The AGR (Adjusted Gross Revenue) dispute has been an ongoing and contentious issue for the Indian telecom sector since 2019. The Supreme Court upheld the Department of Telecommunications (DoT)'s definition of AGR, which significantly increased the financial liabilities of telecom operators. This ruling has had profound implications for companies in the sector, including industry giants like Vodafone Idea and Bharti Airtel.
The telecom industry has been advocating for relief from the substantial AGR dues, particularly focusing on waiving off the penalty and interest components. These demands are a response to the mounting pressure from telecom operators, who have been struggling with the growing financial burden resulting from the Supreme Court's 2019 ruling.
The Indian government has now started deliberating the possibility of granting relief to the telecom sector by considering a waiver of the AGR penalties and interest. This comes after years of consistent rejections by the Supreme Court regarding any relief measures. Previous relief measures were confined to granting moratoriums on AGR payments and offering staggered payment schedules, but no waivers were granted.
In September 2024, the Supreme Court dismissed a curative petition filed by major telecom operators, including Vodafone Idea and Bharti Airtel. The petition had sought a recomputation of the AGR dues, but the court reaffirmed its original 2019 decision, rejecting the appeal for recalculating the liabilities. The dismissals continued through 2020 and 2021, further compounding the financial difficulties faced by the operators.
As of now, the estimated AGR dues for the major telecom operators are:
Vodafone Idea: Estimated AGR dues amount to ₹80,000 crore.
Bharti Airtel: Estimated AGR dues are approximately ₹42,000 crore.
These mounting liabilities have placed the companies under severe financial strain. Despite the high outstanding dues, no significant relief had been offered until the government's latest deliberations.
To date, relief measures have been limited to the granting of a payment moratorium. The moratorium allows telecom companies to defer AGR payments until 2025, after which annual installment payouts will begin in 2026. This arrangement ensures that the net present value (NPV) of the dues remains consistent with the Supreme Court’s directives, with no reduction in the principal amounts.
The Supreme Court has consistently rejected various appeals for recomputing the AGR dues. These appeals included review petitions filed in 2021 and curative pleas submitted in 2024. The court has made it clear that it intends to preserve the NPV of the AGR dues while not permitting any changes or reductions to the principal amounts.
The government’s consideration of an AGR penalty and interest waiver comes as a potential lifeline for telecom operators, particularly for Vodafone Idea. Vodafone Idea is currently facing the highest liabilities in the sector, and any relief in the form of waiving penalties and interest would provide significant financial relief for the struggling operator.
While the government’s decision is still under deliberation, it is expected to strike a balance between the sustainability of the telecom industry and the revenue considerations that the government must manage.
The decision on whether to grant an AGR penalty waiver will require careful balancing. On one hand, the government must consider the financial health and sustainability of the telecom industry, which is vital for ensuring continued competition and innovation in the sector. On the other hand, the government also needs to consider its own revenue needs, as the AGR dues form a significant portion of the sector's contribution to the exchequer.
Conclusion: A Key Decision for the Telecom Sector
The potential waiver of AGR penalties and interest by the government could provide a much-needed relief to telecom operators, especially Vodafone Idea. However, the final decision is still under review, and its outcome will be crucial in determining the future of the Indian telecom industry. The balance between industry needs and revenue considerations will play a significant role in shaping the final relief measures for the telecom sector.