The Supreme Court today, taking a socialist stand, expressed concerns over the government move to slap spectrum dues worth over Rs 4 lakh crore from PSUs as adjusted gross revenue (AGR)-based dues, but saw no problem in applying the same rule to the private sector telecom companies. It doubted the government’s plans for recovery of Rs 1.69 lakh crore spread across 20 years from the private telcos.
The Justice Arun Mishra-led three-judge bench asked the government to clarify in three days why it had raised demands of over Rs 4 lakh crore towards spectrum licence and user charges from PSUs. The court suggested this amount was introduced as an afterthought after the court ruling against other telcos such as Vodafone-Idea and Bharti Airtel.
The court asked the telecom companies to file affidavits on the instalments against their dues — and the securities they would offer to guarantee such payments over time — by 18 June when the court would reconvene to examine the issue again.
These private companies are Bharti Airtel, Vodafone Idea, Tata Teleservices and Hughes Communications. Out of these, Vodafone-Idea has said it would be unable to pay its dues because of its precarious financial state. Senior advocates Abhishek Manu Singhvi, Mukul Rohatgi, Arvind Datar and Kapil Sibal respectively represented Bharti Airtel, Vodafone Idea, Tata Tele and Hughes Communications.
Getting the AGR news from the Supreme Court, the Bharti Airtel stock at the BSE traded 2.6% lower at Rs 552.40 while Vodafone Idea plunged 13.2% to Rs 9.22 in the evening.
Justice Mishra said the government move to slap similar AGR dues for recovery from PSUs was “misuse” of its earlier ruling against the private telcos. He warned of action against the Department of Telecommunications (DoT) officials responsible for the move while seeking clarity on the move from Solicitor General Tushar Mehta who appeared for the government.
Justice Mishra said, “We will request you to withdraw the demand on PSUs otherwise we will take strict action. Outright misuse of our verdict. You are making a demand of Rs 4 lakh crore! This is wholly and totally impermissible. Every day I think about how our judgement has been used and misused.”
Telecom operators’ AGR dues
The solicitor general said that a one-time recovery from telcos would hit operations in the sector and send some into liquidation. The bench was not impressed. Also comprising Justices MR Shah and S Abdul Nazeer, the bench appeared disinclined to the suggestion. “Who knows what will happen in 20 years?” Justice Mishra observed, pointing out that this litigation had begun in 1999 and was yet to draw to a close.
Senior counsel Rohatgi, representing Vodafone-Idea, said that spectrum was the best security for the operator. “Licenses and spectrum were auctioned. We purchased them for thousands of crores. The intrinsic value of the spectrum will be the best security,” he told the court.
The advocate added that the total demand of Rs 50,000 crore plus interest and penalty cannot be furnished in bank guarantees. “We do not have enough money to pay our employees and meet our expenses,” he submitted.
Justice Mishra couldn’t be moved. “Find out what security can be furnished, personal property of directors. Else we cannot consider giving time,” the judge said.
Cash strapped Vodafone-Idea has warned that it would be forced to shut shop in the absence of any relief on its AGR dues, an estimated Rs 58,254 crore. The company has so far paid up Rs 6,854 crore.
Singhvi, representing Bharti Airtel, said his client had paid 100% of its dues as per their calculations and sought time to file affidavits. He said that the company would confirm the remaining dues with the government and clear it.
Bharti Airtel has so far paid Rs 18,000 crore of the Rs 43,980 crore that the DoT had demanded. Tata Teleservices has paid Rs 4,197 crore of the Rs 16,798 crore worth of arrears.
Justice Mishra wanted to know who would take care of the dues if one of the companies went bust. “What if one of the companies goes into liquidation. Who will pay then? Are the telcos willing to give personal guarantees by their directors?” he asked.
Court sympathises with PSUs
The judge questioned Solicitor General Mehta why the government made no demand against PSUs for 30 years. He remarked that the government fined the public sector companies “to make it easy for the private companies not to pay”.
The DoT has demanded Rs 1.72 lakh crore from GAIL India, Rs 48,489.26 crore from Oil India, Rs 22,062.65 crore from Powergrid Corporation of India, Rs 15,019.97 crore from Gujarat Narmada Valley Fertilizers and Chemicals and Rs 5,481.52 crore from the DMRC.
“Who authorised these demands to be raised against PSUs? PSUs should not be paying AGR dues, Such demands on PSUs are wholly impermissible” said Mishra. He asked if the solicitor general had advised the government to withdraw demands against PSUs yet.
Mehta defended the government, saying that the government was raising the AGR due bills as per the agreement with the PSUs. He added that PSUs had been a different set that discharged government functions and that they were different from their private counterparts.
“Kindly consider giving PSUs a different treatment from that of the telcos although they hold spectrum,” said Mehta.
The bench asked the solicitor general to file an affidavit on why the PSUs were charged and did not accept the SG’s request for a clarification. “We want them to file an affidavit. How could this be done by them? We will punish them,” said Justice Mishra.
Mehta said he would file an affidavit on why the government had raised dues against the PSUs.
In the previous hearing on 17 March, the apex court had scrapped self-assessment of AGR dues by telcos. But relieving the likes of Vodafone Idea, Bharti Airtel and Tata Teleservices, it had agreed to consider the government’s plea to allow carriers to stagger the payment of dues over a maximum 20 years.
In its application filed in the top court, the government has cited the risk of “adverse impact” on the economy, jobs and millions of consumers from the possible collapse of any of the telecom companies. It urged the court to accept its formula to receive the AGR dues over a period of up to 20 years.
The government formula for AGR recovery includes freezing interest and penalty components as of 24 October 2019 when the Supreme Court had pronounced the order expanding the scope of the AGR.
The AGR dispute: Editorial view
While worldwide, AGR is defined as the difference between a taxpayer’s total gross income and specific deductions, in India, companies challenged the government definition of what constituted their gross income. According to the DoT, the AGR must include all revenues (before discounts) from both telecom and non-telecom services. But the companies maintain that AGR should comprise the revenue accrued only from the core services and not dividend, interest income or profit on the sale of any investment or fixed assets.
By the time the government’s view prevailed, the AGR dues of companies had accumulated to big amounts. While the Narendra Modi government and advocates of private telecom companies have explained the impact of this repayment on the economy, there is no nationwide debate yet on why the PSUs should be exempted from this rule. Does being late in asking for the payment from GAIL India, Oil India, Powergrid Corporation of India, Gujarat Narmada Valley Fertilizers and Chemicals and DMRC change the definition of AGR?
Of course, a PSU is sustained largely on public money, which may make them deserve a kinder treatment by the state. But given that the Indian political executive barely recognises that business is no business of the state and pours in citizens’ money to pull out PSUs when they are in the rut, why should these government companies get an additional concession in tax recoveries? After all, their payments ease off the tax burden on the citizens of India.