Vodafone Idea’s SOS call, will government respond

After failing to get favourable response from India’s top court, Vodafone Idea has approached the government seeking relief for adjusted gross revenue (AGR) payment and other demands in a bid to remain relevant in the highly competitive telecom business.

Whether the government responds to its demand is still to be known, but given the fiscal condition amid declining GDP growth, stretched revenue collection, it seems the company’s SOS call may go unheard.

According to the media report, the telecom company has called on the government to allow it to pay AGR dues over 15 years, besides seeks a tax refund, cuts in licence fees and spectrum usage charges (SUC) and the establishment of a floor for tariffs among measures to help remain viable.

In a letter to the Department of Telecommunications, the finance ministry and Niti Ayog, the telco, which has over 300 million subscribers, said it needs help from the government to stay in business.

The letter was sent a day ahead of a meeting of Digital Communications Commission (DCC) – the highest decision-making body of DoT – which may discuss some steps on providing relief to stressed telcos such as Vodafone Idea.

In its letter, the operator sought a goods and services tax (GST) refund of Rs 8,000 crore, which can be adjusted against its AGR dues, and option of paying the remaining amount in a staggered manner — over 15 years — after an initial moratorium of three years.

The company has to pay statutory dues of about Rs 57,000 crore, as per DoT’s estimates, but has so far paid only Rs 3,500 crore. Its own estimates peg dues at around Rs 23,000 crore, of which Rs 7,000 crore is the principal amount. Experts don’t expect the cash-strapped telco to cough up even the lower amount.

The telecom operator has warned of shutting shop unless it gets some relief on its AGR dues.

Vodafone Idea has also called for a reduction in licence fees and SUC. Telcos annually pay 8% of AGR as licence fees; Vodafone Idea wants it reduced to 3%. The industry has been long calling for a reduction in SUC as well, which is paid at 3-5% of AGR. The telco wants it brought down to 1%.

Meanwhile, the government is considering deferring licence fee and SUC payments for a substantial period to help free up cash flows at telecom operators, besides setting up a stress fund to offer loans on easy terms.

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