Telcos to face special audit for understating revenues

The Union Government is planning to conduct a special audit of telecom companies for alleged understating of revenues, causing a loss to the exchequer. The Department of Telecommunications has selected seven auditors to examine the books of mobile phone operators from 2011 to 2018.

The telecom department wants auditors to check the billing to post-paid customers, revenue from broadband subscribers, billing to the internet data center, the sale of SIM card/recharge/e-recharge, the sale of the handset, revenue from the leasing of infrastructure and so on. Besides, the auditor would also look into the collection from the installation fees, late fees, sale proceeds of handsets, revenue on account of interest, dividend, value-added services, roaming charges etc. (as part of gross revenue). And find out more about the configuration of tariff plans in the billing systems and discrepancies in call duration and charges.

The auditors would be given the mandate to examine the accounting adjustments for commissions or discounts paid to distributors, promotional schemes like free talk time and discounts to postpaid subscribers, and on roaming services. The audit report would be expected to be submitted in three months.

The special audit was triggered by a 2017 report of the Comptroller and Auditor General of India (CAG). The report said a clutch of telecom companies were found to have understated revenues by more than Rs 61,000 crore over a period of five years, resulting in short payment of nearly Rs 7700 crore in statutory dues to the government. The telcos were Bharti Airtel, Vodafone, Idea Cellular, Aircel, Sistema Shyam Teleservices, and Reliance Communications. Other than these, Tata Teleservices, Telenor, Videocon Telecom, Quadrant Televentures, and Reliance Jio Infocomm were also mentioned in the CAG report. These firms, the report said, understated their adjusted gross revenue (AGR) by over Rs 14,800 crore, resulting in a shortfall of Rs 1526.7 crore to the government.

Mobile service operators are required to share a percentage of their AGR with the government as an annual licence fee. Currently, operators pay 8 percent of their AGR as license fee. In addition, telcos need to pay spectrum usage charges for using airwaves allotted to them. The government is concerned about the continuing shortfall in its revenue collection from the telecom industry. According to data available with the TRAI, the gross revenue of telecom service providers and licence fees paid to the government declined by about 10 percent, while AGR dropped more than 8 percent on a year-on-year basis in 2018.