The Supreme Court Tuesday held that telecom firms will get 10 years to clear their adjusted gross revenue or AGR dues, and that the National Company Law Tribunal (NCLT) should decide whether or not spectrum can be sold under the Insolvency and Bankruptcy Code.
What did the Supreme Court rule on AGR dues?
In its judgment Tuesday, the top court gave all telcos a 10-year timeline to complete the payments of AGR dues, instead of the old 20-year schedule suggested by the DoT.
The top court also directed telcos to pay 10 per cent of the total AGR dues by March 31, 2020, following which they can make payments in annual installments between 2021 and 2031.
Telecom companies would also have to make payments on or before February 7 every year. The non-payment of dues in any year would lead to accrual of interest and invite contempt of court proceedings against such companies. The managing directors of the telcos which are required to pay AGR will deposit a personal guarantee within four weeks from today.
A crucial issue of whether the spectrum could be sold under Insolvency and Bankruptcy Code will now be decided by the National Company Law Tribunal, the Supreme Court said.
What is the AGR issue?
All the telecom companies that operate in India pay a part of their revenues as licence fee and spectrum charges to the Department of Telecommunications (DoT) for using the spectrum owned by the government. In its definition of AGR, the DoT had said that telcos must cover all the revenue earned by them, including from non-telecom sources such as deposit interests and sale of assets.
The telecom companies were opposed to this and had challenged this definition of AGR in several forums, including the Supreme Court. On October 24, 2019, the SC had upheld the DoT’s definition of AGR and said since the licensee 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. The top court had then given the telcos three months to clear their AGR dues.
Though the telcos sought a review of the judgment, it was dismissed by the top court which had then insisted that telcos clear all the dues by January 23, 2020.
Why did the Supreme Court extend the payment timelines?
Following requests by the DoT and the telecom companies that asking them to pay within such a short period of time could have meant the end of the road for them, the Supreme Court agreed to hear them on a revised timeline, but refused to reconsider the quantum of AGR to be paid by them.
In an affidavit to the Supreme Court, the DoT had suggested that telcos be given up to 20 years to complete the payment of pending dues as calculated by the telecom ministry. These dues, the DoT suggested, could be paid by the telcos in annual installments.
In its plea before the SC, the DoT had also suggested that the interest on the past unpaid amount, penalty and the interest on penalty with respect to past dues, be frozen as of October 24, 2019.
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What does the AGR ruling mean for telcos?
For Bharti Airtel, which faced an AGR payment of Rs 36,000 crore, a payment timeline of 10 year will come as a breather. The company has already paid close to 40 per cent or Rs 14,400 crore AGR dues until now. It still has to pay Rs 21,600 crore in total, of which Rs 2,160 crore will have to be paid by March 31.
The remaining amount of Rs 19,440 crore will have to be paid in 10 yearly installments, which comes to roughly Rs 480 crore being shelled out by Bharti Airtel as AGR to the DoT every quarter for the next 40 quarters.
For Vodafone Idea, which faces a payment of more than Rs 58,000 crore, the situation is grim as it has paid Rs 7850 crore AGR dues till date. The telco will have to pay nearly Rs 1128.4 crore as AGR dues every quarter for the next 10 years. Both the companies had sought 15 years for making the AGR payment.
Tata Teleservices, which had in 2017 sold its consumer mobility businesses to Bharti Airtel, will have to pay its AGR dues of Rs 14,819 crore in total as SC has not allowed any recalculation of dues. The company, therefore will have to effectively pay roughly Rs 333 crore in AGR dues every quarter for the next 40 quarters.