The government is working on a relief package for the telecom sector, aimed at helping telecom firms like Vodafone Idea Limited (VIL) and Bharti Airtel. In addition to the relief package, the government is also discussing the possibility of increasing the timeline for the repayment of adjusted gross revenue (AGR) dues.

The government is discussing the prospect of extending the timeline for the repayment of AGR dues to 20 years, reported The Economic Times after speaking with government officials. A legal opinion to come up with a possible mechanism for the deadline extension is likely to be sought. This is in addition to the relief package for the entire telecom sector.

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CAN GOVT EXTEND AGR DUES REPAYMENT DEADLINE?

While the government is reportedly working out a way to extend the timeline for AGR dues repayment, the Supreme Court had earlier ruled that the telcos would have to clear dues by March 31, 2021 — a 10-year deadline.

The court’s ruling came despite a cabinet recommendation for a 20-year timeline for the repayment of AGR dues, as per the ET report.

Although the government would typically not overrule a judgement passed by the Supreme Court, it could negotiate in this case as the health of the nation’s telecom sector — involving thousands of employees, bank and government dues and an entire ecosystem — is on the line.

Vodafone Idea MD Ravinder Takkar said recently that the government does have the power to give more time to the company to clear AGR dues.

It may be noted that Vodafone Idea is facing the biggest financial crisis of all the companies operating in the country’s telecom sector. The stressed telecom firm will not be able to survive without a concrete relief package.

Ravinder Takkar also suggested that Vodafone Idea would get relief if the Supreme Court accepts its review petition on the re-computation of AGR dues calculated by the Department of Telecommunication (DoT).

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Vodafone Idea filed a review petition in the matter after an earlier plea was rejected by the Supreme Court.

HOW WILL IT HELP VODAFONE IDEA?

If the government can extend the timeline for the repayment of AGR-related dues, it would provide massive relief to the loss-making Vodafone Idea.

Any reduction in the actual AGR dues or annual AGR instalments would provide some breathing space to the telecom company.

At the end of June, the telco just had Rs 920 crore in cash and cash equivalents, but its debt had climbed to Rs 1.9 lakh crore. Vodafone Idea has just paid Rs 7,854 crore of its massive AGR dues worth Rs 58,254 crore.

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If there is no relief with regard to AGR in the near future, Vodafone Idea would have to pay approximately Rs 9,000 crore as its next AGR instalment, which is due in March 2022. Analysts tracking the sector are more or less confident that Vodafone Idea would not be able to make the payment as it has failed to raise funds, increased tariffs or get relief from the government.

While Bharti Airtel does not face an immediate crisis like Vodafone Idea, a reduction in AGR dues or lower annual instalments would allow it to strengthen its position as free up capital for 5G rollout.