The telecom sector has witnessed unprecedented number of legal battles in the past year, be it against TRAI's penalties or spectrum usage charges. The buzz is that a whopping Rs 80,000 crore is stuck in disputes with operators.
Given that the litigations are not only hurting balance sheets but also deterring overseas investors, sources in the know told The Economic Times that the Department of Telecommunications (DoT) is now drawing up proposals aimed at reducing them significantly.
According to government officials, the DoT will send its suggestions to the law ministry for vetting before the communications ministry takes a final call. "The telcos have a different point of view and this has led to a large amount of Rs 75,000 crore- Rs 80,000 crore, including penalties and interest, that's stuck in legal battles," explained one, adding, "We do not want the government to lose out on dues that the operators owe us."
The proposals floated by the DoT reportedly include combining all telecom levies into one charge, on the lines of the GST that subsumed indirect taxes. Most of the disputes relate to multiple levies under different heads such as licence fees, spectrum usage charges (SUC) and one-time spectrum fee (OTSC). Rationalisation of taxes and levies was also among the key points included in the draft National Digital Communications Policy (NDCP) 2018.
The department may also suggest being lenient on minor infringements, instead of slapping maximum penalties across the board, and identifying cases that can either be settled or withdrawn where the bone of contention is no longer relevant due to new technology or new policies.
Rajan S Mathews, director general of the Cellular Operators Association of India (COAI) lobby group, told the daily that the government could also look at implementing an "adjudicatory/alternate dispute settlement process where government officials are empowered to settle cases/disputes in good faith, before going to litigation, without fear of being second-guessed later by audit agencies."
More than anything else, the DoT and telecom firms have been at loggerheads over the scope and definition of Adjusted Gross Revenue, on which licence fees and other charges are paid to the government. Around Rs 25,000 crore of the dues stuck in litigation reportedly pertains to SUC alone. Bharti Airtel's dues up to June stands at Rs 8,243.85 crore while Reliance Jio Infocomm owes Rs 116.51 crore and Reliance Communications and its subsidiary Reliance Telecom owe Rs 2,594.45 crore and Rs 519.32 crore, respectively.
Though various judicial authorities have looked at different aspects of the AGR issue multiple times over the past 17-odd years, a formal definition is yet to be fixed. And because of that ambiguity, all related levies also get challenged and stayed by various courts or the telecom tribunal. To address this problem, sources claim that the DoT is looking to set a clearer definition of AGR.
The bleeding industry is hoping for a speedy resolution on these proposals since the lingering litigations also delay merger and acquisition deals. That's because when telcos want to trade spectrum or embark on an M&A, the DoT raises demands for past dues that need to be cleared before any approval. For instance, Vodafone India and Idea Cellular paid a combined Rs 7,249 crore in dues before they could get approval for their recent merger. Many telcos also decide to move court seeking a stay on such demands, prolonging the entire process.
"When we raise money in global bond markets, investors think twice before agreeing because why would you invest in a company knowing thousands of crores are stuck in legal battles with the government?" a senior executive at one of the major telcos told the daily. "Who would want to invest when the case can go either way?" According to operators, there have been informal talks on ways to ease this situation.
COAI's annual report for FY18 noted that the telecom operators are in "severe financial distress" with a cumulative debt of Rs 7.7 lakh crore and revenue under Rs 2.5 lakh crore. At such a time, the DoT's proposals, if passed, would come as a breather.