Vodafone Idea, Bharti Airtel have Rs. 42,000 Crore Locked in Govt Cases: Sources

Sources have said that Vodafone Idea and Bharti Airtel have as much as Rs. 42,000 crore locked in litigation against the government. However, the out-of-court settlement mechanism proposed by the government can reduce their liabilities significantly. The system, similar to 'Vivaad se Vishwas' (VSV), will work to reduce litigation as part of government's relief efforts for the telecom sector.

A Lot of Money Stuck in Govt Cases

A source had told that out of the total amount, the government had asked Rs. 22,000 crore from Vodafone Idea alone. According to the source, "the DoT has raised demands of about Rs. 15,000 crore on Vodafone Idea alone for a one-time spectrum charge (OTSC) alone". However, Vi said that OTSC accruals till March-end this year were Rs. 4,389.8 crore.

A few days ago, the DoT also asked the two telcos to pay Rs. 3,050 crore for allegedly not providing PoIs to Reliance Jio. The penalty was actually recommended in 2019, and the DoT had given the telcos two weeks to comply. However, Airtel has already said that it will challenge the demand, and Vi will likely follow suit too.

Some of the other ongoing cases between DoT and Vi include those around return of bank guarantees (Rs 3,322 crore), and penalties relating to Idea Cellular's 2008 acquisition of Spice Communications and around 3G intra-circle roaming agreements.

Government Looking to Reduce Litigation in Telecom

Last week, the DoT had told the apex court that it will reconsider its appeal against a telecom tribunal ruling which had telcos' argument that OTSC should be levied prospectively. As such, this reflects on the government's willingness to reduce litigation in the sector, which will further improve the sector's health. However, the work on such a mechanism is still underway.

The VSV scheme, though, was launched in March 2020 to reduce tax-related litigations across industries. The system was designed to also generate timely revenue for the government. Basically, the scheme allowed taxpayers to clear their outstanding dues in an easy way:

• The taxpayer would only pay the tax component of the overall demand.
• The government will then waive off the interest and penalty amounts.

The government will look to achieve a similar success in the telecom sector. It now looks at the sector as a vehicle of larger economic growth - in line with its Digital Economy targets. As such, the government had announced the first round of reforms on 15th September. The telecom sector now hopes that the government will keep reforming the sector to improve its health drastically.