Indian government poised to relent on telcos AGR fees

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The relief package could provide a 50% waiver of interest and a 100% waiver on penalties related to adjusted gross revenues

This week, rumours are swirling that India’s upcoming government budget could contain a life raft for the nation’s beleaguered telecoms sector.

According to reports, the government’s annual Union Budget, set to be announced by Minister of Finance Nirmala Sitharaman on February 1, may contain a relief package waiving billions of dollars in fees that are owed to the government related to adjusted gross revenue (AGR).

To recap, back in 2019 the Indian Supreme Court upheld the definition of AGR presented by the Department of Telecommunications (DoT). To the telcos’ horror, this definition saw a far greatr swathe of their revenues fall under the AGR definition, leaving them owing the DoT billions in fees.

India’s largest telco – then a relatively new challenger in the market – quickly paid off its comparatively small AGR dues.

Bharti Airtel and Vodafone Idea (Vi), on the other hand, commenced a longwinded legal campaign to get the fees dismissed or recalculated. All of these challenges have been rejected by the Supreme Court in the past six years, with the only relief coming in the form of a staggered payment schedule and a moratorium on payment. That moratorium concludes this year, with the next tranche of payments due in 2026.

Combined, Airtel and Vi owe the government around 1.2 lakh crore rupees (around $11.6 billion). Vi, which has been struggling to compete and losing ground to rivals for almost a decade, owes around two-thirds of this total.

Over half of the money owed is from interest on the initial AGR dues, as well as a myriad of penalties accrued from missed and late payments.

According to the reports this week, the new budget could contain a 50% waiver on this accrued interest and a 100% waiver on penalties.

The scale of this windfall for the telcos cannot be underestimated. A research note from ICICI Securities estimates that such a decision would reduce the total Vi owes by 520 billion rupees ($6 billion) and 380 billion rupees ($4.4 billion) for Airtel.

Exactly whether this relief will come to pass, however, remains unclear. Following media report yesterday, Vi released a statement clarifying that the company has “not received any communication from the Government in relation to the above-reported matter”.

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