Recently, the government has given relaxation in deadline in respect of Adjusted Gross Revenue- AGR payment by telecom operators.
Adjusted Gross Revenue- AGR
- The Licensing Finance Policy Wing of the Department of Telecommunication- DoT directed all departments not to take any action against telecom operators who failed to pay dues related to Adjusted Gross Revenue (AGR). Have given.
- In this order, no change has been made in the amount paid by telecom operators, but the payment deadline has been increased.
- It is noteworthy that the Central Government had ordered the telecom service providers to pay the outstanding adjusted gross revenue of about Rs 92,000 crore which was challenged in the Supreme Court.
- The Supreme Court set aside a deadline for making payments to telecom service providers, dismissing the petition for challenge. The government has given this directive to provide security to non-payment service providers within this deadline.
Impact on various categories due to increase in payment deadline by the government
Impact on service providers
- The order comes as a major relief to telecom service providers, mainly operators of Bharti Airtel and Vodafone Idea, otherwise these service providers would have faced possible contempt action if they did not pay by 23 January.
- It is noteworthy that the Department of Telecommunications owes Bharti Airtel and Vodafone-Idea approximately Rs 88,624 crore. While Reliance Jio paid the outstanding of Rs 195 crore on 23 January.
Impact on consumers
- In recent years, the price of telecom services had come down significantly due to excessive competition among telecom service providers but excessive revenue burden on service providers like Bharti Airtel and Vodafone-Idea after the government ordered payment of adjusted gross revenue. The prices of services have increased due to the fall.
- With this order of the government, these service providers may get more time for payment and the competition in telecom services market can be increased again, which will benefit consumers.
- It is important to note that in recent times, a service provider like Vodafone was indicating to consolidate its business from the country, but this order of the government can be expected to have stability in this area. In addition, consumers will be able to get continuous service at low prices.
Impact on mutual funds and banks
- The issue of adjusted gross revenue had put the mutual fund and banking sector in concern as the telecom sector is a highly profitable sector and the sector’s crisis also affects the banking sector.
- It is important to note that Vodafone-Idea alone has a debt of 2.2 lakh crore rupees, which it has used in the last few years to expand infrastructure and fund spectrum payments. This will give these service providers time to make adjusted gross revenue payments so that they can expand their market capacity and make payments to the bank easily.
- Supreme Court decision in this context
- On October 24, 2019, the court agreed with the DoT’s definition of AGR and stated that companies would have to pay all dues with interest and fines.
- It is pertinent that Bharti Airtel and Vodafone Idea tried to convince DoT to relax the deadline and after failing, moved the court to review the verdict.
- The court rejected the review petition last week and also did not extend the deadline for payment of AGR balance.
- However, the Supreme Court has agreed to hear the Companies Modification Plea.