Telecom industry to propose new micro definition of AGR

  • The COAI is holding talks with all operators, including Jio, Airtel, and Voda Idea to arrive at a definition

Gulveen Aulakh
First Published21 Mar 2022
Telcos are required to pay a percentage of their AGR as an annual licence fee to the government. mint
Telcos are required to pay a percentage of their AGR as an annual licence fee to the government. mint

The telecom industry will propose to the government that revenue from payments banks, rental income, and e-commerce operations be excluded from calculations of adjusted gross revenue (AGR).

The changes will be applied prospectively.

Telecom operators are required to pay a certain percentage of their AGR as an annual licence fee to the government, making the definition of what constitutes AGR critical for their profitability.

The Cellular Operators Association of India (COAI), which represents telecom service providers, is holding consultations with all the operators, including Reliance Jio Infocomm Ltd, Bharti Airtel Ltd, and Vodafone Idea Ltd, to arrive at a definition.

“A macro definition is in place, but a micro definition of AGR is in the works to identify the non-telecom revenue, which will go into the more granular details,” S.P. Kochhar, director general of COAI said in an interview. The discussions involve preparing a clear segregation of components which will be part of the elements that make up telecom revenue.

“The idea is to reduce as many disputes as possible, so a negative and positive list is being prepared which will specify that components like revenue from payments bank, rental income and e-commerce platforms, will be excluded from AGR. This in turn will reduce levies and liabilities for the telcos and open up newer fields for business,” he added.

The industry intends to share its recommendations with the telecom department by the month-end.

The changes will be incorporated into the notification that amended the AGR definition from 1 October, eliminating the need for the government to issue a separate amendment to the unified license agreement, which binds telecom operators to a revenue sharing arrangement with the government.

Licence fees and spectrum usage charges (SUC) are paid on the basis of AGR. A lower AGR will mean reduced levies and improved profitability of telcos. SUC, however, has been abolished on future purchases of airwaves from auctions. The October notification that changed the definition of AGR introduced the concept of applicable gross revenue (ApGR), excluding all non-telecom revenue from gross revenue earned by the telecom firms.

The notification specified that gains from forex fluctuations, insurance claims, capital gains on account of sale of fixed assets and securities, receipts from Universal Service Obligation Fund, bad debts recovered, excess provisions written back, revenue from activities under the information and broadcasting licence and revenue from operations other than telecom activities will now be excluded from gross revenue to arrive at the ApGR.

Differences over the definition of AGR led to a decade-long legal battle between the government and the telecom companies.

In 2019, the Supreme Court ruled in favour of the government, permitting it to include all non-telecom revenue in calculating AGR.

While the telcos are bound by the apex court’s order to make payments for outstanding AGR-related dues amounting to more than 1.9 trillion over the next several years, the amended definition as part of the rescue package for the industry applies prospectively.

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