The telecom industry is approaching the government to exclude revenue from payment banks, rental income, and e-commerce operations from adjusted gross revenue (AGR) calculations.

The government requires telecom operators to pay a proportion of their AGR as an annual license fee, making the definition of AGR critical to their profitability.

To arrive at a definition, the Cellular Operators Association of India (COAI), which represents telecom service providers, is consulting with all operators, including Reliance Jio Infocomm Ltd., Bharti Airtel Ltd., and Vodafone Idea Ltd.

Although a macro definition exists, a micro definition of AGR is currently being worked towards identifying non-telecom revenue in greater detail. It may call for a creation of clear separation of the components in the elements making up the telecom revenue.

A negative as well as a positive list is being prepared to specify components such as revenue from payments bank, rental income and e-commerce platforms which are expected to be excluded from AGR to reduce disputes as much as possible. This could lead to the reduction in tariffs and liabilities and possibly open up new business opportunities for the telecom industry.

Starting October 1, the changes will be incorporated into the notification amending the AGR definition. This move is expected to prevent the government from issuing a separate amendment to the unified license agreement that binds telecom operators to a revenue sharing agreement with the government.

Capital gains from foreign exchange fluctuations, insurance claims, sales of immovable assets and securities, receipts from the Universal Service Obligation Fund, bad debt recovery, excess provisions written back, and information and broadcasting licenses were all listed in the announcement. To arrive at the APGR, revenue from scheme activities and revenue from operations other than telecom activities will now be removed from gross revenue.

A decade-long legal struggle between the government and telecom firms arose from disagreements over the definition of AGR.

The AGR is used to determine the licensing cost and spectrum usage charges (SUC). Telcos would be able to offer lower rates and earn more money if their AGR was lower. On future purchases of airwaves from auctions, however, the SUC has been removed. The idea of applicable gross revenue (APGR) was introduced in the October notification that modified the definition of AGR. APGR eliminates all non-telecom revenue from telecom enterprises' gross revenue.

The Supreme Court ruled in the government's favor in 2019, allowing all non-telecom income to be included in the AGR calculation.

Whereas telecoms are obliged by the highest court's ruling, which requires them to pay the amount in excess of the outstanding amount related to the outstanding AGR. 1.9 trillion over the next several years, the updated definition might be used as part of an industry rescue package.