DoT considers casting wider net for AGR-related collection; cellcos to begin price increase

19 Nov 2019

India’s Department of Telecommunications (DoT) is reportedly looking to apply the Supreme Court’s recent ruling on Adjusted Gross Revenue (AGR) definitions – on which certain licence fees are based – to a wider array of firms that hold telecom licences. The Economic Times cites an official as saying that the ministry has sought a ‘legal opinion on the order’s wider ambit,’ and would pursue the matter once the applicability of the order has been clarified, noting that: ‘some companies likely to have been impacted by the judgement might not even know that the DoT may raise demands and issue notices’. Firms potentially in the firing line include several utility and rail companies such as GAIL, Power Grid Corporation of India, and RailTel, which hold licences for a range of telecom services. The apex court’s decision to define AGR as the total revenue of the licensee, including income from non-telecom activities could lead to the companies incurring massive bills to the DoT, despite their limited involvement in the sector. A second official, meanwhile, noted that several public sector companies could be facing substantial liabilities and as such: ‘This could be a case of revenue going from one pocket of the government to another’. The official suggested that a exemptions could be made in these cases.

In a related development, meanwhile, mobile providers Bharti Airtel and Vodafone Idea – the two cellcos most affected by the AGR ruling – have announced that they will begin increasing tariffs from 1 December. Neither company revealed the extent to which prices would rise, or over how long. The cellcos have, however, been arguing for ‘rationality in pricing’ in the mobile sector, claiming that the damaging price war launched in September 2016 and a harsh regulatory environment have undermined the financial health of the industry.