The Supreme Court has upheld the Centre's decision on the definition of adjusted gross revenue (AGR). This will have major ramifications for incumbent operators Airtel and Vodafone Idea.
Meaning of AGR:
Telecom operators are required to pay licence fee and spectrum charges in the form of ‘revenue share’ to the Government. The revenue amount used to calculate this revenue share is known as AGR.
Debate over definition?
The definition of AGR has been under litigation for 14 years.
While telecom companies argued that it should comprise revenue from telecom services, the Department of Telecom (DoT)’s stand was that the AGR should include all revenue earned by an operator, including that from non-core telecom operations.
The AGR directly impacts the outgo from the pockets of telcos to the DoT as it is used to calculate the levies payable by operators. Currently, telecom operators pay 8% of the AGR as licence fee, while spectrum usage charges (SUC) vary between 3-5% of AGR.
Recent development:
On October 24, in a strongly-worded order, the Supreme Court of India upheld the DoT’s interpretation of AGR, which came as a huge blow to telecom service providers.
Following the order, the telcos are now staring at dues of an estimated ₹1.4 lakh crore, which needs to be paid to the government within three months.
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