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Adjusted gross revenue (AGR)

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

Adjusted gross revenue (AGR):


Why in News?

The Supreme Court has allowed telecom companies 10 years’ time to pay their adjusted gross revenue (AGR) dues to the government.

The judgment:

  1. The National Company Law Tribunal (NCLT) should decide whether or not spectrum can be sold under the Insolvency and Bankruptcy Code.
  2. Due to the current Covid-19situation, telcos should pay 10 per cent of the total dues by March 31, 2021.
  3. Telecom companies would also have to make payments on or before February 7 every year. The non-payment of dues in any year would lead to accrual of interest and invite contempt of court proceedings against such companies.

What’s the issue?

An October 2019 judgment of the court in the AGR issue originally wanted the telcos to make the repayments in three months. The court had concluded that the private telecom sector had long reaped the fruits of the Centre’s liberalized mode of payment by revenue sharing regime.

  • Later, the government had proposed in court a 20-year “formula” for telcos to make staggered payments of the dues. But, the court observed that the period of 20 years fixed for payment is excessive.

Even after part payment, the dues still run to ₹1.43 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.

How is it calculated?

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.

What are issues associated? When it all began?

The telecom sector was liberalised under the National Telecom Policy, 1994 after which licenses were issued to companies in return for a fixed license fee.

However, to provide relief from the steep 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). License agreements between the Department of Telecommunications (DoT) and the telecom companies define the gross revenues of the latter.

The dispute between DoT and the mobile operators was mainly on the definition of AGR.

  • The DoT argued that AGR includes all revenues (before discounts) 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 sale of any investment or fixed assets.

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.