NEW DELHI: The national auditor pulled up six telcos including the top three — Bharti Airtel, Vodafone India and Idea Cellular — for allegedly understating their revenue by Rs61,064.5 crore over five financial years, leading to the government losing out on Rs12,229.24 crore as payment from spectrum charges and interest, which are computed by using revenue as the base.

The Comptroller and Auditor General (CAG), in its latest report presented in Parliament on Friday, said there was under-reporting of adjusted gross revenue (AGR) by the top three as well as Aircel, Reliance Communications (RCom) and Sistema Shyam Teleservices Ltd.
(SSTL). This led to revenue share payment to the government falling short by Rs7,697.6 crore, of which Rs4,859.27 crore was from the licence fee and Rs2,838.35 crore coming from the spectrum usage charge (SUC).
Interest on the “short-paid” revenue share came to Rs4,531.62 crore for the period up to March 2016.

“We observed nonconformities with conditions of licence agreement in the accounts prepared by all six operators covered in audit due to which their AGR computed for sharing revenue with the government was understated,” the national auditor said in its report, which was seen by ET.
CAG audited five carriers—the top three, Aircel, RCom and its unit Reliance Telecom combined—from FY 2010-11 till FY 2014-15. It also audited SSTL, the Indo-Russian joint venture that’s merging into RCom, from FY 2006-07 till FY 2014-15.

According to the report, Bharti Airtel understated its revenue by more than Rs 20,000 crore during the audit period, while Vodafone India’s revenue was understated by over Rs17,000 crore. The amount for Idea was over Rs9,000 crore and RCom, which included accounts of Reliance Telecom, understated revenue by Rs10,000 crore. The auditor’s report added further that Aircel’s revenue was lower by over Rs4,000 crore and that of SSTL was lower by around Rs800 crore.

Bharti Airtel, Vodafone and SSTL said they couldn’t comment as the definition of AGR was still not settled and the matter was with the telecom tribunal. Aircel, RCom and Idea didn’t respond to emailed queries.
“Bharti Airtel adheres to highest standards of compliance and corporate governance,” said a company statement.

“While we are not privy to the mentioned report, the points being referred to by you are old industry matters that are under litigation in various judicial forums, including the Supreme Court, TDSAT (Telecom Disputes Settlement and Appellate Tribunal) and high courts.” Vodafone India said, “Several items related to AGR of various operators are presently sub judice. Hence, it will not be appropriate to comment.”

AGR DEFINITION
The definition of AGR has been extensively litigated. The Supreme Court left the interpretation of line items to TDSAT. For example, TDSAT can interpret and define what constitutes roaming revenue, but it cannot be deemed non-licence revenue.

While the telecom department has always argued that all revenue earned by telcos including non-telecom revenue should be considered for calculating AGR, carriers have said the purview should be limited to telecom services only.

The auditor also said that even though computation of gross revenue was not in compliance with the licence agreement, the statutory auditors had always certified— through affidavits—that the accounts were prepared in accordance with guidelines. CAG said that the statements submitted by telcos departed from stipulations in the licence agreement while computing gross revenue.

“DoT (Department of Telecommunications) on its part did not take any proactive steps to ensure that licensees disclosed their revenue as stipulated in the licence agreement,” CAG said.

SEGMENTS UNDER SCRUTINY
The auditor said telcos under-reported revenue in over a dozen segments, including commissions, discounts paid to distributors, promotional schemes like free talk time, netting off revenue from infrastructure sharing, discounts to postpaid users and excluding revenue from sale or lease of bandwidth from AGR for computation of SUC.

CAG said that telcos under-reported revenue by not including revenue from forex gains, interest income, profit from sale of investment and fixed assets and written-off bad debt which they claimed as deductions.

“Audit noticed that Airtel and Reliance did not include revenue from lease of sale of bandwidth for computation of SUC though it was included for Licence Fee,” it said in one instance, and while highlighting another anomaly it said, “Netting off or reducing commission or discounts paid to distributors dealers or agents, from revenue for purpose of reporting AGR was not in line with conditions of license agreement.”

CAG also said more than 50% of IFCI’s loans audited by it were not as per the general lending policy, asking the state-run lender to strengthen its credit appraisal mechanism. Citing the case of Bhushan Steel, CAG said the amount was sanctioned in violation of the extant general lending policy. “In view of substantial increase in its debt burden as well as huge losses during 2014-15 and 2015-16, the chances of recovery of Rs402.54 crore are doubtful,” the report said.