How will telecom firms pay AGR dues in the next 10 years?

The Supreme Court has given telecom firms a period of ten years to clear their AGR (Adjusted Gross Revenue) dues. The move came as a little reprieve to cash-strapped Vodafone Idea Ltd which was struggling for survival in the market. The company's cash reserves and profit are not enough to meet Rs 58,254 crore AGR dues it owes to the government. Here is what we know so far.

Supreme Court ruling on AGR dues

The Supreme Court gave all telecom companies a period of 10-years, and not 20-years as suggested by DoT earlier, to pay AGR dues. As per the Supreme Court, 20 years were excessive for payment of AGR dues. Also, the telcos will have to pay 10 per cent of the total dues by March 31, 2020. After this, they can start making payments on an annual installment basis between 2021 and 2031.

8 per cent interest rate

The telcos have to pay the balance amount in equal annual instalments over 10 years at an interest rate of 8 per cent, as directed by the apex court. The companies will have to make payments on or before February 7 every year over 10 years. Any failure of annual instalment payment would attract interest in addition to a penalty, and interest on the penalty besides inviting contempt of court proceedings against such companies.

Personal guarantee from MDs

A personal guarantee would be deposited by the managing directors of the companies on successful completion of repayment of dues within four weeks.

What about spectrum holdings

The bench headed by Justice Arun Mishra, however, left the crucial issue unanswered whether the spectrum holdings of telcos can be sold under the Insolvency and Bankruptcy Code by National Company Law Tribunal (NCLT) or not.

Why apex court agreed on payment extension

The Supreme Court heard the plea made by DoT and telecom companies in which they admitted that repaying the whopping amount of dues in such a short span of time could lead to their end. Supreme court agreed to their plea but refused to utter a single word on adjusting the AGR which has to be paid by them.

What is AGR

The telecom companies operating in India pay a part of their revenues to the government. That amount is known as AGR. The payment includes licence fee and spectrum charges which are to be paid to the Department of Telecommunications (DoT) for using the government-owned spectrum.