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Relief Package for Telecom Operators
Context:
The Cabinet Secretary is set to make a final decision on a proposal aimed at providing a significant relief package worth approximately ₹90,000 crore to telecom operators such as Bharti Airtel and Vodafone Idea.
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- The proposed relief, which includes waiving a substantial portion of their adjusted gross revenue (AGR) dues, is expected to ease financial pressures on the sector.
- The Department of Telecommunications (DoT) had earlier recommended to the Finance Ministry a waiver of 50% interest and 100% of penalties and interest on penalties associated with AGR dues.
Background on AGR Dues
- In October 2019, the Supreme Court upheld the government’s interpretation of AGR and imposed dues amounting to ₹1.47 lakh crore on telecom companies.
- This included ₹92,642 crore in license fees and ₹55,054 crore in spectrum usage charges.
- A significant portion—around 75%—of these dues comprised interest, penalties, and interest on penalties.
- Since the ruling, telecom operators have collectively paid approximately ₹37,000 crore.
- However, last year, the Supreme Court dismissed their curative petition seeking rectification of alleged computational errors by the DoT in assessing the AGR dues.
Potential Beneficiaries of the AGR Relief
- If approved, the relief package would primarily benefit Vodafone Idea and Bharti Airtel, as well as Indus Towers.
- Analysts estimate that the AGR dues for Vodafone Idea could reduce by ₹52,000 crore, while Bharti Airtel may see a reduction of ₹38,000 crore.
- As of December 31, 2024, Vodafone Idea’s financial obligations to the government stood at ₹2.27 lakh crore, which includes deferred spectrum payments extending until FY 2044 and AGR-related liabilities payable until FY 2031. The company’s AGR liability alone was estimated at ₹77,000 crore.
- For Bharti Airtel, total AGR dues are projected to exceed ₹40,000 crore. The telecom firm has already paid ₹18,000 crore towards its AGR liabilities, while Vodafone Idea has paid ₹8,000 crore.
Financial Implications and Industry Concerns
- Analysts warn that without AGR relief, Vodafone Idea could face a financial crisis in the latter half of FY26 or early FY27.
- During this period, the company will be required to make annual spectrum and AGR payments to the government amounting to $4-5 billion (around ₹40,000 crore) per year.
- This financial pressure is attributed to the expiration of the government’s four-year moratorium on AGR and spectrum dues, which was granted in 2021 and is set to end in FY26.
SC’s Payment Mandate and Government’s Moratorium
- In its order dated September 1, 2020, the Supreme Court directed telecom companies to clear their AGR dues over a 10-year period.
- As per the ruling, telcos were required to make an upfront payment of 10% of their dues by March 31, 2021, followed by annual installments until 2031.
- Subsequently, the government introduced a four-year moratorium on these payments, which is set to expire in October 2025.
- As the deadline approaches, telecom operators are facing mounting financial challenges, prompting discussions on additional relief measures.
The final decision on the proposed relief package is expected soon, with stakeholders closely watching the government’s next move.
