India’s Supreme Court has rejected an appeal by cellcos Bharti Airtel and Vodafone Idea (Vi) and defunct mobile provider Tata Teleservices Limited (TTSL) that sought to allow the correction of mistakes made by the Department of Telecommunications (DoT) in calculating dues related to the Adjusted Gross Revenue (AGR) case, the Economic Times writes. The trio are facing demands worth a combined total of around INR1.19 trillion (USD16 billion) in unpaid fees, interest, penalties and interest on the penalties following a ruling by the apex court in October 2019 on the definition of AGR – upon which operators’ various licence fees are based – to include income from non-core sources, ending a dispute dating back to 2005. The court’s October 2019 ruling ordered providers to pay their dues within 90 days, but failed to specify the amounts that the providers were required to pay. As such, the DoT scrambled to work out the cellcos’ dues, with the providers submitting their own self-assessed calculations to speed up the process. The court rejected the self-assessed totals and ruled that the DoT’s calculations were final, despite a huge disparity between the two sets of figures. Whilst it had been expected that there would be some differences in the calculations it was expected that these would be fairly minor and easily reconciled – in submitting its initial payment, for example, Airtel included an additional INR50 billion to cover such discrepancies. The demands finally issued by the DoT were roughly double the self-assessed figures, though, and following subsequent analysis the cellcos claimed that the DoT’s calculations were riddled with errors that had massively inflated the final figure. For Airtel, its self-assessed total was INR130.0 billion but the DoT’s demand totalled INR439.8 billion, whilst for Vi the totals were INR215.3 billion and INR584.0 billion, respectively, and TTSL INR22.0 billion and INR168.0 billion.
Notably, due to span of the dispute and the layers of additional payments (principle amount, interest, penalties and interest on penalties), even comparatively small mistakes in determining the providers’ unpaid fees resulted in a substantial increase in the final demand. According to the providers, the DoT had made simple clerical errors in some places alongside mistakes in its actual calculations, including counting some revenue twice, not taking into account allowed exemptions and failing to fully recognise payments made. At a hearing in September 2020 the Supreme Court ruled that cellcos would be permitted to pay the dues over a ten-year period, but enshrined the DoT’s allegedly faulty calculations as final, determining that the amounts could not be recalculated or re-assessed. Consequently, in its recent ruling the Supreme Court noted that it had said ‘not just once, but twice and thrice that the amounts cannot be recomputed’. No explanation or reasoning was offered for the dismissal of the cellcos’ pleas, except that the Supreme Court had already ruled on the matter.
Meanwhile, the Supreme Court did not clarify its position on the other legacy of its September 2020 decision. Whilst the ruling allowed providers to pay 10% of their dues up front and the remainder in annual instalments to 31 March 2031, it did not state whether the payments already made by the cellcos by that date were to be taken into account. As such, the providers have argued that they had already paid the first 10% instalment and are not due to make another payment until March 2022, whilst the DoT has argued that they were required to pay 10% of the remaining dues by March 2021.
The decision casts doubt on the viability of Vi to continue operating, with the debt-laden and loss-making cellco struggling to raise funds to cover its immediate expenses. Whilst the company is reportedly expected to be granted approval to raise INR150 billion through foreign direct investment (FDI), it has payments totalling INR225 billion due by April 2022, including regular debt payments, spectrum fees and AGR dues.