Adjusted Gross Revenue is a rate sharing mechanism. The telecommunications company then pays the government a royalties. AGR is a fee sharing mechanism between the government and telecommunications companies that moved from a fixed license fee model to a revenue sharing fee model in the year 1999.
Highlights
The 1994 National Telecommunications Policy liberalized the telecommunications sector. As part of the policy, the license was issued to the telecommunications company for a fixed license fee. In late 1999, the government offered the option to switch to a revenue sharing model. The revenue sharing model requires carriers to share a portion of their revenue in the form of frequency usage fees and annual license fees. This turnover, known as adjusted gross turnover, is determined by a contract signed between the entity and the Department of Telecommunications.
Issues with Adjusted Gross Revenue
AGR has no standard definition. The definition of AGR has been the subject of proceedings for over 15 years. The Indian government has all the income, namely NS. Revenues from both telecommunications and non-telecommunications services must be included in the AGR calculation. Telecommunications companies, on the other hand, argue that revenue from core services should only be considered. The profits, dividends or interest from the sale of fixed assets or investments should not be considered.
Courts and Tribunals
The 2015 Telecom Disputes Settlement and Appellate Tribunal Court ruled that AGR does not include revenue from non-telecommunications services. This has benefited Telecom. However, in 2019 the Supreme Court upheld the government’s definition of AGR. And thus included revenue from non-telecommunications services. However, the Apex Court rejected the 20-year payment deadline proposed by AGR instead bringing it down to 10 years. The 2019 SC ruling has led to the bankruptcy of several telecommunications companies. According to the SC ruling, the telecommunications company owes the government a debt of Rs. 92,000 crores.
Conclusion
New infrastructure policies are the need of the hour to drive the growth of the telecommunications sector, generate resources and improve the quality of service for telecommunications companies. Governments need to create a favorable environment for carriers. To achieve this, a corresponding long-term vision plan needs to be developed. As improved accessibility of broadband services enables digital empowerment in India, governments need to take reasonable steps to empower the entire telecommunications sector.
Last Modified: February 13, 2024