Airtel to seek reassessment of AGR dues after SC relief for Vodafone Idea
Company has claimed calculation discrepancies in the past
Gopal Vittal says reconciliation process will begin soon
A day after the Supreme Court ordered the government to reassess the adjusted gross revenue (AGR) dues from Vodafone Idea up to FY17, Bharti Airtel will approach the Centre for a similar reassessment.
During the company’s earnings call, Bharti Airtel vice chairman and MD Gopal Vittal said, “We have always said that the AGR adjustment which you know we sought reviews on around calculation errors was something that you know having lost was a disappointment for us”.
“So in that sense, we are pleased that this has been allowed for reconciliation by the court. We are now going to be taking it one step at a time. So first we're going to reach out to the government and that is something that the company will do over the course of the coming days,” Vittal added. He was replying to a question seeking Bharti Airtel’s stand on the apex court order.
To give context, AGR is the portion of a telecom operator’s total earnings which is used to calculate statutory dues. Operators are required to pay 8% as licence fee to the government from this amount. And this also includes a 5% contribution earmarked for the Digital Bharat Nidhi initiative.
After the announcement, shares of Bharti Airtel showed upside movement by 1.66% from opening on the National Stock Exchange. The stock price reached ₹2,108.80 apiece on the bourses. In contrast, the broader Nifty 50 index was down 0.65%
SC Order on VI's AGR Dues
The apex court said that the government is free to consider relief on both additional and reassessment of the AGR dues.
According to a Mint report, Vodafone Idea AGR dues amount to ₹83,400 crore, with annual payments of ₹18,000 crore set to begin next March. This amount goes up to a massive ₹2 lakh crore, including penalty and interest.
After months of battle at the court, the telecom major has asked for relief on its AGR dues case. There are multiple reasons behind this move including massive financial crunch, dues being unfairly inflated, etc.
Currently under massive dues, it is essential for VI to get relief to ensure financial viability and avoid insolvency.
The AGR dispute comes from the argument that whether non-core income like rent, interest, or profit from asset sales should be included in telecom revenue. In connection to that, Vi and some of the other telcos have maintained that the government’s broad definition massively inflated their dues.
Even though the Supreme Court upheld the government’s view in 2019, the telecom major argues that the interest, penalties, and compound interest together make the total amount ‘exorbitant and disproportionate’.
Additionally, in order to stay competitive in the market, Vi needs to expand rapidly and thereby would need money to invest in 4G expansion and 5G.
The government is also considering offering limited relief to the telecom operator by reviewing and rectifying possible duplicate entries and calculation errors in its additional AGR dues, an NDTV Profit report stated.
If Vodafone Idea’s AGR dues remain unresolved, the debt-laden company could face the risk of collapse or insolvency, which in turn will have a massive impact on the country’s telecom sector as the market will be left to be dominated by Jio and Airtel.
