FIVE TELCOS UNDERSTATED REVENUE: CAG
TELECOM AUDIT Underreporting led to a shortfall of nearly ₹2,578.83 crore
The Comptroller and Auditor General of India, in a report released on Tuesday, said non-compliance with licence conditions by five operators led to a shortfall in payment of revenue share to the government to the tune of ₹2,578.83 crore.
The Comptroller and Auditor General of India (CAG), in a report released on Tuesday, said non-compliance with licence conditions by five telecom operators led to a shortfall in payment of revenue share to the government to the tune of ₹2,578.83 crore.
Tata Teleservices Ltd and Tata Teleservices (Maharashtra) Ltd together accounted for a lion’s share of the total at ₹1,893.60 crore and Reliance Jio Infocomm Ltd’s share was ₹6.78 crore, the government auditor said.
In the report tabled in Parliament, the CAG said its audit of the basic accounting records and documents of Tata Teleservices and Tata Teleservices (Maharashtra), Quadrant Televentures Ltd, Videocon Telecommunication Ltd, Telenor group and Reliance Jio, for varying periods from 2006-07 to 2014-15, indicated total understatement of annual gross revenue (AGR) of about ₹14,813.97 crore and a consequent shortfall in payment of revenue share to the government to the tune of ₹1,526.70 crore.
The interest due on the shortfall in payment of revenue share for the period up to March 2016 was ₹1,052.13 crore.
Telecom operators are liable to pay around 3-5% and 8% of the AGR as spectrum usage charges and licence fees to the government.
According to the CAG report, this understatement of gross revenues came in terms of the amount of commission/discount paid by operators to their distributors/dealers/agents/franchisees; promotional schemes like Free Talk Time/Free Air Time; netting of discounts from revenue pertaining to roaming services as well as infrastructure sharing; shortfall/non-inclusion of forex gains in gross revenue; noninclusion of interest income as well as profit from the sale of investments; non-inclusion of miscellaneous revenue and profit on sale of fixed assets and bad debts written off and claimed as deductions.
Of the five companies named in the CAG report, only Reliance Jio now runs full-scale operations. The company began commercial operations only in September 2016.
Prior to that, in June 2010, Reliance Industries bought a 95% stake in the Mahendra Nahataowned Himachal Futuristic Communications Ltd’s arm, Infotel Broadband Services, while also paying the ₹12,848 crore for 20MHz of pan-India spectrum that Infotel bagged in an auction that year.
In January 2013, RIL’s telecom subsidiary, Infotel Broadband Services Ltd, was renamed as Reliance Jio Infocomm.
According to the report, Reliance Jio’s share of the short-payment was at ₹6.78 crore.
While the company did not start commercial operations in the period mentioned in the report, the government estimates AGR as 5% of the bid value of the spectrum, for which it collects spectrum usage charges and licence fee.
“The charge on Reliance Jio is related to ‘revenue share on realized forex gain’. This is an industry issue and was referred to TDSAT (Telecom Disputes Settlement and Appellate Tribunal) which ruled in favour of telecom operators. However, the TDSAT decision was appealed against by DoT (Department of Telecommunications) and this matter is currently sub judice with the Supreme Court,” a spokesperson at Reliance Jio said.
All the other operators named in the report have either shuttered or sold their businesses.
Videocon shut down operations in 11 circles where the Supreme Court cancelled licences in January 2012. It subsequently won spectrum in five of those circles in a November 2012 auction but exited the mobile business completely almost two years ago.
Quadrant Televentures (formerly HFCL Infotel), a subsidiary of Videocon Telecom which ran the latter’s mobile services in Punjab, ceased operations in February 2017.
Bharti Airtel in October announced the acquisition of Tata Teleservices and Tata Teleservices (Maharashtra) on a debtfree, cash-free basis. Airtel has also bought Telenor ASA’s India business.
Emails, calls and texts to the other companies remained unanswered till press time.