Bharti Airtel and Vodafone Idea Might Get Relief in Dues as Govt Plans for Easing of Taxes

The government is considering bringing some kind of relief to the telecom operators for their AGR dues

Highlights
  • The total burden on industry is Rs 1.3 lakh crore
  • Vodafone Idea and Bharti Airtel together owe Rs 89,000 crore
  • The new dues are because of the AGR decision by Supreme Court

Right now, the biggest issue that the telecom operators in the industry are facing right now is the issue of AGR (Adjusted Gross Revenue) which has come up after the Supreme Court verdict on the matter. As per the new ruling of Supreme Court on the AGR definition, the two of the telecom operators are required to pay off more than Rs 89,000 crore in dues to the government. However, the already financially grim situation of the telcos is not making it any easier for the companies. This means that the telecom operators are caught in a very tough spot with drained out balance sheets, heavy debts and the new dues on their shoulders. But, as per a new ET report, the government might be exploring some options to provide relief to these telecom operators. The method of relief might include an extended payment deadline, allowing the telcos to defer these hefty payments by a substantial time.

bharti-airtel-relief-govt

Payment Timeline to Extend to 20 Years

As per this new report, the government is looking at extending the payment period for these dues of the telecom operators to 20 years. The centre might also be looking at an initial moratorium — based on the net present value (NPV), which is a method used to ease the burden on the heavily indebted companies. Not only this, but the government could also consider some relief on the taxation to make it easier for these telecom operators to pay off their dues in this time period. Separately, the centre could talk to the sector regulator, the Telecom Regulatory Authority of India (Trai) which oversees the telecom industry to set some floor pricing in the sector to ensure viability for these telecom companies. A government official quoted, said that the government stays keen on ensuring the viability of the telecom industry and is keeping all the options on the table.

The panel which met yesterday for the first time to discuss on the issue is headed by cabinet secretary Rajiv Gauba and also consists of key stakeholders in the industry. As per the people present during the discussion, there is a realisation that external attempts would have to be made to keep the telecom industry competitive.

New Decision on AGR Increases Woes for Telcos

It is noteworthy that the Apex Court ruled on the matter of AGR definition to include the non-core services as well. This means that the dues from the telecom operators which include spectrum usage charges, and license fees which are calculated based on the AGR will be more as the AGR will now include revenue from the non-core services of the telecom operators as well. This new decision has put pressure on the telecom operators who will now have to pay Rs 1.3 lakh crore in dues to the government in total.

Floor Pricing Likely to Help Telcos

Out of all the telecom companies, Vodafone Idea and Bharti Airtel have taken the most hit since the two companies have been in operation longer and the matter of AGR has been ongoing in the legal domain since more than a decade. The two companies together have to pay Rs 89,000 crore in dues. If the NPV method is adapted, then the future payments will be eased for the telecom operators and discounted at an agreed rate. The committee has also remarked that the taxes on the dues also need to be eased. On top of this, the floor pricing in the sector would mean that the telecom operators would have more viability.

Arpit spends his day closely following the telecom and tech industry. A music connoisseur and a night owl, he also takes a deep interest in the Indian technology start-up scene and spends rest of his time spilling poetry and stories on paper.

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