In a blow to telecom service providers, the Supreme Court upheld the Department of Telecom’s move to recover adjusted gross revenue (AGR) of about ₹92,000 crore from them.

Rationale by Supreme Court
The SC Bench said the sector had long reaped the fruits of the Centre’s liberalised mode of payment by the revenue sharing regime. It has benefited immensely under the scheme as apparent from the gross revenue trend from 2004 to 2015.  However, the service providers failed to fulfil their obligations to the government and raised frivolous objections.

The telecom service providers, in spite of the financial benefits of the package, did not pay the licence fee to the public exchequer based on an agreed AGR.

The Supreme Court dismissed the telecom service providers’ objection to the government’s formulation of AGR.

What is AGR?
The judgment said the gross revenue shall be inclusive of installation charges, late fees, sale proceeds of handsets (or any other terminal equipment, etc.), revenue on account of interest, dividend, value-added services, supplementary services, access or interconnection charges, roaming charges, revenue from permissible sharing of infrastructure and any other miscellaneous revenue, without any set-off for related item of expense, etc.

What did the court further say?
The court explained that the government intended to pump revenue from its share of telecom gross revenue into developing remote and uncovered areas.

But all it ended up doing was incur a colossal amount of Rs. 49.120 crore under the Universal Service Obligation Fund (USOF) and a committed liability of Rs. 59,774 crore for ongoing projects including laying of optical fibre cables up to gram panchayat areas under ‘Digital India Mission’.

As a sign of the liberalisation allowed in the sector, the court highlighted how the 15% AGR, fixed as license fee under revenue sharing, was reduced to 13% and lastly to 8% in 2013.

“Out of the 8%, a substantial portion of 5% is spent by the Central Government under the USOF,” the court pointed out. The court has said that the balance which is not paid will carry penalty to the extent of 50%.

Source: The Hindu

Relevant for GS Prelims & Mains Paper II; Polity & Governance