Why in news?
The Supreme Court has upheld the definition of Adjusted Gross Revenue (AGR) calculation as stipulated by the Department of Telecommunications
Background about telecom sector
- The telecom sector was liberalized under the National Telecom Policy, 1994 after which licenses were issued to companies in return for a fixed license fee.
- To provide relief from the steep fixed license fee, the government in 1999 gave an option to the licensees to migrate to the revenue sharing fee model.
Revenue sharing model with government
- Under this, mobile telephone operators were required to share a percentage of their AGR with the government as annual license fee (LF) and spectrum usage charges (SUC).
- License agreements between the Department of Telecommunications (DoT) and the telecom companies define the gross revenues of the latter.
- AGR is then computed after allowing for certain deductions spelt out in these license agreements.
- The LF and SUC were set at 8 per cent and between 3-5 per cent of AGR respectively, based on the agreement.
Definition of AGR
- The dispute between DoT and the mobile operators was mainly on the definition of AGR.
- The DoT argued that AGR includes all revenues (before discounts) from both telecom and non-telecom services.
- The companies claimed that AGR should comprise just the revenue accrued from core services and not dividend, interest income or profit on sale of any investment or fixed assets.
