Relief of cargo for telecommunications companies: the government panel considers the reimbursement of AGR fees for 20 years

NEW ONE DELHI: The government panel that considers aid for the telecommunications sector is considering a repayment period of up to 20 years for adjusted gross income ( AGR ) fees, possibly with an initial moratorium, based on the net present value ( VPN ) method to ease the burden of heavily indebted companies.

It will also consider a reduction in the total tax incidence to help the troubled sector and will communicate separately with the regulator to consider a flat on rates to help with viability.

The government may not even need to waive interest and penalty on AGR dues adding up to Rs 1.3 lakh crore in case of a long payback period, although that is also being discussed.

All options are on the table, said a government official aware of the deliberations. The government wants to ensure that the telecommunications sector remains competitive.

The panel, which met for the first time last week, discussed several options, including tax exemption.

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Another official who attended the meeting said that something had to be done if the government wanted a competitive telecommunications sector. The panel is headed by cabinet secretary Rajiv Gauba and has staff members from key ministries and departments of stakeholders.

AGR blow

A Supreme Court decision on October 26 backing the telecom department’s stance on including revenues from non-core items in the definition of AGR while calculating government levies, has created a crisis for the debt-ridden telecom sector. The decision means a Rs 1.3 lakh crore burden on telecom companies.

VPN Method

Bharti Airtel & Vodafone idea will together need to pay about Rs 80,000 crore. Apart from hurting consumers, government revenues will also depend on companies remaining viable, said the official. The money has to be paid in three months. Under the VPN method, payments stretching into the future are discounted at an agreed rate - the required rate of return the government wants on the outstanding - so that the sum total of all such discounted flows is equal to the total AGR liability of the telecom companies . While government will get its dues without any loss, though over many years, the telecommunications You will get a respite from immediate payments.

Some members of the committee were of the view that tax on the spectrum charges needed to be eased. The telecommunications have acquired spectrum at high cost and, in addition, face a topup of up to 30% in taxes. A reduction in goods & services tax would need the GST Council’s backing, said another official. States may have reservations on the proposal, considering lower GST collections. Besides, the tax relief will not be specific to the telecommunications cited above & will cover all telecom companies. “ A more holistic view needs to be taken on what should be the total incidence on the sector,” said the first official cited.

El comité también está considerando la necesidad de un piso tarifario para hacer viable el sector. Se comunicará con el regulador de telecommunications para analizar el problema. Hay países que tienen pisos arancelarios, dijo el primer funcionario, haciendo un caso para alguna intervención para mantener el sector competitivo.

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