The government, among other options, is considering to set up a fund to facilitate operations of telcos post the payment of their AGR dues.

Government looking to stick to SCs AGR order but with least impact on telcos
Money Telecom Friday, February 21, 2020 - 11:53

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 options to stick to the Supreme Court's directive but with least possible impact on the financials of the stressed operators.

According to people in the know, the government will try to ensure that its action regarding AGR dues takes care of all the perspectives. Firstly, compliance with the Supreme Court's order and then ensuring minimum impact on the health of the telcos along with making sure that the consumers are not impacted adversely.

The government, among other options, is considering to set up a fund to facilitate operations of telcos post the payment of their AGR dues, sources said.

According to sources in the know, the dues which have to be paid to the Department of Telecommunications (DoT) would have to be put in the telecom fund, and can then be lent to the companies at 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 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 DoT has maintained that it will execute the top court's directive and stick to the spirit of the order.

In the last couple of days, chiefs of telecom majors Bharti Airtel and Vodafone Idea met government officials and ministers in a bid to get some relief.

Bharti Airtel Chairman Sunil Mittal on Thursday met Communications Minister Ravi Shankar Prasad in the wake of the current AGR payment to be made by the telcos, saying he suggested that for the overall health of the industry, taxes needed to be brought down.

"Adjusted Gross Revenue has been an unprecedented crisis for the telecom industry. I made certain suggestions on the overall health of the industry. Industry has been heavily taxed and taxes need to be looked at. The issue of very low revenues left in the kitty of the industry needs to be addressed and the AGR also need to be dealt with," he said after the meeting.

On Wednesday, Mittal and Vodafone Idea Chairman Kumar Mangalam Birla met Finance Minister Nirmala Sitharaman to apprise her the current stressed state of affairs in the telecom sector due to huge AGR payment and are learnt to have sought relief for sustenance. Both the telco bosses have also met Telecom Secretary Anshu Prakash.

Bharti Airtel faces Rs 35,500 crore AGR dues. The company has already announced its plans to pay the dues that arose from the Supreme Court ruling. Earlier this week, Airtel had paid Rs 10,000 crore as part of its AGR dues. The company plans to pay the balance amount before the next date of the Supreme Court hearing on March 17.

Vodafone Idea, which is likely to be the worst-hit operator if made to pay the dues, has a total AGR bill of Rs 53,000 crore. It had paid Rs 2,500 crore to the Department of Telecom (DoT) earlier this week and paid another Rs 1,000 crore on Thursday.

The company has sought relief from the government to remain a going concern.

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