Telcos Owe Indian Govt Rs 1.47 Lakh Crore In Dues, Here¡¯s What Happens If They Fail To Pay

A 14-year-long legal battle is now coming to a conclusion as almost all of the telecom majors face their adjusted gross revenue (AGR) dues. In succession to the Supreme court¡¯s decision imparted in October last year, Rs 1.47 lakh crore still stand unpaid by the telecom majors, which the apex court is now demanding to be paid at the earliest.

A major propellant for the payment of these dues came on Monday as a three-judge bench of the Supreme court expressed its anguish over the delay in this payment. The court reacted on a notice issued by a Department of Telecommunications (DoT) official to circle officers preventing any coercive action against telcos who stood at fault.

¡°How can a desk officer do this to the Supreme Court's order? Is this the law of the country? Is this the way you treat the courts," the bench comprising Justice Mishra, Justice S Abdul Nazeer and Justice M R Shah said. It then directed the top executives of the involved telcos as well as the desk officer of DoT to come up with an explanation for not holding any contempt against them for non-compliance of the order.

As a result, some of the telcos have started clearing their AGR dues in part. But as the process has just begun, here is a look at what these telecom operators face, whether they stand at a position to do so and what effect this might have on the telecom as well as bank customers going forward.

(Representative Image: Reuters)

Total unpaid dues

As per the existing laws, telecom operators in India need to pay 3-5 per cent of their AGR as spectrum usage charges while 8 per cent is charged to them as the licence fees. In numbers, this amounts to a total of Rs 1.47 lakh crore yet to be paid by the telecom operators at default.

A breakdown of this shows Rs 92,642 crore in unpaid licence fee and Rs 55,054 crore in outstanding spectrum usage charges. The defaulters here comprise of Bharti Airtel, Vodafone Idea and Tata Teleservices which have outstanding AGR dues of over Rs 35,500 crore, Rs 53,000 crore and nearly Rs 14,000 crore, respectively. State-owned BSNL and MTNL are also on this list with total unpaid dues of Rs 4,989 crore and Rs 3,122 crore respectively.

Payments start

Bharti Airtel paid Rs 10,000 crore to DoT as a part of this due on Monday. The company further promised to pay the rest of the amount before 17 March, the next date of hearing for the case in supreme court. As per the company, the amount has been paid on behalf of ¡°Bharti Airtel, Bharti Hexacom, and Telenor."

Vodafone Idea, on the other hand, said on Monday that it can pay only Rs 2500 crore as of now to the telecom department, with a promise to follow up with another Rs 1000 crore in AGR dues by February 21. The Rs 3,500 crore will account for 50% of its estimated principle AGR dues of Rs 7,000 crore. The company further appealed to the court for no coercive action against it in order to let it continue its operations smoothly. The appeal comes even as the company reflects on the continuation of its business in the country.

Even though the Department of Telecom had sent the demand notice to all 15 defaulters in the list, so far only two have responded to it. Payment of dues or corresponding responses are still awaited from the others.

Reliance Jio was the only one to clear its dues in time. The company paid its AGR dues worth Rs 195 crore before January 23, becoming the only telecom operator in the process to do so.

(Representative Image: Reuters)

The larger impact

Any negative impact on the telecom consortium will not be a stand-alone one. The same was recently confirmed by the SBI chief Rajnish Kumar, who cleared that the banks ¡°will have to pay the price¡± if the collection of AGR dues results in any negative impact.

¡°If there is a negative impact on any enterprise, it impacts a larger ecosystem, whether it is banks, whether it is employees, whether they are vendors, consumers, so everybody gets impacted. So, that impact, when it comes, we will have to pay the price," Kumar said.

Here Kumar highlights a situation wherein telecom operators declare bankruptcy. With almost none of the remaining defaulters showing the potential to pay the exorbitant dues implicated on them, there is a potential of them filing bankruptcy, in which case external help would be needed to help balance the sector.

More than bankruptcy, there are chances of an upcoming consolidation between these entities. Vodafone Idea was the most recent example of this, which merged to form India's largest mobile phone company last year citing rising competition in the market. The impending AGR dues might be a similar shove towards a consolidation or even dissolution for other entities.

The end result can very possibly be a market domination by those who will be able to pay these AGR dues without any external support. Bharti Airtel and Reliance Jio are the biggest possibilities of this and looking at how others still struggle to pay their dues, the two firms might find a boon in these dues in the form of scarce competition afterwards.

(Representative Image: Reuters)

Effect on customers

For now, any impact on consumers of these telecom services cannot be pinpointed. Even though some changes are inevitable, these might occur as standalone modifications to revenue models of singular operators. There are, of course, chances that the industry-wide service rates are heightened for the consumers.

Glimpses of this can be seen already, as operators increase the data and call rates of their services. Moreover, the situation can further impact the consumers if banks are called upon to the rescue of these firms. Though Kumar reassures that the heightened premium would never be collected from the consumers, there is no other way to keep a check on that apart from his word.