NEW DELHI: Non-telecom public sector companies holding telecom licenses received crucial relief from the Supreme Court on Thursday, with the SC bench pulling up the Department of Telecom (DoT) for sending them "totally impermissible" demand notices towards pending adjusted gross revenue (AGR) dues running to over Rs 4 lakh crore.
These actions, the Bench said, were "an outright misuse" of its October 24, 2019 verdict that AGR should include the non-telecom revenues of telecom service providers (TSP). Since AGR is the basis on which statutory charges like spectrum usage charges (SUC) and license fees (LF) are levied, the court had directed TSPs to pay pending dues, interest and penalties calculated by the DoT at over Rs 1.47 lakh crore.
The DoT had subsequently also sent out demand notices for dues calculated on the full revenue of PSU license holders in non-telecom segments.
Among major PSUs presented with shocking demands were Oil India (Rs 48,489 crore), Power Grid Corporation (Rs 22,062.65 crore), Gujarat Narmada Valley Fertilisers and Chemicals (Rs 15,000 crore) and GAIL, which received a whopping Rs 1.83 lakh crore bill.
The total pending dues demanded from all such PSUs run up to around Rs 4.2 lakh crore, according to submissions made in the court.
These amounts stand in stark contrast to the negligible revenue made by the PSUs from these licenses. Oil India, for instance, had argued in January that it had made just Rs 1.47 crore as revenue by leasing spare bandwidth capacity during the period (FY08-19) -- for which the DoT was demanding Rs 48,488 crore. Other impacted PSUs had made similar submissions.
On Thursday, the SC bench comprising Justices Arun Mishra, S Abdul Nazeer and M R Shah questioned the basis on which these notices were sent. "The government," the SC observed, "admits to a difference in licenses of PSUs and telcos.
"Our judgment could not have been made the basis of launching demand against PSUs. The DoT is thus directed to clarify raising of demands within three days of the orders," it said, directing the DoT to reconsider demands sent to PSUs.
The Centre had submitted that there was a difference in licenses of PSUs and commercial sector firms. Solicitor General Tushar Mehta further told the court that they would file affidavits on why these demands were raised as on PSUs.
Telecom firms directed to submit payment roadmaps
The SC, however, provided no immediate relief to TSPs who are seeking more time to make the rest of the payments. While the DoT had submitted a proposal before the court to permit licensees like Bharti Airtel, Vodafone Idea and the Tata Group to pay their remaining dues in installments over the next twenty years, the SC questioned the timeframe and asked how one could ensure the payments would be made.
"Your plea of 20 years can't be reasonable, especially when this matter is already pending for 20 years," the SC observed.
The court also noted the need for some form of security from the companies to ensure that they would make the payments -- along the lines of bank guarantees or personal guarantees from directors.
The bench subsequently directed the TSPs to file affidavits providing a roadmap on how and when they could pay their remaining dues and the security they can provide, with the next hearing slated for June 18.
As things stand, sources say those facing the largest demands are Vodafone Idea (VIL), Bharti Airtel and Tata Teleservices (Tata Group) at Rs 58,254 crore, Rs 43,890 crore and Rs 16,798 crore respectively. However, while these companies have already made partial payments, a substantial balance remains—around Rs 51,400 crore for VIL, nearly Rs 26,000 crore for Bharti Airtel and Rs 12,600 crore for the Tata group.
The SC's observations on the need for some form of guarantees from the telcos could be of particular worry, especially to VIL. The company submitted Thursday to that it did not have enough money to issue bank guarantees. VIL has repeatedly stated that it faces the risk of insolvency if it is to pay the entire demand in one-go.
Telecom industry insiders also say that personal guarantees from directors would be out of the question.
Solicitor General Mehta also argued on behalf of the government that it would be "difficult for the companies to pay the amount in one-go. If the court objects, it will adversely impact the telecom sector, affect networks, and the consumers will ultimately suffer".