Indian judgment leaves telecom companies and DoT in disarray

Indian judgment leaves telecom companies and DoT in disarray

After a brief period of optimism encouraged by Department of Telecommunications (DoT) efforts to ease the adjusted gross revenue (AGR) debt burden, there has been bad news for India’s telecommunications companies from the Indian Supreme Court.

The Court has insisted that companies hit by October’s  dues judgement will still need to pay the AGR interest and penalties laid down at the time. However, there is a ray of hope in the Court’s agreement to consider the timeline of the payment.

The Court again made strong statements about the attitude of both telecommunications companies and the DoT. The companies’ self-assessment of their AGR dues has confused matters recently; they came up with figures much lower than the October estimate. The Court said its judgement on AGR dues is ‘full and final’ and needs to be followed. It also suggested that self-assessment could be seen as a contempt of court.

The court was equally withering about the DoT’s willingness to ask the companies to pay on the basis of self-assessment, wondering whether the officers of the DoT considered themselves superior to the Supreme Court.

However, the court has indicated that it will consider the government's plea on allowing companies to stagger their payments over several years. This will be considered in the next hearing, due in two weeks.

It’s now unclear where the DoT stands on AGR payments. Having started the case that led to the ruling that AGR should include non-core items, it now seems to want to backtrack, fearing the collapse of a major player like Vodafone Idea, with the knock-on effects on employment and investment that this could entail.

However, its proposal to allow the telecommunications companies hit by AGR dues to stagger their payments over a maximum of 20 years, at a reduced interest rate of eight per cent, now seems to be in disarray.

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