Title 2. Telcos asked to pay AGR[adjustied gross revenue} 1.

4lakh cr dues immediately

Syllabus Prelims: Indian Economy

Mains: Indian Economy (GS Paper III)

Highlights What is Adjusted Gross Revenue?

 Under the Revenue Sharing Model introduced in National Telecom Policy of

1999, the licence fee charged by the government from telecom operators and

spectrum usage charge (SUC) charged on lease of radio frequency spectrum

were linked to revenue earned by the telecom operators.

 This revenue that used to calculate the licence fee and SUC is known as AGR.

 Accordingly AGR as defined by DoT included all revenue including revenue from

core-telecom activities and that from non-core activities (dividend income,

interest income, discounts on calls, sale of handsets etc.)

 However this is opposed and challenged by the industry since 2003 and the

matter is subjudice since then.

Implications of the decision

On Telecom Operators

 Additional burden of more than Rs 1 Lakh Crores as the telecom operators have

to now pay

 the differential of the licence fee and SUC (from 1999) calculated

according to DoT’s AGR (So far AGR was calculated only from core-

telecom operations)

 Penalties and interest on penalties.

On Lenders

 Threat of NPAs to banks who have lent around Rs.1 Lakh Crores

Other Sectors

Dated: 15-Feb-2020 DNS Notes

 The entire digital value chain is closely linked to telecom sector for connectivity
and thus will hugely be impacted.

 Upcoming disruptive technologies like IOT, 5G revolution, Big Data etc will be

severely affected.

On Consumers

 The telecom operators may transfer the burden of additional cost on

consumers and thus user-charges may be significantly increased.

On Telecom Sector as a whole

 Additional burden will significantly affect the profits and overall health of the

sector as a whole.

 Besides since the additional cost is applicable only to old players in the sector, it

may give undue advantage to the new players and eventually may monopolise

the sector.

 The sector may be staring at job losses on account of cost cutting.

On government

 While the outstanding revenue is seen as a boost to public exchequer, in the

long run this will severely affect the direct tax revenue of the government.

Way Forward

 Government may provide some relaxation by increasing the term of payment

of outstanding dues.

 Deferment of payment for spectrum, licence fee, USOF (5% of AGR in Licence

fee and 3% of AGR in SUC).

 Relaxation in penalties and interest on penalties. (75% of the outstanding

amount is penalty and interest)

 Reduction the overall licence fee and SUC.

 Introduction of a ‘floor- price’ for voice and data charges which are currently

unsustainably low.

 If no relaxation is given government should invest the amount so recovered to

the overall development of the sector.

Crisis in the Telecom Sector

 Growing losses: on account of lower tariffs and high cost

 Huge debt: Currently about 7 Lakh Crore

 Price war: Lower tariffs

 High spectrum costs

 Transition in telecom ecosystem

 Low Revenue: average revenue per user (ARPU) in telecom sector in India is

around $1.5 compared to $36 in the US, around $30 in Europe and $6.5 in

China.

 Additional burden of AGR