The audits will resume after a three-year gap due to a 23 percent decline in the licence fees and SUC collected by the government, a downtrend expected to continue this year
The Department of Telecommunications (DoT) will conduct ‘special audits’ of telecom companies beginning FY12 to check for under-reporting of revenue to see if it could explain the sharp decline in licence fee and spectrum usage charges (SUC), The Economic Times reported.
Telecom companies pay licence fees and SUC to the government on the basis of their revenue.
The audits will resume after a three-year gap due to a 23 percent decline in the licence fees and SUC collected by the government. The downtrend is expected to continue this year. The reason for this could be a brutal price war, which led to many exits and mergers in the telecom industry over the past three years.
Sources told the paper that Airtel has already received an audit notice. DoT is combing through the records of these telecom companies under the clauses 22.5 and 22.6 of the Unified Access Service Licence.
The telecom industry has been under stress and players are wary that another audit will lead to all-new new dues. Many telcos have shut their shop, some have merged and others have suffered heavy losses. The only private companies in the market are Bharti Airtel, the recently merged Vodafone Idea and Reliance Jio Infocomm.
The audits were previously conducted in 2009 for years FY06 to FY08 and in 2015/2016 for FY09 to FY11. After the first audit, demand notices worth Rs 1,846 crore were issued to five telcos. The second audit showed under-reporting to the tune of Rs 46,045 crore in revenue, which led to a Rs 12,000-crore demand from the government. The companies have challenged both demands in court.
Six telecom companies—Airtel, Vodafone India, Idea Cellular, Aircel, Reliance Communications and Sistema Shyam—were pulled up by the Comptroller and Auditor General (CAG) in 2017 for allegedly understating their revenues by Rs 61,064 crore from FY11 to FY15, due to which the government suffered losses worth Rs 12,229 crore.
These audits happen when DoT is not confident about financial reporting by companies, according to Rajan Mathews, Director General of Cellular Operators Association of India (COAI). “The concern is mainly on the adjusted gross revenue calculations that are defined differently. They have every right to audit, but if operators again decide to challenge the new findings, it will lead to more legal cases,” he added.Disclaimer: “Reliance Industries Ltd. is the sole beneficiary of Independent Media Trust which controls Network18 Media & Investments Ltd.”