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AGR dues: Oil India, GAIL, other PSUs face payouts nearly double of net worth

The SC directive to the telecom sector with respect to the AGR dues pales in comparison to the payout confronting the non-telcos, which face the prospect of shelling out over twice the amount that telcos are required to pay.

Written by Aashish Aryan | New Delhi | Published: February 5, 2020 3:05:16 am
What is agr, agr telecom explained, agr telecom, AGR dues, Oil India AGR dues, GAIL AGR dues, The total demand raised by the Department of Telecommunications (DoT) against state-owned gas transporter Gail is Rs 1.72 lakh crore — nearly four times its net worth at Rs 44,092 crore, and nearly three times its average annual revenue over the past five years.

The impact of the Supreme Court’s (SC) direction on the telecom sector with respect to the pending adjusted gross revenue (AGR) dues pales in comparison to the payout confronting the non-telecom companies, which face the prospect of shelling out over twice the amount that telecom companies are required to pay.

At Rs 3 lakh crore, the demand from non-telecom companies — nearly all of which are public sector units (PSUs) such as Gail India Ltd, Power Grid Corporation India Ltd, Rail Tel, Oil India Ltd, and Delhi Metro Rail Corporation (DMRC) — is also between two and three times their average revenue for the past five years.

The total demand raised by the Department of Telecommunications (DoT) against state-owned gas transporter Gail is Rs 1.72 lakh crore — nearly four times its net worth at Rs 44,092 crore, and nearly three times its average annual revenue over the past five years.

The AGR demanded from electricity transmission major Power Grid is nearly Rs 22,170 crore — nearly equivalent to its average annual revenue over the five years at Rs 25,513 crore and over three times the company’s average net profit over the past five years.

In case of Oil India, on November 22, the DoT sent the oil exploration company a demand notice to pay Rs 40,108 crore as part of its pending AGR dues. The amount sought from the oil exploration company is nearly one-and-a-half times its net worth as of March 2019 and nearly 20 times its average net profit over the past five years.

This is despite companies such as Gail, Oil India, and others having maintained that while most of the bandwidth bought by them in the mid-2000s is for captive use, “any additional bandwidth capacity available with them is leased out by them to telecom operators” for optimal use of the spectrum. The clarifications by these PSUs notwithstanding, DoT officials are of the view that they have to pay the AGR dues as they failed to “hive off the unit using the spectrum” into a separate unit, as per the SC’s directions in 2011.

The high pending payout amounts against all licencees, DoT officials further explained, is on account of compounding of dues which include principal amount payable, interest on pending AGR dues, the penalty levied due to faulty self-assessment by companies, and the interest on penalties.

In its October 24, 2019 judgment, the SC upheld the DoT’s definition of AGR and said since the licencees had agreed to the migration packages, they were liable to pay the dues, the penalty on dues, and the interest on penalty due to delay in payments.

Since 2011, when the case first came to the apex court, the central government has maintained that since all the license holders had “unconditionally accepted the migration package and having taken the benefit of the same are bound by the terms and conditions of the license agreement and cannot be permitted to resile from the same”.

“The 2011 Supreme Court judgment clearly mentions that if they wanted to avoid the burden, they should have hived off those units into a separate unit and maintained separate accounts,” a senior DoT official said.

Non-telecom PSUs, which now face the burden of shelling out the amounts had, however remained conspicuous by their absence during which the SC heard the arguments for and against upholding the DoT’s AGR definition. These PSUs started mounting their defenses nearly three months after the October 24 SC judgment, and only to contest the notices sent to them by DoT asking them to pay their AGR dues.

The first to move the apex court with a modification plea in November was Gail, which had received the demand notice of Rs 1.72 lakh crore from the DoT. Gail was followed by others including Oil India, DMRC, Power Grid and others. GAIL, DMRC and Oil India did not respond to queries by The Indian Express on why the companies took nearly three months to challenge the SC ruling on AGR.

Incidentally, Gail and Oil India, alongside PGCIL and others, approached the apex court on January 24 seeking an early hearing in to their modification plea exactly a day after Oil Minister Dharmendra Pradhan had said that DoT seeking AGR dues from non-telecom PSUs was a result of a “communication gap” and that these firms did not owe any such amounts.

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