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Daily Current Affairs – 2020

Topic: For Prelims and Mains

Adjusted Gross Revenue (AGR)

 

Why in News?

The Supreme Court has come down heavily on the Department of Telecommunications (DoT) for issuing a notification last month that asked for no coercive action against telecom companies even though they had not paid the adjusted gross revenue (AGR) dues by the stipulated deadline of January 23.

The Court also initiated contempt proceedings against the telecom companies for not paying the AGR dues.

  • The court also asked DoT to immediately withdraw the notification which said that there would be no coercive action against telcos.

Background:

Last year, the Supreme Court upheld the definition of Adjusted Gross Revenue (AGR) calculation as stipulated by the Department of Telecommunications.

The order by the top court means that the telecom companies will have to immediately clear the pending AGR dues, which amount to nearly Rs 1.47 lakh crore.

What is AGR?

Adjusted Gross Revenue (AGR) is the usage and licensing fee that telecom operators are charged by the Department of Telecommunications (DoT).

It is divided into spectrum usage charges and licensing fees, pegged between 3-5 percent and 8 percent respectively.

Why the definition of AGR is important?

Because it has revenue implications for both government & Telecos.

  • For government – it means increase in its revenue collection which helps maintaining fiscal deficit and undertake welfare measures
  • For Telecom Operators– Added financial burden especially at a time where their assets ae over leveraged and profits are under pressure from severe competition (after Jio’s entry).

Implication of the Supreme Court’s 2019 Order:

  • On Telecom companies: Increased liability means losses in their operation in short term. It also erodes the telcos’ net worth impacting retail investors
  • On Telecom Sector: It could potentially lead to Vodafone Idea’s exit due to its weak financial position & its inability to pay its dues. This leads to the creation of a Airtel-Jio duopoly which may not augur well for the competitiveness in the sector and thus the government’s vision of Digital India.
  • On Banking Sector: 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.
  • Mutual fund industry having exposure to telecom sector will also see erosion of value.
  • On Consumers: Competition in the sector will always lead to better prices and better technology. Possibility of creation of duopoly will impact the competition in negative manner.

Way ahead:

  • Government should realize the consequences of the failure/weakness of the sector on the broader economy & on its long term vision of Digital India.
  • Therefore, instead of being inflexible on AGR for short term revenue gain, it should accommodate the interests of the telecom operators (like extension of deadline, foregoing interest on dues) so that long term vision is not compromised.

Facts for Prelims :

I-GOT Programme :

The Government has recently launched the iGOT (Integrated Government Online Training Programme) developed by Department of Personnel and Training, Ministry of Personnel, Public Grievances & Pensions.

  • It will augment the existing training mechanism with online module-based training coupled with certification.
  • The National Training Policy-2012 mandates that all civil servants will be provided with training to equip them with the competencies for their current or future jobs.
  • The current structure of training for Government servants including domestic and foreign training is mostly available to very small section of the government servants.

 

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