- on revenues for calculating dues was final.
What are the telecom AGR Issues?
- 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.
- 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.
- 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).
- License agreements between the Department of Telecommunications (DoT) and the telecom companies define the gross revenues of the latter.
- 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.
- 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 core services and not dividend, interest income or profit on sale of any investment or fixed assets.
- In 2005, Cellular Operators Association of India (COAI) challenged the government’s definition for AGR calculation.
- 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.
- However, setting aside TDSAT’s order, the Supreme Court on October 24, 2019 upheld the definition of AGR as stipulated by the DoT.