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Sunday 5 April 2020

Vodafone-Idea may get a breather from government

Cabinet Secretary Rajiv Gauba has been asked to sort out the problem the telecom companies are in, as the shutdown of one of them will lead to a monopoly in the market and layoffs in connected industries as well

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The government is working on several options to prevent Vodafone-Idea from a shutdown. This includes the option of giving the company more time to pay its liabilities, excluding Adjusted Gross Revenue (AGR). A senior government official said that the government wants to keep the condition of the telecom sector in good shape and take measures that avoid the layoffs.

On Thursday, Airtel chairman Sunil Bharti Mittal met Telecom Minister Ravi Shankar Prasad and demanded a reduction in tax. Mittal later said at a CII event, “AGR has become a major crisis for this industry. The government is looking for a solution.”

A government official today said that the government was not considering bringing an ordinance to help government companies like GAIL, Power Grid Corporation of India and Oil India Limited change the definition of AGR. He clarified, however, that for relief on the demand notice issued by the Department of Telecommunications (DoT), they will have to go to the Telecom Tribunal as indicated by the Supreme Court.

Telecom officials say that their dilemma is that, on the one hand, they have to follow the order of the Supreme Court and collect revenue from the telecom companies. Together, arrangements will have to be made that these companies continue to operate. On the other, “our stand is clear. The government does not want to let a monopoly form in the market”.

The source said, “The DoT is considering all possible methods. There is also an option to postpone payment of dues other than AGR.”

The official said that the companies had started paying as per the court order,” so the government is thinking about taking legal advice from the solicitor-general on whether to redeem the bank guarantee. He said, “In a way, the court has given time till 17 March to the companies to pay the full amount. On the same date, the court will hear the petitions filed by the companies.”

Vodafone-Idea has so far paid Rs 3,500 crore out of the estimated Rs 57,000 crore to the DoT. However, the company has estimated that it owes only about Rs 23,000 crore, of which Rs 7,000 crore is the principal amount, as their lawyer Mukul Rohatgi told reporters two days ago.

Bharti Airtel has paid Rs 10,000 crore and has said it would repay the arrears due to self-assessment by 17 March. DoT estimates the AGR liability of the company to be about Rs 40,000 crore.

On Thursday, Vodafone-Idea shares rose 5% in value to close at Rs 4.40. Bharti Airtel gained 0.4% to close at Rs 545.50.

The government had asked Cabinet Secretary Rajiv Gauba to sort out the problem Vodafone-Idea and other companies are in because if one of these companies closes, it would have an impact on all sectors and would result in massive layoffs.

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Since the facts and figures related to the novel coronavirus disease 2019 (nCOVID-19, COVID-19 or COVID) are changing by the minute, Sirf News has begun this blog to keep the readers updated with information coming from authentic sources

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