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Telecom stress: Secretary panel may seek legal opinion on options

Government to assess if it has right to grant waiver and whether there are any precedents.

Updated: Nov 02, 2019, 08.32 AM IST
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The government needs to tread “extremely carefully” to avoid any future vigilance scrutiny, an official said.

NEW DELHI: A panel of secretaries set up to recommend relief measures for telecom companies is likely to seek legal opinion on the options, including any legislative measures needed, to alleviate the stress on the sector that was aggravated by last week’s Supreme Court order on adjusted gross revenue (AGR).

While the committee, headed by cabinet secretary Rajiv Gauba, is mulling steps such as a two-year moratorium on spectrum payments, besides reductions in the Universal Service Obligation Fund component of the licence fee, and spectrum usage charges (SUC), government officials say it may also discuss issues arising out of the SC order broadening the definition of AGR. This includes any precedent of waivers being granted on penalties and interest after a court order.

“We have to assess whether we have the right to do it (grant a waiver) or not … we need to take a legal opinion on this,” a senior government official said. “We also need to know whether there is any precedent, if after an apex court judgment any waiver was given.”

Gauba earlier this week met telecom department (DoT) officials, who gave presentations on the sectoral stress, including issues arising from the AGR ruling.
telecom-info

More meetings are slated early next week.

The government needs to tread “extremely carefully” to avoid any future vigilance scrutiny, another official said.

The panel, set up earlier this week, comprises secretaries from the ministry of corporate affairs and departments of financial services, revenue, law & justice, and information technology, as well as the NITI Aayog CEO besides Gauba.

The court’s decision to broaden the definition of AGR to include non-core items has added to the debt-ridden sector’s woes as telecom companies must now pay an additional Rs 1.3 lakh crore within three months to the government towards licence fees and spectrum usage charges. Both licence fees and SUC are paid on the basis of AGR. The industry association as well as Vodafone Idea and Bharti Airtel have sought a waiver on the payment, or at least lower penalties and interest on the dues, and the government is considering their demand, among other options.

Bharti Airtel and Vodafone Idea, the two most affected operators facing combined dues worth over Rs 80,000 crore, have board meetings next week to consider their fiscal second quarter results. They are hoping for some clarity from the government on any relief before those meetings.

The officials though said it is up to the mobile phone companies to move court to seek a review of the order or seek more time to pay up the statutory dues, and that the DoT will be issuing the updated demand notices in a few weeks, which will include both licence fees and SUC dues.

Industry body Cellular Operators Association of India has sought a total waiver of the entire amount of over Rs 1.3 lakh crore, “given the poor financial state of the sector” If that is not possible, it has requested that the principal portion be allowed to be repaid over 10 years, with a two-year moratorium. Reliance Jio Infocomm, which has dues of just Rs 41 crore, has opposed any relief.

Loss-making Vodafone Idea, which analysts say, would face survival issues if forced to pay the entire amount, had last week said it might file a review application. Analysts said while Bharti Airtel was better placed financially, the telco too would need to curb its spending sharply, including on capex and on spectrum buys, if it needed to pay the dues in full.

According to government officials, an analysis of the financial performance of the mobile phone companies showed that AGR of the industry between 2017-18 and 2018-19 had decreased. Besides, the price of data was an average of Rs 8 per GB at present, which was perhaps the lowest in the world, even as monthly average revenue per user had plunged to Rs 113 in FY19 from Rs 174 in FY15. They added that the SC ruling was expected to further hurt the telcos.

Meanwhile, Vodafone Idea shares surged nearly 23% intraday, before closing 10.5% higher at Rs 4.30 on the BSE Friday, after co-parent Vodafone Group said Thursday that it had no plans to exit India and would support the local JV in the “challenging” times. Bharti Airtel ended flat at Rs 374.05.


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