Nearly three months after rejecting self-assessment of AGR dues by telecommunications companies, India’s Supreme Court was back in session this week to consider the government’s plea to allow carriers like Vodafone Idea, Bharti Airtel and Tata Teleservices to stagger their dues payments over a maximum of 20 years.
The government has been keen to get its payment schedule approved, given the disastrous potential effects of an operator going under on the economy, jobs and consumers. The government's formula also includes freezing interest and penalties from 24 October 2019, when the Supreme Court judgement widened the definition of adjusted gross revenue.
So was the court sympathetic? Well, the judges did wonder whether 20 years would be too long, given the possibility that one or more companies could go into liquidation, and asked how the dues could be secured.
And that, roughly, is where we now are. The affected companies will have to come back in five days with affidavits detailing the guarantees they can offer to ensure the payment of dues within a timeframe fixed by either the court or the government. The next hearing will be on 18 June.
However, Vodafone Idea in particular made it clear that guarantees would be difficult. The vast amount it owes (close to $7 billion at current exchange rates), cannot be backed up with bank guarantees, it said. In fact, the company’s representative suggested that it did not have enough money to pay its employees and meet its expenses.
As a side development, Bharti Infratel has deferred the 11 June board meeting which was to finalise its merger with Indus Towers, citing ‘lack of critical key inputs’ in the current business environment – possibly a reference to the ongoing uncertainty about AGR payments.
The merger has now been stalled for over two years, although, as more than one report has pointed out, this is modest compared to the AGR debate: litigation began in 1999 and has yet to end.
