Demystifying Adjusted Gross Revenue (AGR)

ADJUSTED GROSS REVENUE (AGR): CONCEPT, DISPUTE AND SIGNIFICANCE

1. What is AGR?

Adjusted Gross Revenue (AGR) refers to the portion of a telecom operator’s total revenue that is used to calculate licence fees and spectrum usage charges payable to the Department of Telecommunications (DoT). It determines how much telecom companies owe the government for using public telecom resources such as spectrum and infrastructure.

2. What are core and non-core revenues?

Core revenue: Income earned directly from telecom services such as voice calls, data usage, SMS, roaming, and value-added services.

Non-core revenue: Earnings not directly related to telecom operations but still part of a company’s total income. These include:

• Interest from bank deposits or loans
• Dividends from investments
• Sale of scrap or handsets
• Rental income from towers or real estate
• Sale of shares or other financial instruments
• Income from leasing infrastructure or providing consultancy

3. How is AGR calculated?

The DoT includes both core and non-core revenues in the calculation of AGR. Telecom operators are required to pay:

• 8% of AGR as licence fee
• 3–5% of AGR as spectrum usage charge (SUC)

The inclusion of non-core income substantially increases the total dues payable by telecom companies.

4. What caused the AGR dispute?

Telecom operators argued that only core revenues should be part of AGR, as non-core sources do not rely on the telecom spectrum. The DoT, however, maintained that all revenues—core and non-core—fall under the definition of AGR. This disagreement led to a prolonged legal battle spanning nearly two decades.

5. What did the Supreme Court decide in 2019?

In October 2019, the Supreme Court of India upheld the DoT’s broad definition of AGR. It ruled that all revenues, including interest income, dividends, rent, and asset sales, must be included in the AGR calculation. This verdict imposed massive financial liabilities on telecom operators.

6. How heavy were the dues?

The 2019 judgment required companies to clear cumulative dues exceeding ₹1.6 lakh crore, including penalties and interest. The major liabilities included:

• Vodafone Idea: ₹83,400 crore
• Bharti Airtel: ₹40,000 crore
• Tata Teleservices: ₹16,000 crore

7. Why is FY17 important now?

The Supreme Court recently directed the government to reassess and reconcile AGR dues up to FY2017 for Vodafone Idea, considering potential calculation errors and discrepancies. Bharti Airtel has also sought a similar reassessment.

8. What relief has the government granted so far?

In 2023 and 2024, the Government of India converted Vodafone Idea’s dues worth over ₹53,000 crore into equity, making the government the largest shareholder with nearly a 49% stake in the company. This move aimed to ease the company’s financial burden and stabilise the telecom sector.

9. Why is AGR significant for the telecom industry?

The AGR issue has major implications for the financial health and competitiveness of India’s telecom sector:

• High AGR dues limit investments in 5G rollout and rural network expansion.
• It impacts the overall financial sustainability of telecom operators.
• A rational reassessment of AGR could revive competition and ensure long-term industry stability.

10. What reforms are expected?

The government is considering revisiting the definition of AGR for future periods. The proposed reform may separate non-telecom income from the computation base to prevent similar disputes and ensure transparency, fairness, and growth in the telecom sector.