Why in news?

• The government has approved the conversion of ₹16,133 crore (Approx $ 2 bn) interest dues of Vodafone Idea (Vi) into equity.
  • With this, the govt would become the single largest shareholder in the cash-strapped telecom company.
• The relief for the company comes as part of the reforms package announced by the government in September 2021.
  • The reform package had allowed telecom companies to convert interest on deferred Adjusted Gross Revenue (AGR) owed to the government into equity.

What’s in Today’s Article?

• Adjusted Gross Revenue (about, controversy, legal battle, final Judgement on calculation of AGR, Steps taken by the government after SC Judgement)
• News Summary and way ahead

In Focus: Adjusted Gross Revenue (AGR)

• Telecom operators are required to pay licence fee and spectrum charges in the form of revenue share to the Centre.
• The revenue amount used to calculate this revenue share is termed as the AGR.

Calculation of AGR and Controversy

• As per Dept of Telecom, the revenue calculations should incorporate all revenues earned by a telecom company.
  • This also includes revenues from non-core telecom sources such as deposit interests and sale of assets.
• The companies, however, are of the view that AGR should comprise the revenues generated from telecom services only.

Legal battle over definition of AGR

• The telcos and the government were involved in the legal battle over the definition of AGR
• In October 2019, the top court widened the definition of AGR to include the government's view.
• The court ordered to include all revenues, except for termination fee and roaming charges, as a part of the AGR.

Final Ruling on AGR issue

• On September 1, 2020, the Supreme Court gave its final ruling on the AGR issue.
• It had directed telecom companies to pay AGR, interest and penalty on non-payment on AGR dues.
• Telecom service providers were asked by the SC to make payments in yearly instalments between April 1, 2021 and March 31, 2031.
  • In case of default on payment, interest and penalty on interest would automatically be payable, and that non-payment would be punishable for contempt of court.

Steps taken by Government after SC Judgement of 2020:

• In September 2021, the Union Cabinet had cleared the telecom reforms package aimed at improving liquidity and ease of doing business.
• Telecom companies were provided with the option of four-year moratorium on spectrum and AGR dues.
  • This meant that telecom companies could opt to pay the principal, the interest, and all other penalties, after four years, instead of paying it then.
• The government had also given all the telcos a one-time opportunity to convert the interest on this deferred payment into equity at the end of the four-year period.

News Summary

• The Union government cleared a long-awaited plan to convert Vodafone Idea’s (Vi) interest dues worth more than Rs 16,000 crore (or $2 billion) into equity.
• With this, the government would pick up around 33% stake in the company to emerge as the largest shareholder.
  • The government will pick up the equity at issue price of 10, in line with the Companies Act provisions.
• The move came after promoters Aditya Birla group and Vodafone Plc assured that they will infuse additional capital in the company, apart from kickstarting the exercise to launch the high-speed 5G network.
  • Government wants want India to be a three-player market plus BSNL and ensure healthy competition for consumers.
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