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AGR Judgment - What it is about?

What is AGR?

AGR stands for Adjusted Gross Revenue. The events that led to this recent Supreme Court judgment started in 1999 when Department of Telecom(DoT) said the Telcos should pay more than what they were paying for. The Telcos made up of Vodafone and Airtel at that time were paying tax only for the revenue that they got from each user. The DoT wanted them to pay for non-core such as such as rent, profit on sale of fixed assets, dividend, interest and miscellaneous income.

COAI disputes with DoT

In 2005, COAI (Cellular Operators Association of India) disagreed with the definition of AGR. They contended that they were sharing revenue for all the licensed activities. But they dont see any need to share any revenue when it comes to non core activity.

 All this while , Airtel ,Vodafone and Idea has been in their prime. they were making progress in different location and their profits were on the rise. 

Jio Disruption

Jio launched its operations in first quarter of FY 2016 . It specialised in 4G only and it gave wide variety of apps and freebies to attract users. Whereas other Telcos were behind the curve. Under pressure Vodafone and Idea merged to form Vodafone Idea. But the loss of Airtel and Vodafone only increased.

AGR Supreme Court Ruling

The Supreme Court in November 2019 ruled in favor of DoT which means that Vodafone Idea and Airtel which was in severe stress due to Jio Disruption have to shell out more to DoT. They have to for all the non core activities that they have done for the period 1999-2019. 
Vodafone Idea -₹21,682 crore
Airtel-₹21,682 crore
Jio- 13 crores

 Jio being a new entrant had it easy.

Implications 

Vodafone Idea has posted a loss of 5000 crore and Airtel 2500 cores.Vodafone CEO Mr. Read stated that Vodafone's going as a concern in India is being threatened. Vodafone do not have enough money to go on. 
And here comes the government's dilema . Should they help or not. If they help out, they might have to help out large number of distressed industries.  And they don't have enough resources to do that. And if they don't what will international investors do? Will they leave India thinking that investing in India only leads to loss and better to invest in other countries?

 Government has now mellowed out. It said that they will give some leeway on the time of payment. They need not pay immediately and can work out some deal that is beneficial to all


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