The telecom fund is likely to help telcos manage their cash flows and would be fiscally neutral for the government.

AGR crisis Govt mulls setting up telecom fund to facilitate operations of telcos
Money AGR Crisis Thursday, February 20, 2020 - 11:39

With the telecom sector reeling under severe financial stress and Vodafone Idea staring at bankruptcy in case it is made to pay its adjusted gross revenue (AGR) dues, the government is considering the setting up of a fund to facilitate operations of telcos post the payment of their AGR dues.

According to sources in the know, the dues which have to be paid to the Department of Telecom (DoT) would have to be put in the telecom fund, and can then be lent to the companies with lower interest.

This will allow companies to maintain their going concern status and continue operations without running to banks to raise funds.

With the sector in trouble, none of the banks would also be ready to lend to telcos so the fund would act as critical funding support. The telecom fund is likely to help telcos manage their cash flows and would be fiscally neutral for the government.

The sources also said that two other options are being looked at -- waiver of penalties or staggered payments with interest. The Prime Minister's Office (PMO) and the Law and Finance Ministries would take the final call.

The government is concerned that a complete stop of operations of any of telcos may be a big negative for the sector and is, thus, looking for a way out. It is, however, not looking at changing its AGR demand that could attract adverse observations from courts.

Telcos and the DoT are also engaged in reassessment of AGR dues which some of the telcos have challenged. This could, however, only marginally change the AGR demand and would not benefit telcos to a big extent unless a decision is taken on staggering the penalty and interest payment.

Earlier on Wednesday, Bharti Airtel chief Sunil Mittal and Vodafone Idea Chairman Kumar Mangalam Birla met Finance Minister Nirmala Sitharaman to apprise her on the current stressed state of affairs in the telecom sector due to the huge AGR payment demand and are learnt to have sought relief for sustenance.

"We are responding to the Supreme Court judgment on AGR dues. Have made our payments, working to calculate the remaining AGR liability. Telecom industry has seen a lot of stress for the past three years," Mittal said.

Mittal also had a meeting with Telecom Secretary Anshu Prakash. Birla had met Prakash on Tuesday regarding the AGR issue. While neither Birla nor the DoT have stated any details of their meeting, according to a source, Birla was insistent on going to the National Company Law Tribunal (NCLT) if AGR relief was not given to the company.

He left the choice to the DoT regarding the exact form of relief but seems to have given ideas, including staggered payments, or that the dues should be limited to principal of the AGR, without penalty and interest on penalty.

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