India Seeks Supreme Court Permission To Stagger Telecom Dues Over 20 Years
Adverse impact on telecom companies may have a cascading impact on the economy, government says in plea to the Supreme Court.
The government has filed a plea in the Supreme Court seeking permission to allow telecom operators pay statutory dues worth thousands of crores over 20 years.
The telecom ministry proposed the staggered payment of dues in view of the current economic condition of the industry and impact it will have, including on consumers and job losses, if one of the operators decides to file for bankruptcy, according to an affidavit filed in the apex court.
Bloomberg had first reported about the government’s proposal quoting people aware of the matter as the filing wasn’t public then.
According to the plea, the interest on the unpaid amount, penalty and the interest on that penalty will only be calculated up to the date of the Supreme Court’s October ruling.
The proposed relief comes after a Supreme Court verdict asked the operators to include non-core revenue while calculating taxes and duties. That threatened to cripple the industry already battling a tariff war.
The beleaguered companies, according to government’s calculations, were expected to pay Rs 119,292 crore in adjusted gross revenue dues as on March 6, 2020.
The government’s decision would aid cash flows, particularly for Vodafone Idea Ltd. which warned that the dues would make survival difficult. The government too would have lost tax revenue in case of a shutdown. Indian operators had seen debt mount and profits fall after Mukesh Ambani’s Reliance Jio Infocomm Ltd. unleashed cheap data tariffs, driving smaller rivals out of business and forcing the larger ones to merge.
Bharti Airtel Ltd. and Vodafone Idea owe the government Rs 1.32 lakh crore in deferred spectrum liabilities. Usually, the companies pay half of the spectrum cost upfront. After a two-year moratorium, the remaining is paid in equal instalments over the next 16 years.
The relief, if it comes, will also benefit tower operator Bharti Infratel Ltd., which earns revenue by putting up antennas of wireless carriers. Nearly a third of its tenancy income comes from Vodafone Idea.
Confusion Of Who Owes What
Bharti Airtel said it has fully paid AGR dues to the government, based on its own self-assessment basis. Vodafone Idea deposited only Rs 6,854 crore, or 32 percent of its self-assessed dues.
The problem is that these are far short of the what the government expects. The dues calculated by four operators—Bharti Airtel, Vodafone Idea, Reliance Jio and Tata Teleservices Ltd.—account for only 35 percent of the Rs 1.04 lakh crore that the Department of Telecommunications expects from them.
The Bloomberg report, quoting the affidavit filed in the apex court, said Bharti Airtel and Vodafone Idea still owed Rs 26,000 crore and Rs 54,700 crore, respectively. According to the affidavit, Bharti Airtel has paid Rs 18,000 crore, while Vodafone Idea made a payment of Rs 3,500 crore. Vodafone Idea told the bourses that it had paid another Rs 3,354 crore to the DoT on Monday.
Also Read: AGR Dues: A Wide Gap Between Government And Telecom Firms’ Assessment
The difference, according to ICICI Securities, Morgan Stanley, Kotak Securities and IIFL, could be on account of:
- Accounting difference—cash versus accrual accounting used for certain items of income.
- Disallowing deduction on absence of documents—these include interconnect usage charges payouts.
- Computational differences—duplication, inclusion of prior demands, etc.
Kotak Institutional Equities said the path forward could involve an independent audit by the Comptroller and Auditor General of India and/or one of the ‘Big 4’ auditing firms, assuming the Supreme Court sees the efforts of telecom companies as bona fide and allows reconciliation of dues. The operators would have been extra cautious in their math, given the Supreme Court’s tough stance on the matter, the brokerage said in a note.
The telecom operators have yet to respond to BloombergQuint’s emailed queries.
The Supreme Court directed the case to be listed on March 17, 2020 but with the ongoing measures amid the spreading Covid-19, it’s not certain if the case will come up for hearing on Tuesday.