NEW DELHI/MUMBAI :
Vodafone Idea Ltd said on Thursday that it will be forced to cease operations if the company has to submit bank guarantees for outstanding government dues as directed by the Supreme Court.

“Vodafone’s position is ‘precarious’ and is not in a position to give any more guarantees,” senior advocate Mukul Rohatgi, representing the company, told the court. “The ship is barely afloat. The only way to pay AGR (adjusted gross revenue) dues is to stagger payments over 20 years,” he said, reiterating that loss-making Vodafone Idea will have to shut operations, impacting 11,000 employees, if asked to pay its dues up front.

The move brings to fore the long-drawn issue of how some telecom firms, facing high debt and mounting losses, will be able to gather the large sums to pay government dues. Defaults by telecom operators may also spell trouble for banks, which have a large exposure to the industry.

Bharti Airtel Ltd, India’s second-largest telecom operator by users, sought 20 years to pay its dues, saying that it is not a “fly by night” operator.

Hearing the case on dues related to AGR of the telecom firms, the top court on Thursday directed them to furnish details of revenues earned and taxes paid in the past 10 years. This was after the telcos submitted before the apex court that furnishing bank guarantees under their current strained financial health will hamper planned investments.

The telcos said the department of telecommunications (DoT) can always encash more than 10,000 crore worth of bank guarantees if the telcos default on their payments.

Vodafone Idea has so far paid around 7,000 crore of its total dues of 21,533 crore, which it has estimated on its own. The government, however, pegs the dues at 50,000 crore.

Goldman Sachs has estimated Vodafone Idea’s net debt at $14 billion as of December 2019.

Asked about personal guarantees by directors, Rohatgi said, “I wonder how independent directors can be asked to give guarantee for dues as high as 55,000 crore”. He sought two weeks to reply to the court.

Senior advocate Abhishek Manu Singhvi, representing Bharti Airtel, said the operator has already paid 18,000 crore of its self-estimate of 13,000 crore, against DoT’s estimate of 35,000 crore.

Similarly, Tata Teleservices has paid 2,197 crore in AGR dues, followed by an additional 2,000 crore to cover reconciliation differences, against DoT’s estimate of 14,000 crore.

Ending a 14-year court battle between DoT and telcos, the court in October upheld the government’s definition of AGR and asked operators to pay levies based on that definition, along with interest and penalty.The dues of telcos for the 13-year period ended March 2017 is at 1.69 trillion.

Solicitor general Tushar Mehta said telcos have filed their affidavit with respect to the timelines and guarantees for paying dues to the government. He sought time for DoT to file its response. DoT earlier this year filed a plea seeking a 20-year payment period for the dues.

The bench, comprising justices Arun Mishra, S. Abdul Nazeer and M.R. Shah, said, “Telecom is the only sector making money…Government needs this money during the pandemic.”

The case has been adjourned for the third week of July.

The central government told the court that it is withdrawing the demand for 96% of around 4 trillion AGR dues raised against PSUs.

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