Telcos feel Rs 12,489 crore CAG case pinch over DoT move


The department of telecommunications (DoT) on Tuesday began sending out notices to the country’s top six mobile operators, who have been charged by the Comptroller and Auditor General of under-reporting their adjusted gross revenue by Rs 46,045.75 crore for the period 2006-07 to 2009-10, due to which the government suffered a loss of Rs 12,488.93 crore by way of revenue share licence fee and spectrum usage charge.
Sources said so far notices for the Delhi circle have been sent out and will be followed up by similar notices for other circles over the next fortnight.
A spokesman for Bharti Airtel confirmed receiving the notice, while Vodafone India’s managing director Sunil Sood said he was yet to receive any such demand notice. Executives at Idea Cellular, Tata Teleservices, and Aircel were not reachable.
The issue had led the government and the main opposition party, the Congress, clash earlier this month when the latter had charged that the government was deliberately going slow on the CAG’s audit report as it wanted the companies to go scot free.
The CAG report was tabled in Parliament in March and in fact, was the first audit report by the national auditor after the government’s decision, later upheld by the apex court that the revenue side of those private parties be audited who are using natural resources leased by the government, to ensure that the latter is not losing out on revenues.
The government had defended itself against the Congress’ charge stating that first, the under-reporting of revenue and loss to the exchequer and happened during the UPA government’s regime and it was in the process of sending notices to the concerned companies to recover the amount.
However, it seems unlikely that the government will be able to recover the amount from the concerned companies because they are likely to challenge it. In fact, all these firms have already got stay orders from various high courts on demand notices by the DoT from an earlier special audit done by it.
As reported by FE earlier, all the counts on which the under-reporting has been shown by the auditor is under dispute, and the matter is sub judice in different courts and tribunals between the operators and the DoT. The dispute between the operators and the government is over the definition of adjusted gross revenue, a percentage of which they pay as licence fee and spectrum usage charge. The mobile operators contend that only revenues accruing through services construe AGR while the government contends that revenues from other streams like forex gains, sale of fixed assets etc should also be counted towards AGR.
In fact, in response to the CAG report, a joint statement by operators’ associations — COAI and AUSPI — in March had stated, “We would like to clarify that matters relating to interpretation of “gross revenue/adjusted gross revenue” of telecom companies for the purpose of calculation of licence fees are under litigation in various judicial forums including the TDSAT, high courts and the Supreme Court. The issues pointed out by the CAG pertain to those disputes, which have either been settled or stayed by various courts. Further, we would like to reiterate that our member companies follow the highest standards of corporate governance and have always been in compliance with all regulations”.
Though the CAG, in its report went by the government’s definition of AGR, it also criticised the DoT for not reviewing the disputes/litigation. It had also recommended that the definition of gross revenue and adjusted gross revenue should be revisited considering the drastic changes in the scenario since 1999 when spectrum was allocated administratively to the present when it is allocated through bidding process where operators have to pay considerable amount as one-time payment at the time of allocation of spectrum.
There are 13 counts on which the CAG had found under-reporting stating that while the companies concerned did not include these in their AGR, they should have done so as per the licence conditions.
To illustrate an instance, the CAG had said, “Since commission/discounts etc paid to distributors/dealers/agents/franchisees is in the nature of business expense, netting off or reducing the revenue for the purpose of reporting GR/AGR for computation of revenue share to the government is against the licence agreement”.
Similarly, it had included expenses on promotional schemes, discounts given to post-paid subscribers, discounts on roaming pacts, infrastructure sharing, etc in the ambit of AGR on which licence fee should be paid

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