Understanding AGR Dispute And India’s Changing Telecoms Industry

Understanding AGR Dispute And India's Changing Telecoms

The Supreme Court has reserved its order on the timeline of payment of Adjusted Gross Revenue (AGR) due of telecoms. Companies are struggling to hold their presence in the market. Telecoms giants have asked SC to give 15 years of time to repay this due. Let’s understand how a change in the definition of AGR resulted in a huge amount of debt for telecoms in India and whether this would change the landscape of the industry.

Crux of the Matter

SC’s Stand Over The Matter
After hearing telecoms on the matter of due and payment timeline, the Supreme Court has reserved its order on the timeline of payment of Adjusted Gross Revenue (AGR) due of telecom companies. Since the amount of due is huge, the government has proposed to give a timeline of 20 years to pay all the dues. But companies have shown their readiness to pay dues even in 15 years. Moreover, SC has denied reassessment of AGR dues. Government calculated amounts will be taken as the final amount for AGR dues.

Adjusted Gross Revenue
Adjusted Gross Revenue (AGR) is the usage and licensing fee that telecoms are charged by the Department of Telecommunications (DoT). AGR is divided into spectrum usage charges and licensing fees, pegged between 3-5% and 8% respectively. The dispute is about what particulars to include in the calculation of AGR. DoT says that AGR should be levied on total revenue. But in 2005, the Cellular Operators Association of India (COAI) challenged DoT’s definition, saying AGR should be calculated on revenue from core operations and exclude non-core revenue such as rent, dividend, interest, etc. In 2015, Telecom Disputes Settlement and Appellate Tribunal (TDSAT) ruled in favor of COAI and telecoms. But In 2019, SC upheld DoT’s definition of AGR, and hence companies are paying accumulated dues of past years.


Premium Plans Controversy
Recently, TRAI had ordered telecom giants to block their premium plans with immediate effect. Vodafone Idea and Bharti Airtel offered premium plans RedX and Platinum respectively. The consumer having premium plans can get better and faster services with high-speed internet. Considering this, Reliance Jio lodged a complaint claiming that providing better services to one set of customers would ‘undoubtedly deteriorate service quality to another set of customers’. In July 2020, TRAI ordered telecom giants to block these plans with immediate effect. TRAI’s argument was regarding the disruption of service and misleading advertisement of faster speed.

Companies replied that they are using ‘advanced technologies’ to help the premium customers get better service and faster speeds without impacting other users. In addition, telecom operators say that they need flexibility on tariff plans if the government is not ready to decide floor price. Soon after TRAI’s orders, Vodafone-Idea moved to TDSAT challenging the order. TDSAT stayed TRAI’s orders and allowed Vodafone-Idea to onboard new customers, but asked TRAI to continue its investigation of the premium plans offered by Airtel and Voda-Idea.

Curiopedia
  • The name Vodafone comes from voice data fone (phone), chosen by the company to “reflect the provision of voice and data services over mobile phones”. Racal Electronics, the UK’s largest maker of military radio technology, formed a joint venture with Millicom called ‘Racal’, which evolved into the present Vodafone.
  • As of 31 Dec 2019, India has the world’s second-largest Internet user-base with 661.94 million broadband internet subscribers in the country. It has one of the lowest call-tariffs in the world enabled due to hyper-competition among mega telecom operators.
  • Telecom Regulatory Authority of India was established on 20 February 1997 by an Act of Parliament to regulate telecom services and tariffs in India. Earlier regulation of telecom services and tariffs was overseen by the Central Government. The current Chairman of TRAI is Ram Sewak Sharma.

SC and RBI Face-off over Interest Waiver

SC v/s RBi on interest waiver

On May 22, the RBI allowed banks to allow an additional 3-month moratorium from June 1 to August 31, 2020, on all outstanding loans while banks have continued to charge interests, sparking a face-off between RBI and SC that is hearing a plea on interest waiver.

Crux of the Matter

Moratorium is a time period in which you don’t have to pay your EMIs and for which you’ll not be penalized nor your credit score would be affected. A moratorium is simply a deferment of the payment to provide relief to borrowers facing liquidity issues and is not any form of concession.

What Is The Issue?
Though the RBI has extended the moratorium period for another 3 months, it has not waived the interest that will be charged. Which simply means that though the banks will not deduct interest from your account, the interest that has been deferred will be added to charges payable later and thus there will be interest on the interest which is the primary issue.

For instance, you have an outstanding loan of ₹5 lakh on which 10% interest is charged annually. Annual interest amount comes to ₹50,000. Interest amount for 3 months (in case of moratorium for 3 months) is equal to ₹12,500. This interest will not be deducted from your account but will be added to your outstanding loan amount. You will be charged interest effectively on the amount of ₹5,12,500.

Once you fix a moratorium, it should serve the desired purpose. Customers are not opting for it because they know they are not getting any benefits.

Supreme Court

Supreme Court v/s RBI & Government
A three-judge bench of the Supreme Court on 17th June heard the plea that sought a waiver of interest on loans during the moratorium period. SC calling for centre’s intervention said that ‘charging interest on loans during the period of the moratorium would defeat the very purpose of the scheme.’

The State Bank of India filed an intervention application in the SC against the interest waiver plea and presented a joint view of all the banks that interest for the six months of moratorium cannot be waived. The apex court has also sought inputs from the Indian Banks’ Association (IBA) on whether new sectoral guidelines could be issued to give benefits to extremely distressed sectors.

Defending the government Solicitor General Tushar Mehta opposed waiving off interest on interest citing impacts which would push the banking system towards financial instability and said that banks also have to pay interest to depositors.

SC has sought clarifications from the central government whether banks can charge interest during the moratorium period. The central government will be holding a meeting with the finance ministry and RBI to formalize a view and reply to SC which has deferred the hearing to the first week of August on request of IBA and SBI.

What Does Moratorium Mean For The Banks?
According to RBI, lenders will lose ₹2 lakh crores if interest is waived during the moratorium period. According to data available from large banks namely State Bank of India, ICICI Bank, Kotak Mahindra Bank and Axis Bank, nearly 30% of their outstanding loans come under moratorium. Whereas the banks like Bandhan Bank, Ujjivan Small Finance Bank and Equitas Small Finance Bank catering to small scale businesses have nearly 70%-90% of loans under moratorium.

While moratorium gives much-needed relief during the lockdown period we see the banking sector taking a hit to their NPAs which were seen to be coming down in 2020. Banks would inevitably seek to cover their potential or actual loss of interest income through further cutbacks in the deposit interest rates and thus the depositors would be severely hit if a waiver on interest rates is allowed.

Curiopedia
  • Jyske Bank, Denmark’s third-largest, launched the world’s first negative interest rate mortgage – handing out loans to homeowners where the charge is minus 0.5% a year. Negative interest rates effectively mean that a bank pays a borrower to take money off their hands, so they pay back less than they have been loaned.
  • On 20 February 1980, a black bronze sculpture of 210 cm (6 ft 11 in) height was installed in the lawn of the Supreme Court. It portrays Mother India in the form of the figure of a lady, sheltering the young Republic of India represented by the symbol of a child, who is upholding the laws of land symbolically shown in the form of an open book. The sculpture was made by the renowned artist Chintamoni Kar.
  • The Supreme Court building is shaped to symbolize scales of justice with its center-beam being the Central Wing of the building comprising the chief justice’s court, the largest of the courtrooms, with two court halls on either side. The foundation stone of the supreme court’s building was laid on 29 October 1954 by Dr. Rajendra Prasad, the first President of India.

Supreme Court Stands Up For Common Man

Supreme Court of India

Supreme Court of India recently passed decisions to facilitate the transportation of migrant workers, with similar help coming from a Bollywood actor.

Crux of the Matter

SC Saves
Supreme Court (SC) of India recently ordered all state governments to transport all migrant workers to their homes within 15 days. Moreover, the order also directs the governments to reinforce their decision to ferry the workers without charging and to make mandatory food and water provisions.

In another major decision, the SC also directed state governments to nullify FIRs filed against laborers for breaching lockdown norms by walking to their homes.

Plight Of The Workers

  • 8 May: 16 workers run over by a train while sleeping on train tracks near Aurangabad
  • 9 May – 27 May: 80 workers died while being transported back to homes on shramik special trains
  • Besides these, several migrants had to walk or ride a bicycle for 1,500+ km to reach home in the absence of facilities

Saviour From Bollywood
Bollywood actor Sonu Sood has arranged for the transportation of 20,000+ migrant workers to their homes by buses, trains, and flights. No charges are levied on the workers, who are also provided food and water for the journey. Sood has also started a helpline for the workers to contact, and also receives help requests through social media feed.

Curiopedia
  • The Supreme Court of India came into being on 28 January 1950. It replaced both the Federal Court of India and the Judicial Committee of the Privy Council which were then at the apex of the Indian court system. H. J. Kania was the first CJI of India.
  • Bollywood actor Sonu Sood established the production house Shakti Sagar Productions, named after his father, Shakti Sagar Sood.
  • The foundation stone of the supreme court’s building was laid on 29 October 1954 by Dr. Rajendra Prasad, the first President of India. The main block of the building has been built on a triangular plot of 17 acres and has been designed in an Indo-British style by the chief architect Ganesh Bhikaji Deolalikar, the first Indian to head the Central Public Works Department. 
  • The design of the Supreme Court’s seal is reproduced from the wheel that appears on the Sarnath Lion Capital of Ashoka with 24 spokes. It is also referred to as the wheel of righteousness, truth, goodness and equity. The inscription in Sanskrit reads यतो धर्मस्ततो जयः (whence justice (dharma), thence victory).  

Ex-CJI Gogoi Nominated to RS: Confluence of Judiciary and Politics

Ranjan Gogoi

President Ramnath Kovind has nominated Former Chief Justice of India Ranjan Gogoi to Rajya Sabha. Congress criticized the move and said that it might affect the reputation of the judiciary.

Crux of the Matter

Ranjan Gogoi served as the Chief Justice of India from October 3rd, 2018 to November 17th, 2019. After nearly 5 months of his retirement, in an unprecedented move, he has been nominated to be a member of the Upper House of the Parliament. The opposition was of the opinion that the move would jeopardize the ‘impartiality’ of the judiciary.

Yashwant Sinha, former BJP leader, hoped that ‘the CJI would say no to the offer, otherwise it would do incalculable damage to the reputation of the judiciary.’

Case of Judiciary and the Government
This is the first time a judiciary member is crossing the line of the legislature for a Rajya Sabha seat, but few members have crossed that line in the past for other positions.

  • MC Chagla served as Chief Justice of the Bombay High Court from 1947 to 1958. In 1958, he was appointed as India’s ambassador to the US. He was also the High Commissioner to the UK, Minister of Education, and Minister of External Affairs, in his later years. Gap post-retirement – 0 years.
  • Justice Baharul Islam, formerly a Rajya Sabha member between 1962 to 1972, served the apex court from 1980 to 1983. He became a Rajya Sabha member again in 1983 and served till 1989. Gap post-retirement – 0 years.
  • Justice KS Hegde served the judiciary from 1967-1973. In 1977, he was elected for the Lok Sabha seat from Bangalore. He served as the Speaker of the Lok Sabha from 1977 to 1980. Gap post-retirement – 4 years.
  • In 1979, former CJI Hidayatullah became the Vice President of India. However, he had retired as CJI in 1970. Gap post-retirement – 9 years.
  • After his retirement in 1991, former CJI Ranganath Mishra had joined the Congress in 1998. Gap post-retirement – 7 years
  • In 2014, former CJI P. Sathasivam was appointed as the Governor of Kerala after his retirement in 2013. Gap post-retirement – 1 year.
  • In 2017, CJI TS Thakur was offered Rajya Sabha seat by the Aam Aadmi Party. He denied the offer.

Former BJP leader, late Arun Jaitley at a conference said that there should be an adequate cooling period – preferably 2 years – before a retired judge is offered a position. He said, “For two years after retirement there should be a gap (before appointment), because otherwise the government can directly or indirectly influence the courts and the dream to have an independent, impartial and fair judiciary in the country would never actualize. I say this with a lot of responsibility that even before they retire, it is decided for the Supreme Court and High Court judges as to which Commission they will go and join.”

Curiopedia

Former CJI Ranjan Gogoi is the son of politician Kesab Chandra Gogoi. His brother Retired Air Marshal Anjan Gogoi was appointed as a full-time non-official member of the North Eastern Council in January. He is known for leading the 5-judge Supreme Court Bench that gave a verdict on Ayodhya Temple-Babri Masjid Land Dispute case. He, along with three other SC judges, held a press conference in which he and other judges had said that ‘the judiciary needs to be protected, else democracy will not survive in this country.’ They also raised the issue of the allocation of cases in the court. In April 2019, he was accused of sexual harassment by a co-working woman. He was given a clean chit by a 3-judge SC bench. More Info

Indian bitcoin community rejoices as SC lifts ban on cryptocurrency trading

bitcoin

In a move that is being considered iconic by many, India’s Supreme Court (SC) overrode a two-year-old ban on cryptocurrency trading in the country this week. This verdict comes two years after The Reserve Bank of India (RBI) had imposed a ban that barred banks and other financial institutions from facilitating any service in relation to virtual currencies. In the ruling, the bench headed by Justice Rohinton F. Nariman overruled central bank’s 2018 circular on the grounds of disproportionality.

Crux of the Matter

Cryptocurrency: The Vault of Electronic Currency
Alternatively known as a virtual currency, it is an internet-based medium of exchange which uses codes and tokens to conduct safe financial transactions. It’s most important feature is that it is not controlled by any central authority i.e it has a decentralized nature which makes it theoretically immune to the old ways of government interference.

Popular cryptocurrencies like bitcoins and litecoins can be sent directly from one party to another via the use of private and public keys. These transfers are done with minimal processing fees, allowing users to avoid the steep fees charged by traditional financial institutions, which in turn leverages blockchain technology to gain decentralization, transparency, and immutability.

Why did RBI Hide this Crypt from Citizens ?
In April 2018, RBI reportedly wanted to curb ring-fencing” of the country’s financial system. It had also argued that Bitcoin and other cryptocurrencies cannot be treated as currencies as they are not made of metal or exist in physical form, nor were they stamped by the government.

The central bank notice had sent several local startups and companies into panic mode as they were actively offering services to trade in cryptocurrency. A group of petitioners including a trade body, the Internet and Mobile Association of India, had challenged this decision. They argued back then how this move would put a brake on the nation’s digital progress when countries like US and China were not only involved in cryptocurrency trading but also launching their own virtual currencies.

Now that Virtual Laxmi is Back, Is She Welcomed?
Even if many startups have had to shut shop since the RBI ban, others survived the storm to even attract M&A interest. Now they are planning to restart work with the regulators in order to create a better framework and improve the presentation in the draft cryptocurrency bill.

Nischal Shetty, founder and chief executive of Bitcoin exchange platform WazirX, is overjoyed as his twitter handle reads, “Crypto has won in India. We can now innovate. The entire country can participate in the Blockchain revolution.” He adds that India will now see 100 crypto new startups in the next few months, along with VC investments, better jobs and a real contribution to the economy.

Curiopedia

Bitcoin (₿) is a cryptocurrency. It is a decentralized digital currency without a central bank or single administrator that can be sent from user to user on the peer-to-peer bitcoin network without the need for intermediaries. Transactions are verified by network nodes through cryptography and recorded in a public distributed ledger called a blockchain. Bitcoin was invented in 2008 by an unknown person or group of people using the name Satoshi Nakamoto and started in 2009 when its source code was released as open-source software. Bitcoins are created as a reward for a process known as mining. They can be exchanged for other currencies, products, and services. Research produced by University of Cambridge estimates that in 2017, there were 2.9 to 5.8 million unique users using a cryptocurrency wallet, most of them using bitcoin. More Info