Should telecoms pay licence fee on income from dividend and interest?

Indian telecom operators Bharti Airtel, BSNL, Vodafone Idea and Reliance Jio may have to pay Rs 92,000 crore as outstanding licence fee – based on the forthcoming Supreme Court verdict on the definition of adjusted gross revenue (AGR).
Smartphone customers on 4G networkTelecom operators are pressing for a favourable verdict from the Supreme Court that will conclude the hearings on the definition of adjusted gross revenue (AGR) and pronounce its judgment, Financial Express reported.

The AGR dues of the telecom operators as on July 7, 2019 stands at Rs 92,641 crore, as per the department of telecommunication’s calculations. This includes licence fee dues as raised by DoT, interest on the unpaid part, penalty, and interest on penalty.

In 2016 the outstanding licence fee dues, as per DoT’s methodology, stood at Rs 29,474 crore.

Telecom operators pay 8 percent of their adjusted gross revenue as licence fee to the India government. The components of AGR, which is being contested since 2006 in the Telecom Disputes Settlement and Appellate Tribunal, high courts and Supreme Court, will define the total outstanding licence fee.

According to DoT the definition of AGR includes all revenues accruing to operators except a few like termination and roaming charges which are collected on behalf of other operators. Indian mobile operators want revenue that accrues directly to them as part of the licence should be counted as AGR.

Telecom operators demand that other income such as interest income, dividend income, value of rebate, discounts, free calls, etc should not be included in computation of AGR for the purpose of payment of licence fee.

TDSAT on July 7, 2006 decided the matter in favour of the mobile operators and against the government. The TDSAT’s decision was based on the fact that the DoT cannot demand a share of revenue as licence fees which are derived from activities that do not require a licence.

DoT challenged TDSAT’s judgment in the Supreme Court. Initially the SC ruled in favour of the operators but in a later appeal against an order of the TDSAT it struck down the tribunal’s order since it questioned the validity of the licence agreement drawn up by the DoT.

SC earlier TDSAT could look into disputes between DoT and operators over interpretation of the licence conditions. Later TDSAT excluded a number of items from AGR definition, and DoT challenged the same in the SC.