India’s Supreme Court on Thursday asked the Department of Telecommunications (DoT) to consider withdrawing its demand for Rs 4 lakh crore ($52.63 billion) in adjusted gross revenue (AGR)-based dues from non-telecom Public Sector Units (PSUs) or state-run companies.
“Our judgment could not have the basis for demands on PSUs. We would request you (DoT) to withdraw this otherwise we will take strict action….this is wholly and totally impermissible,” it said while referring to the demand raised against the PSUs,” a bench of Justice Arun Mishra, S Abdul Nazeer and M R Shah observed during the hearing on Thursday.
The DoT had previously sought a total of Rs 4 lakh crore in dues from gas utility GAIL India Ltd (Rs1.72 lakh crore or $22.63 billion), electricity transmission firm PowerGrid (Rs 22,062.65 crore or $2.9 billion), Oil India Ltd (Rs 48,489.26 crore or $6.38 billion), Delhi Metro Rail Corporation (Rs 5,481.52 crore or $721.25 million) and Gujarat Narmada Valley Fertilizers and Chemicals (Rs 15,019.97 crore or $1.98 billion) among others following the Supreme Court’s October 2019 decision on AGR definition.
The Court had in October 2019 expanded the definition of AGR by including non-telecom revenues.
The PSUs, however, challenged the DoT’s demand for dues saying telecom wasn’t their core business and their revenue from telecom licences is insignificant.
The Court on Thursday also allowed private telecom operators to submit an affidavit explaining the time needed and strategy to clear the remaining AGR-related dues.
During the hearing, India’s solicitor general Tushar Mehta argued that a one-time recovery of dues from telecom operators would impact the entire sector and will send some players into liquidation.
The Indian government has already told the Supreme Court that a one-time recovery of AGR-related dues can have an adverse impact on the economy, jobs, and millions of consumers from the possible collapse of a telco. It had also urged the Court to allow staggered payment of remaining Rs 93,520 crore or $12.31 billion AGR-related dues over a period of up to 20 years.
Market watchers believe that the Supreme Court’s move to allow these telcos to file affidavits on their staggered payment roadmaps offers a window of opportunity to both Vodafone Idea and Airtel to buy more time to clear their AGR dues.
Notably, Vodafone Idea’s promoters Vodafone Plc and AV Birla group have already said that they will not infuse fresh equity in their Indian telecom venture to help it pay adjusted gross revenues or AGR related dues, such as license fees, penalties and interest.
Cash-strapped telecom operator Vodafone Idea, which owes Rs 58,254 crore or $7.6 billion towards AGR-related dues, told the apex court that it doesn’t have enough money to pay its employees and meet expenses, and it can’t provide a bank guarantee against these dues.
During the hearing, Vodafone Idea’s representative counsel told the Court, “Licenses and spectrum were auctioned. We purchased them for thousands of crores. Intrinsic value of the spectrum will be the best security.”
Vodafone Idea’s AGR and related dues for the telco stand at Rs 21,533 crore ($2.83 billion), as per its internal assessment. It has already Rs 6,854 crore ($901.84 million) to the Indian government, and has warned that it would be forced to shut shop in the absence of any relief on its AGR dues.
Bharti Airtel, on the other hand, has paid Rs18,000 crore ($2.37 billion), as per its self-assessment. Its representative counsel informed the court that the telco will confirm the remaining dues with the government and clear it.
Airtel’s total AGR-related outstanding dues stand at Rs 43,980 crore ($5.79 billion), as per the Indian government.
Another defunct telco Tata Teleservices’ has paid Rs 4,197 crore ($552.24 million) against Rs 16,798 crore ($2.21 billion) dues.