Adjusted Gross Revenue (AGR) Judgement

The Supreme Court has allowed 10 years for staggered payment of AGR dues. The court also observed that contempt proceedings will begin in case of non-payment of installment. Every year by 7th February, payments have to be made.

What is AGR issue?

• The telecom sector was liberalized under the National Telecom Policy, 1994 after which licenses were issued to companies in return for a fixed license fee.
• To provide relief from 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).
• The definition of AGR has been under litigation for 14 years. In 2005, Cellular Operators Association of India (COAI) challenged the government’s definition for AGR calculation.
• DoT argued that AGR includes all revenues 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 the sale of any investment or fixed assets.
• This contradiction over definition and the slowdown in economy created huge financial liability under AGR rules throwing many telcos on the verge of collapse.

Highlights of the judgement

• Payments will have to be made in installments till March 31, 2031.
• The telecom companies will have to clear their dues by February 7 each year and non-payment of dues will incur penalty, interest and contempt of court
• Court did not agree to Telecoms definition of AGR that non-core business like rent or income from sale of handsets or roaming charges should not be included in the revenue of which they pay a percentage to the government.
• Issue of sale of spectrum by telecom companies facing insolvency proceedings will be decided by the National Company Law Tribunal (NCLT).

Though, the critiques are arguing that the judgement would only be beneficial for one particular brand. But ultimately, this allows the telcos sector breathing space to make staggered payments over a period of 10 years without tremendously disrupting their current cash flows.

Month: Current Affairs - September, 2020