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Govt lost Rs7,700 cr in 5 years as telcos understated revenue by Rs61,000-cr: CAG

22 July 2017

Private telecom operators, including Bharti Airtel, Vodafone, Idea Cellular, understated revenue by Rs61,000 crore in the five fiscal years ended FY15, denying Rs7,697.62 crore in revenue to the government, the Comptroller and Auditor General of India (CAG) stated in its latest report.

According to the CAG's report, the six private telecom operators, including Bharti Airtel, Vodafone India and Idea Cellular, under reported revenues to the tune of more than Rs 61,000 crore between FY11 and FY15.

Together with Rs4,531 crore of interest thereon, the operators owed government Rs12,228.62 crore for the period between FY11 and FY15, as per the CAG report tabled in Parliament on Friday.

''To sum up the verification of records of six telecom operators by audit indicated total understatement of adjusted gross revenue (AGR) of Rs61,064.56 crore… and consequent short payment of revenue share to government of India to the tune of Rs 7,697.62 crore. The interest due on the short paid revenue share, for the period up to March 2016 was Rs 4,531.62 crore,'' the report said.

This understatement in gross revenue (GR) and AGR was done by adjusting the amount paid as commission or discount to distributors, dealers, agents, etc besides expenses on promotional free airtime schemes, discounts given to postpaid subscribers, revenue from infra sharing, roaming revenue netted off by discount given to other operators, non-inclusion of foreign exchange gain, on / short inclusion of interest income and dividend income among others, says the report.

These private telecom operators also understated revenue by ''netting of income from infrastructure sharing and non-inclusion of forex gains, interest income, and sale of an investment,'' the CAG report stated

According to the CAG report, the Sunil Mittal-led Airtel owes the government Rs2,602.24 crore in licence fee and spectrum usage charge (SUC) and Rs1,245.91 crore in interest for 2010-11 to 2014-15. Similarly, Vodafone owes Rs3,331.79 crore, including Rs1,178.84 crore in interest, while Idea Cellular owes Rs1,136.29 crore in licence fee and spectrum usage charge (SUC) and Rs657.88 crore in interest.

RCom, Aircel, and SSTL owe Rs1,911.17 crore, Rs1,226.65 crore and Rs116.71 crore, respectively.

For five operators, the audit period is from 2010-11 to 2014-15, while for Systema Shyam (SSTL), the period is from 2006-07 to 2014-15.

As per licensing conditions, telecom service providers are required to share a percentage of their adjusted gross revenue (AGR) with the government as annual license fee (LF), besides paying Spectrum Usage Charges (SUC) for the use of radio frequency spectrum allotted to them.

Gross Revenue (GR) of the licensee operator includes its entire sales revenue and no sets-offs related to expenditure are allowed.

The CAG said all six operators failed to confirm with licensing conditions in the accounts due to which their GR computed for sharing revenue with the government was understated.
However, CAG noted that although computation of the GR was not in compliance with the licence agreement, the statutory auditors had always certified that the accounts were prepared by the guidelines / norms.

''These statements submitted by the operators appeared to be only a perfunctory practice as they consistently departed from the stipulations in the Unified Access Service License (UASL) agreements while computing GR (gross revenue). DoT on its part did not take any proactive steps to ensure that the licensees disclosed their income as stipulated in the license agreements,'' reports quoted the CAG as saying.

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