Adjusted Gross Revenue
- September 8, 2021
- Posted by: OptimizeIAS Team
- Category: DPN Topics
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Adjusted Gross Revenue
Subject – Economy
Context – Major licence fee, AGR relief expected today.
Concept –
- It is the usage and licensing fee (spectrum usage charges and licensing fees, pegged between 3-5 percent and 8 percent respectively) that telecom operators are charged by the Department of Telecommunications (DoT).
- It is calculated based on all revenues earned by a telco – including non-telecom related sources such as deposit interests and asset sales.
- All the telecom companies that operate in India pay a part of their revenues as licence fee and spectrum charges to the Department of Telecommunications (DoT) for using the spectrum owned by the government.
- In its definition of AGR, the DoT had said that telcos must cover all the revenue earned by them, including from non-telecom sources such as deposit interests and sale of assets.
- The telecom companies were opposed to this and had challenged this definition of AGR in several forums, including the Supreme Court.
- On October 24, 2019, the SC had upheld the DoT’s definition of AGR and said since the licensee had agreed to the migration packages, they were liable to pay the dues, the penalty on dues, and the interest on penalty due to delay in payments.
- AGR is a fee-sharing mechanism between the government and the telcos who shifted to the ‘revenue-sharing fee’ model in 1999, from the ‘fixed license fee’
AGR issue –
- The telecom sector was liberalised under the National Telecom Policy, 1994 after which licenses were issued to companies in return for a fixed license fee.
- To provide relief from the steep fixed license fee, the government in 1999 gave an option to the licensees to migrate to the revenue sharing fee model.
- Under this, mobile telephone operators were required to share a percentage of their AGR with the government as annual license fee (LF) and spectrum usage charges (SUC).
- License agreements between the Department of Telecommunications (DoT) and the telecom companies define the gross revenues of the latter.
- The definition of AGR has been under litigation for 14 years.
- The dispute between DoT and the mobile operators was mainly on the definition of AGR.
- The DoT argued that AGR includes all revenues (before discounts) from both telecom and non-telecom services. The companies claimed that AGR should comprise just the revenue accrued from core services and not dividend, interest income or profit on sale of any investment or fixed assets.