Vodafone Idea AGR Case: Supreme Court Allows Reassessment

Supreme Court allows reassessment of Vodafone Idea's AGR fees, boosting the telecom operator facing financial strain. Government's equity infusion and consumer protection are key factors. Shares surge on the news.

Moreover, Vodafone Concept had looked for a direction to the DoT to “adequately re-assess and fix up all AGR charges for the period up to FY 2016– 17 complying with the ‘Reduction Confirmation Standards’ outdated February 3, 2020.”

Government’s Equity Infusion

A bench headed by Principal Justice of India BR Gavai delivered the order after listening to Solicitor General Tushar Mehta, that notified the court that the federal government has actually instilled equity to the extent of 49% in the telecom business which the choice was driven by issues for over 20 crore customers.

Vodafone Concept’s stock observed a significant turn-around adhering to the top court’s judgment. The business’s shares, which opened up over 2% reduced, surged as long as 11.4% to a fresh 52-week high of Rs 10.52 on the NSE as of 11:35 am. As the news broke, the firm’s supply erased early losses and was trading virtually 7% higher in early morning trade.

High Court’s Refusal to Review

Earlier this year, the High court had refused to review its 2021 order declining appeals by telecommunications majors, consisting of Bharti Airtel and Vodafone Idea, for rectification of alleged mistakes in the estimation of AGR charges. The leading court had actually dismissed their applications looking for adjustment of what they referred to as arithmetical errors and duplication of access in DoT’s computation.

Making clear the range of the relief, the CJI stated: “We make clear that this is in the policy domain of the Union … there is no factor regarding why that Union must be stopped from doing, keeping that view of the matter, we dispose of the writ request.”

AGR Definition Amendment

Complying with extreme sector pressure, the government in 2021 amended the interpretation of AGR to leave out non-telecom income, significantly decreasing the financial lots on operators. This change has actually because been seen as an essential reform in the market’s recuperation initiatives, though it did not use retrospectively to the long-pending charges that stimulated years of litigation.

“The government has actually instilled equity for 49%. There are 20 crore consumers. That was among the factors for which the federal government took this decision. The consumers would certainly suffer … they have issues, something duplicate payment, some over-invoicing and so on, this what I have proposed,” Mehta informed the court.

In a major increase to Vodafone Concept, the High Court on Monday permitted Centre to reconsider the concern of reassessment of the telecommunications driver’s modified gross revenue (AGR) fees, observing that the issue falls within the Union’s policy domain.

Supreme Court’s Decision and Rationale

The Supreme Court has actually allowed the federal government to examine Vodafone Concept’s adjusted gross revenue fees, a move that supplies a considerable policy window for the financially stretched telecommunications operator. This advancement is expected to help the firm in drawing in and maintaining procedures financial investment, with its shares seeing a notable jump adhering to the news.

The cash-strapped telecommunications company had submitted a fresh plea challenging the DoT’s latest demand of 5,606 crore for the financial year 2016– 17. Earlier, Centre had informed the apex court that efforts were underway to reach a resolution, noting that the federal government, holding almost 50% equity in Vodafone Idea, is a direct stakeholder in the company’s survival.

In September 2020, the court allowed telecommunications drivers battling with huge liabilities to clear their AGR charges, totaling up to 93,520 crore, over ten years. It directed that 10% of the overall dues be paid by March 31, 2021, with the staying equilibrium payable in yearly instalments from April 1, 2021, to March 31, 2031. The court also ruled that no additional conflicts or reassessment of dues would certainly be allowed.

The Supreme Court made it clear that the order was being passed only in the strange truths and situations of the case, particularly because the federal government had infused equity in the business and acted in the passion of Vi’s 20-crore consumer base.

The consumers would certainly endure … they have problems, something duplicate invoicing, some over-invoicing etc, this what I have proposed,” Mehta told the court.

AGR Dispute History

Vodafone Concept’s stock saw a remarkable turnaround complying with the top court’s judgment. In September 2020, the court enabled telecom operators battling with massive obligations to remove their AGR charges, amounting to 93,520 crore, over 10 years. The court additionally ruled that no further disputes or reassessment of charges would certainly be allowed.

The modified gross earnings (AGR) disagreement goes back to October 2019, when the Supreme Court supported the DoT’s definition of AGR to include both telecommunications and non-telecom earnings– such as rate of interest and property sales– for computing licence fees and range use fees.