India begins worst-case planning after AGR judgement

India begins worst-case planning after AGR judgement

The Indian government has apparently begun planning to look after the mobile subscribers and businesses likely to be affected if a telecommunications company collapses after the October 2019 adjusted gross revenue (AGR) ruling was confirmed recently by the Supreme Court.

While the Department of Telecommunications (DoT) still hopes to find a way out of the crisis, the prospect of abandoned subscribers, millions of porting requests and the closure of leased lines for businesses of all sizes seems to have focused quite a few minds. The admission by a senior official that none of the existing private companies could cope with a large influx of new subscribers underlines the seriousness of the situation.

This clearly isn’t just speculation. Vodafone Idea, in particular, has made it clear that it may not survive without a bailout package and has so far paid only about one eighth of the more than $7 billion the ruling insists it owes.

Operator industry body COAI has, not surprisingly, also weighed in, pointing out that the government is well aware of the implications of not coming up with a relief package, and urging policymakers to find solutions.

While telecommunications companies had offered to pay up on the basis of their own estimates, the Supreme Court was not impressed with the telecommunications companies for trying to self-assess the amounts owed to government; the results fell well short of the DoT’s original estimate.

DoT requests that AGR dues payment be spread over 20 years were also dismissed, not too surprisingly since the DoT itself had pressed for the original judgement last year, when the Supreme Court upheld the government’s position on including revenue from non-core businesses in calculating the annual AGR of telecommunications companies. This decision significantly boosted the amount owed.

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