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AGR dues: Boon for government, bane for telcos?

AGR dues: Boon for government, bane for telcos?

What is AGR?

The AGR is divided into spectrum usage charges and licensing fees, pegged between 3-5 percent and 8 percent respectively. As per DoT, the charges are calculated based on all revenues earned by a telco – including non-telecom related sources such as deposit interests and asset sales. Telcos, on their part, insist that AGR should comprise only the revenues generated from telecom services.

How the due payment will affect government?

The payout by telecom and non-telecom companies is likely to lead to windfall gains for the central government,

which could help it close some of the fiscal deficit gap for the current financial.

At the same time, however, the government will be under pressure to ensure that the telecom market does not turn into a duopoly if Vodafone Idea does indeed decide to shut shop.

It will also have to manage the payouts to be done by non-telecom companies as most of them, such as Oil India, Power Grid, Gail, and Delhi Metro Rail Corporation are public sector units.

How the order will affect telecom companies and coustomers?

If Vodafone Idea does exit, an Airtel-Jio duopoly will be created, which could lead to bigger bills, considering it was the cutthroat competition in the sector that made mobile telephony and Internet almost universally affordable.

The AGR issue has triggered panic in the banking industry, given that the telecom sector is highly leveraged. Vodafone Idea alone has a debt of Rs 2.2 lakh crore that it has used to expand infrastructure and fund spectrum payments over the years. The mutual fund industry has an exposure of around Rs 4,000 crore to Vodafone Idea.

Agencies

Agencies

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