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Is DoT Building A Case In Favour Of Airtel And Vodafone Idea?

The AGR (adjusted gross revenues) ruling of the Supreme Court continues to spring surprises. Over the past few weeks, there are random yet unmissable numbers being thrown around in the media reports. The AGR blow that was initially believed to just strike the telecom operators down has now begun to spook the non-telecom entities.

In fact, the DoT’s (department of telecom’s) reported demand of Rs 3.12 lakh crore from three non-telecom entities – GAIL, Gujarat Narmada Valley Fertilisers & Chemicals (GNVFC) and PowerGrid Corporation – is now more than double the estimated dues (Rs 1.47 lakh crore) from 15 telecom companies such as Vodafone Idea, Bharti Airtel and Reliance Communications. Out of 15 telcos, just five are operating currently.

These entities (both telecom and non-telecom) owe money to DoT for different types of licences. GAIL, for instance, was asked to pay for IP-I (infrastructure provider-I), IP-2 and ISP (internet service providers) licences. DoT, the nodal agency for telecom services in the country, grants different types of licences – basic, UASL, cellular, ILD, VSAT, NLD, IP-I, PMRTS – to numerous entities for carrying out their businesses and sell services to consumers.

While these non-telecom entities were expecting some demand from DoT after the apex court’s order, nobody had imagined the magnitude. It’s obvious that these entities would not likely pay the due amounts as they would go belly up. In nearly all the cases, the DoT dues on these companies are far higher than their annual revenues, net profits and market capitalisation.

It is understood that DoT’s internal estimates are based on the AGR definition – as certified by SC in its October ruling – which should also take into account the non-telecom revenues of these entities, but these lofty estimates have opened a Pandora’s Box. And this is just a beginning as similar demands are expected to be made from other entities such as Oil India, Delhi Metro Rail Corporation, RailTel and others.

It also seems rather illogical that telcos were fighting the AGR case for the past 14 years wherein their own dues were far lesser than non-telecom companies.

So far, the telcos have done their bit by knocking on the doors of the government to provide relief. The chances of a direct succour seem distant as similar demand could arise from other distressed sectors such as automobiles, steel, real estate and agriculture.

They have also filed petitions in SC to review interest, penalty and interest on penalty which constitute nearly 75 per cent of their total dues. Telcos have recently raised tariffs to tide over the AGR crisis but how much they are going to benefit from it is yet to be seen. Vodafone Idea has made it clear that without the government support, they are likely to shut shop.

The non-telecom entities are still evaluating legal remedies. Gujarat-based GNVFC, for instance, is seeking expert legal advice on the matter and based on the advice, it will decide the future course of action.

Non-telecom entities can argue that telecom licenses obtained by them don’t directly result in generating revenues for them. Their core businesses are elsewhere whereas telcos generate the bulk of their income from selling services riding on the licensed airwaves.

But where does this lead to? Is DoT looking at giving an indirect relief to telcos? One thing these monumental demands have done, for sure, is to take all the attention away from telcos. In order to make a problem look less severe, create a bigger problem.

Then, when the time comes to clear out the mess, everybody will benefit. Nobody is arguing that the incumbent telcos are in a position to pay dues but by raising substantial demands from non-telecom companies who are probably undeserving of the dues, DoT could perhaps be making a case where the dues will be lowered for everybody.

The consequentialism theory says that most people would believe that lying is wrong, but if telling a lie helps save somebody’s life, it’s the right thing to do. In the similar fashion, if saving telcos ensures a steady income for the government (and boosts India’s image as investment destination), the DoT would be better off giving up on some of the windfall gains from the AGR case. And after all, the frequent visits of the telecom bosses to Sanchar Bhawan in the recent weeks would pay off.—Business Today

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