Why the SC verdict on AGR does not validate Indian telecom licensing regime

On Thursday, the Supreme Court, settled a 15-year-old dispute between the government and incumbent telecom companies including Airtel and Vodafone Idea. The companies had disputed payments claimed by the government on account of licence fees and spectrum usage charges (SUC). The Court has ruled against them and has, in effect, asked them to pay the government over Rs 1.3 trillion or 1.3 lakh crores including the original demand, interest and penalty charges. The Judgement means a massive windfall for the government, but it might be unwise to rejoice.

The dispute related to the so-called Adjusted Gross Revenues (AGR) of mobile operators. This AGR refers to operator’s total revenues minus permitted exclusions. An operator’s licence fee and SUC are defined as a percentage of its AGR and are currently 8 per cent and 3 per cent respectively.