Power Grid hit with USD1.8bn licence fee demand

5 Jun 2020

State-owned energy utility Power Grid Corporation of India has received a demand from the Department of Telecommunications (DoT) for INR136.1 billion (USD1.8 billion) in relation to the company’s national long distance (NLD) licence fee for the years from 2006/07 to 2009/10. In a regulatory filing from the firm, which holds licences for NLD and ISP services, the demand included licence fees for the period as well as interest, penalty and interest on the penalty. The demand is understood to relate the Supreme Court’s ruling in October last year on the definition of Adjusted Gross Revenue (AGR) – the figure upon which telco’s licence fees are based – to include revenue from non-telecom sources. In the fallout from the decision it was not made clear whether the rule should be applied to public sector undertakings (PSUs, i.e. state-owned ventures) or companies such Power Grid and RailTel – which hold licences to utilise their own networks but do not operate as service providers – with the bill for such firms estimated to total around INR3 trillion. As previously noted by TeleGeography’s CommsUpdate, the providers hold that they were incorrectly included in the decision, but were left in limbo after the Supreme Court refused to hear an appeal earlier this year and instructed them to seek relief elsewhere. As the ruling came from the apex court, however, other governmental authorities have argued that they are powerless to intervene, regardless of their stance on the matter, with many senior officials having challenged the application of the Supreme Court ruling. On the other hand, DoT came under fire from the Supreme Court for failing to implement its decision to the letter and threatened to take further punitive action against the DoT officials involved.

Consequently, in April this year the DoT issued Power Grid a revised NLD/ISP licence fee for 2018/19 totalling INR48.3 billion – the company’s consolidated income for that year was INR356.6 billion, and net profit was INR100.3 billion. By contrast, however the company’s revenue for the four years from 2006/07 to 2009/10 was INR210.2 billion whilst the new licence fee, penalty and interest demand for the period was INR136.1 billion.

India, Department of Telecommunications (DoT)