Scatmag.com

January 2020

DOT DEMANDS 2,97,000 CR FROM GAIL & POWER GRID

DoT has asked GAIL to pay ₹ 1,72,655 Crore, as dues against the IP-1, IP-2 and ISP licences that GAIL has taken. This is a direct consequence of the Supreme Court ruling regarding payment of AGR and spectrum charges payable by all license holders.

GAIL (formerly Gas Authority of India Limited) is the largest, natural gas processing and distribution company in India. It is owned by the Government of India, under the Ministry of Petroleum and Natural Gas.


GAIL'S REPLY

GAIL has responded that it owes nothing more than what it has already paid. GAIL has told DoT that it had obtained a 15-year ISP licence in 2002, which expired in 2017. However, GAIL never did any business under the licence.

On IP-1 and IP-2 (Infrastructure Provider) licences, GAIL said it generated ₹ 35 crore of revenue since 2001-02 and not ₹ 2,49,788 crore that has been considered for computing past dues.

The ₹ 1,72,655 Crore demand is more than 3 times the net worth of GAIL!


8% ISP License Fee On GAIL's Gas Revenues Has Been Demanded, Even Though GAIL Did Not Commence ISP Operations!








POWERGRID TOO

Besides GAIL, DoT is also seeking ₹ 1,25,000 crore from government owned Power Grid Corporation Of India Limited, which had both a national long-distance as well as an internet licence.

PGCIL has already paid ₹ 59 crore as license fee, based on 8% of its ISP related activities. Telecom revenues account for only 2% of the company's revenues. "We will fight it in court," said a company official.


8% ISP License Fee Must Be Paid On Non Internet Business Also!



8% FEE ON ALL ACTIVITIES

ISP & IP licenses holders are required to pay a license fee of 8% AGR (Adjusted Gross Revenue) on the total revenues of the company, not on just its internet revenues.


This Is A Key Reason Why Cable Modems Cannot Be Used In India



CALCULATION OF 8% AGR

AGR includes all types of revenue from Internet services that a licence-holder gets.

All ISP license holders must pay 8% of their AGR (for ISP licenses issued post 2013) as the ISP license fee. The Adjusted Gross Revenue (AGR) is calculated by deducting pass-through charges that go to another company (e.g. cost of ISP bandwidth) & taxes that go to the government.


Hathway & Other MSOs Must Pay 8% of Their CATV Revenues Also, For Their ISP License, For The Years They Did Not Separate Their CATV & ISP Operations.



IMPLICATIONS FOR MSOS

To illustrate the matter, let us assume that a Cable TV network has revenues of ₹ 20 lakhs per month i.e. ₹ 2.4 Crore & Internet services had a revenue of ₹ 40 lakhs per year. The Internet license fee payable will be 8% of ₹ 2.8 Cr i.e. ₹ 22 lakhs or more than 50% of the Internet revenue!

This is a key reason why Cable TV networks had to stop deploying Cable Modems on their cable TV networks, else they would have to pay 8% AGR on their Cable TV revenues also!

Infact, Cable TV MSOs had to build separate networks and establish separate companies to retail broadband.

Several representations had been made to the government to change the ISP license terms so that 8% AGR is computed only on the Internet business revenue. Several promises were made but nothing was done.

Today, MSOs like Hathway and others are required to pay their AGR based licenses fee, even on their Cable TV revenues, for the years before they established separate companies & separate networks to deliver Cable TV and broadband services. n