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Adjusted Gross Revenue (AGR) issue

Topics Covered: Government policies and interventions for development in various sectors and issues arising out of their design and implementation.

Adjusted Gross Revenue (AGR) issue

Context: The Supreme Court has said it was “totally impermissible” for the Department of Telecommunications (DoT) to “misuse” a judgment of the Apex Court to demand ₹4 lakh crore in adjusted gross revenue (AGR) from public sector undertakings.

The Court has also questioned the viability of the government’s 20-year ‘formula’ for telecom companies to repay their AGR dues to the tune of ₹1.42 lakh crore.

What has the Court said?

The Court pointed out its October 2019 judgment which was completely silent with regard to public sector undertakings.

What has the government said?

The government told the Court that it would file an affidavit explaining as to why the AGR demands were raised against the PSUs.

Background:

Last year, the Supreme Court upheld the definition of Adjusted Gross Revenue (AGR) calculation as stipulated by the Department of Telecommunications.

The order by the top court means that the telecom companies will have to immediately clear the pending AGR dues, which amount to nearly Rs 1.47 lakh crore.

What is AGR?

Adjusted Gross Revenue (AGR) is the usage and licensing fee that telecom operators are charged by the Department of Telecommunications (DoT). It is divided into spectrum usage charges and licensing fees, pegged between 3-5 percent and 8 percent respectively.

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 How is it calculated and what’s the contention?

As per DoT, the charges are calculated based on all revenues earned by a telco – including non-telecom related sources such as deposit interests and asset sales. Telcos, on their part, insist that AGR should comprise only the revenues generated from telecom services.

Challenges for telecom sector:

The AGR issue has triggered panic in the banking industry, given that the telecom sector is highly leveraged. Vodafone Idea alone has a debt of Rs 2.2 lakh crore that it has used to expand infrastructure and fund spectrum payments over the years. The mutual fund industry has an exposure of around Rs 4,000 crore to Vodafone Idea.

InstaLinks:

Prelims Link:

  1. What is AGR? How is it calculated?
  2. What was SC’s verdict on this?
  3. Composition of TRAI?
  4. How spectrum allocation is done in India?

Mains Link:

Discuss the challenges facing Indian telecom sector today. What should the Government of India do to save the telecom sector?

Sources: the Hindu.