Indian government makes significant moves on AGR relief

Indian government makes significant moves on AGR relief

In India there have been some signs that the government is finally responding to widespread fears about the effect of adjusted gross revenue (AGR) dues on telecommunications companies.

The modification appeal filed by Vodafone Idea and other telecommunications companies on AGR dues was due to be heard by the Indian Supreme Court on Tuesday 17 March, but so far but there has been no news on this score. However, India’s Department of Telecommunications (DoT) may have given the hard-pressed Vodafone Idea in particular something to cheer about.

The DoT has sought approval from the Supreme Court to allow telecommunications companies to pay their AGR dues in annual instalments over an extended period.

In fact the application to the Supreme Court requests that telecommunications companies be allowed to spread the payment of AGR dues over 20 years or less, at a reduced interest rate of eight percent. Of course both the DoT and many of the companies penalised disagree on how much those dues actually are. Such discrepancies will  be reconciled, apparently.

It seems as though this is the first time government has clearly acknowledged the danger of a Vodafone Idea collapse. The company serves over 300 million users, directly employs some 11,000 people and pays various tax and non-tax revenues to government. If all of this were disrupted (and there would be indirect effects on other sectors), this would undoubtedly hurt the wider economy. This possibility seems to have encouraged government to try to spread the AGR payment if possible.

The government is also considering a broad package for industry, including a number of guarantees that would make it easier for telecommunications companies to get support from the banking sector, the lowering of various fees and taxes, and the setting up (as reported yesterday) of a so-called empowered group of ministers (eGoM) to oversee the implementation of such measures.

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