Report No. 4 of 2016 - CAG

Report of theComptroller and Auditor General

of India

Sharing of Revenue by Private Telecom Service Providers

during the years 2006-07 to 2009-10

Union Government(Communications and IT Sector)

No. 4 of 2016

Report No. 4 of 2016

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CONTENTS

Description Paragraph Page

Preface xi

Executive Summary xiii

Chapter – I : Introduction

Genesis of revenue sharing regime in the Indian Telecom Sector 1.1 1

New Telecom Policy-1999 1.2 1

Unified Access Service Licence (UASL) and Unified Licences (UL) 1.3 2

Provisions in the Licence agreements on definition of Gross Revenue (GR)/Adjusted Gross Revenue (AGR)

1.4 2

Stipulations in UASL Agreements on reporting revenue and payment of LF

1.5 4

Rates of licence fee 1.6 6

Allocation of Spectrum and Spectrum Usage Charges 1.7 6

Revenue share collected by DoT 1.8 7

Arrangements in DoT for collection and accounting of licence fee and SUC

1.9 8

Chapter – II : Audit Approach

Scope of Audit 2.1 9

Audit methodology 2.2 10

Audit criteria 2.3 11

Acknowledgement 2.4 11

Chapter-III: Revenue shared by M/s Bharti Airtel Limited and M/s Bharti HexacomLimited

Brief Profile of M/s Bharti Airtel Limited and M/s Bharti Hexacom Limited

3.1 13

Licenses granted to M/s Bharti Airtel Limited and M/s Bharti Hexacom Limited

3.1.1 13

Spectrum allotted to M/s BAL/BHL 3.1.2 14

Subscriber base of BAL/BHL 3.1.3 15

Gross Revenue, Deduction, Adjusted Gross Revenue reported and revenue share paid by BAL/BHL

3.1.4 15

Under reporting of revenue by BAL/BHL 3.2 15

Under reporting of revenue due to netting off of revenue pertaining to Commission/offers/discounts to dealers/subscribers for prepaid services

3.2.1 16

Under reporting of revenue due to netting off of discounts/waivers granted to post-paid subscribers

3.2.2 20


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Under reporting of Roaming Revenue due to set off of Inter Operator traffic (IOT) Discounts paid/credited to other Operators

3.2.3 22

Under reporting of revenue from Infrastructure sharing with other telecom operators for GR/AGR by BAL/BHL

3.2.4 23

Under reporting of revenue from Forex gain for GR/AGR by BAL/ BHL

3.2.5 25

Under reporting of revenue in the Statements of Revenue and LF (AGR Statements) though reported in the books of accounts

3.3 27

Non consideration of Interest Income for GR/AGR 3.3.1 27

BAL’s interest free loan to subsidiary resulted in avoidance of payment of LF/SUC

3.3.2 29

Non consideration of Profit on sale of Investment for GR/AGR for payment of revenue Share by BAL

3.3.3 29

Different standards for payment of dividends 3.3.4 30

Non Consideration of revenue accounted under Global Operations (BILGO) for LF

3.3.5 30

Non Consideration of revenue of erstwhile SBEL 3.3.6 32

Non consideration of revenue accounted under Infrastructure Provider (IP)-1 service for computation of revenue share by BAL

3.3.7 33

Non consideration of miscellaneous income for AGR for computation of LF/SUC by BAL

3.3.8 34

Non consideration of Income from profit on sale of fixed assets for AGR for payment of revenue Share by M/s BAL

3.3.9 35

Short/ non-payment of revenue share due to other issues 3.4 36

Irregular Deduction of Bad debts written off from GR to arrive at AGR by BAL/BHL

3.4.1 36

PSTN Deduction claimed against Leased Line Charges in 2006-07 3.4.2 37

Non consideration of revenue from sale/lease of bandwidth charges for AGR for payment of SUC

3.4.3 37

Transfers of telecom infrastructure assets by BAL to its subsidiary (BIL) at NIL value

3.5 38

Interest on short/non-payment of LF and SUC 3.6 39

DoT’s response to the audit observations 3.7 39

Chapter – IV : Revenue shared by Vodafone India Limited

Brief Profile of M/s Vodafone India Ltd 4.1 43

Licenses held by Vodafone Group 4.1.1 43

Radio frequency spectrum held by M/s Vodafone 4.1.2 43

Subscriber base growth - 2006-07 to 2009-10 4.1.3 44


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Financial data on GR/Deductions/AGR and revenue share paid by Vodafone India Limited

4.1.4 44

Audit verification of accounting and reporting of GR by Vodafone 4.2 44

Commission/discounts to dealers netted of from pre-paid and post-paid revenue

4.2.1 45

Airtime Discounts to customers 4.2.2 46

Roaming revenue understated due to netting of Inter Operator traffic (IOT) Discounts paid/credited to other Operators

4.2.3 46

Understatement of GR due to Service Tax being set off from revenue on schemes like ‘Full Pe Full’, ‘Full Talk Time’ etc.

4.2.4 47

Understatement of GR due to non-inclusion of revenue from Infrastructure sharing in full

4.2.5 48

Under reporting of revenue from FOREX gains for GR/AGR 4.2.6 49

Debits from revenue as Waiver- Goodwill waiver, rebates etc. 4.2.7 51

Other Income not included in Gross Revenue 4.3 51

Interest Income 4.3.1 52

Income received on profit of Sale of fixed assets not included in GR 4.3.2 52

Bad debts deducted from GR 4.4 53

Transfer of assets to subsidiary Company 4.5 54

Interest on revenue share short paid 4.6 54


Chapter – V : Revenue shared by M/s Reliance Communications Limited and M/s Reliance Telecom Limited

Brief Profile of M/s Reliance Communications Limited (RCL) and Reliance Telecom Limited (RTL)

5.1 57

Licences granted to RCL and RTL 5.1.1 57

Spectrum allotted to RCL/RTL 5.1.2 57

Subscriber base of RCL/RTL 5.1.3 58

Gross Revenue (GR), Deduction, Adjusted Gross Revenue (AGR) reported and revenue share paid by RCL/RTL

5.1.4 58

Arrangement between RCL and its subsidiary RCIL for Value added Services, Selling/ Marketing and Billing

5.1.5 59

Under reporting of Gross Revenue in the books of accounts of RCL/RTL

5.2 60

Booking of Prepaid revenue net of Free Air Time/Commission by RCL/RTL

5.2.1 60

Booking of revenue by RCL net of commission given to its subsidiary (RCIL) and booking of revenue in the subsidiary (RCIL) books of accounts instead of RCL’s accounts

5.2.2 61


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Netting of commission from the revenue by RCL for computation of GR/AGR

5.2.3 68

Netting of revenue earned from channel partners/Franchisees from expenses for computation of GR/AGR by RCL

5.2.4 68

Netting of revenue by discount given to distributors/dealers/franchisees on sale on prepaid products for computation of GR/AGR by RTL

5.2.5 68

Non - inclusion of value of Free of Charge (FOC) recharge vouchers given to distributors for computation of GR/AGR by RTL

5.2.6 70


5.3 71

Non consideration of forex gain in GR/AGR by RCL and RTL 5.3.1 71

Non consideration of Interest/Other income for computation of GR/AGR by RCL/RTL

5.3.2 72

Interest free loan to subsidiary by RCL resulted in avoidance of payment of LF/SUC

5.3.3 74

Netting off of loss on sale of investment and non - inclusion of balance profit on sale of investment for computation of GR/AGR by RTL

5.3.4 74

Different standards for payment of dividends – RCL 5.3.5 75

Revenue considered for Licence Fee but not considered for Spectrum Usage Charges (SUC)

5.4 75

Non consideration of revenue from sale/lease of bandwidth for computation of SUC

5.4.1 75

Non consideration of income from investment for computation of SUC

5.4.2 76

Transfer of infrastructure assets by RCL/RTL to its subsidiary Reliance Infratel Ltd (RITL)

5.5 77

Transfer of Optic Fibre Undertaking (OFU) by RCL to RITL 5.5.1 77

Transfer of passive infrastructure by RCL/RTL to its subsidiary (RITL) at “nil’ value

5.5.2 78

Non-consideration of Refund of Service Tax for GR during the year 2009-10

5.6 79

Interest on short/non - payment of LF and SUC 5.7 80

Reply from DoT on issues raised above 5.8 80

Chapter – VI : Revenue shared by Idea Cellular Limited (ICL) and Aditya Birla Telecom Limited (ABTL)

Brief profile of the company 6.1 83

Licences granted to Idea Cellular Ltd (ICL) & Aditya Birla Telecom Ltd. (ABTL)

6.1.1 83

Spectrum allotted to ICL / ABTL 6.1.2 84


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Subscriber base of ICL/ ABTL 6.1.3 84

Gross Revenue, Deduction and Adjusted Gross Revenue reported and revenue share paid by ICL/ ABTL

6.1.4 84

Under reporting of revenue by ICL/ ABTL 6.2 84

Under reporting of revenue due to netting off of revenue pertaining to Commission/offers/discounts to dealers/subscribers for prepaid services

6.2.1 85

Under reporting of revenue due to netting off of discounts granted to post-paid subscribers

6.2.2 88

Under reporting of Roaming Revenue due to set off of Inter Operator traffic discounts paid/credited to other Operators

6.2.3 89

Under reporting of revenue from Infrastructure sharing revenue from other telecom operators for GR/AGR by ICL/ABTL

6.2.4 90

Non consideration of revenue from Switch sharing between Idea (NLD) and Idea (LSAs) for GR/AGR

6.2.5 92

Non consideration of revenue by ICL from assets given on Indefeasible Right to Use (IRU) for GR/AGR

6.2.6 93

Under reporting of revenue from Forex gain (revenue) for GR/AGR by ICL/ ABTL

6.2.7 94


6.3 95

Non consideration of Interest Income for GR/AGR by ICL/ ABTL 6.3.1 95

Non consideration of profit on sale of Investment for GR/AGR for payment of revenue Share by ICL/ ABTL

6.3.2 96

Non consideration of miscellaneous income for AGR for computation of LF/SUC by M/s ICL

6.3.3 98

Non consideration of Income from profit on sale of fixed assets for AGR for payment of revenue Share by ICL/ABTL

6.3.4 99


Irregular Deduction of Bad debts written off from GR to arrive at AGR by ICL

6.4.1 100

Other issues 6.5 101

Transfer of infrastructure assets by Idea Cellular Ltd to its subsidiary at NIL consideration for ultimate transfer to a Joint Venture

6.5.1 101



Chapter–VII: Revenue shared by Tata Teleservices Limited and Tata Teleservices (Maharashtra) Limited

Brief profile of the company 7.1 103

Licenses granted to TTSL and TTML 7.1.1 103


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Spectrum allotted to TTSL and TTML 7.1.2 103

Subscriber base of TTSL and TTML 7.1.3 104

Gross Revenue, Deduction, Adjusted Gross Revenue reported and revenue share paid by TTSL and TTML

7.1.4 104

Under reporting of revenue by TTSL and TTML 7.2 104

Commission paid to Distributors/Franchisees/Agents/Dealers etc. debited from the Revenue in respect of TTSL

7.2.1 105

Revenue understated due to netting of discounts allowed to subscribers etc. by TTSL and TTML

7.2.2 105

Netting of adjustments offered to customers from the Gross Revenue in respect of TTSL and TTML

7.2.3 106

Netting of the revenue from Startup Kit, recharge vouchers etc. by TTSL and TTML

7.2.4 107

Non consideration of income received from infrastructure sharing in GR by TTSL

7.2.5 108

Non- inclusion of realized forex gain for computation of GR by TTSL and TTML

7.2.6 109


7.3 110

Non consideration of interest income in GR/AGR by TTSL 7.3.1 110

Profit on sale of Investment not considered in GR/AGR 7.3.2 111

Non consideration of profit on sale of assets for GR/AGR 7.3.3 111


Bad debts written off adjusted from the revenue by TTSL resulting in understatement of AGR

7.4.1 112

Lease line and Port Charges included in deductions claimed by TTSL and TTML resulting in understatement of AGR

7.4.2 112

Non consideration of revenue from sharing/leasing of infrastructure/bandwidth links for payment of SUC by TTSL

7.4.3 113

Non-consideration of Rental Income 7.4.4 114



Chapter–VIII: Revenue shared by Aircel Group (Dishnet Wireless Ltd, Aircel Ltd and Aircel Cellular Ltd)

Brief Profile of Aircel Group 8.1 115

Licenses granted to Aircel Group 8.1.1 115

Spectrum allotted to Aircel group of companies 8.1.2 115

Subscriber base of AL/ACL/DWL 8.1.3 116

Gross Revenue (GR), Adjusted Gross Revenue (AGR) and Revenue share paid by the Aircel Group

8.1.4 116


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Under reporting of revenue by Aircel Group 8.2 116

Under reporting of Prepaid/Post-paid revenue due to netting off of revenue relating to various offers given to subscribers

8.2.1 116

Short accounting of revenue due to upfront debit in the revenue heads

8.2.2 120

Under reporting of prepaid revenue due to set off of revenue pertaining to Commission/Discount allowed to the distributors

8.2.3 120

Under reporting of revenue due to set off on account of “Impact of Market stock”

8.2.4 121

Non consideration of revenue from Infrastructure sharing from other telecom operators for GR/AGR

8.2.5 122

Short/Non-consideration of revenue from Forex gain in GR/AGR 8.2.6 123

Non/Short consideration of Interest Income for GR/AGR 8.2.7 124

Non consideration of Income from Investment for GR/AGR for payment of revenue Share

8.2.8 125

Non consideration of Miscellaneous income for GR/AGR 8.2.9 126

Non consideration of Income from profit on sale of fixed assets for payment of revenue share

8.2.10 127

Non Inclusion of Profit on revaluation of assets in GR 8.2.11 129

Short/non-payment of revenue share due irregular/excess deductions claimed in the AGR Statements

8.3 129

Irregular deduction of bad debts written off from GR to arrive at AGR

8.3.1 129

Excess Deductions claimed in ISP (IT) AGR 8.3.2 130



Chapter–IX: Verification of deduction claims in the Offices of the Controllers of Communications Accounts

Introduction 9.1 133

Audit Observations 9.2 133

Deductions allowed in absence of required proof 9.2.1 133

Ineligible deductions allowed from GR 9.2.2 134

Inadmissible deduction on account of Service Tax 9.2.3 135

Allowing deduction twice on same claim 9.2.4 136

Excess deduction allowed by Pr. CCA Andhra Pradesh while restricting deduction claims not supported by proof documents for TDS

9.2.5 137

Allowance of deduction on account of TDS despite non-submission of TDS certificate

9.2.6 137

Claims disallowed despite submission of proof documents 9.2.7 138


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CsCA permitted irregular deductions on inter-divisional adjustments of ` 432.64 crore

9.2.8 139

Miscellaneous Observations 9.2.9 140

DoT’s response 9.3 143

Chapter–X: Assessment of Licence Fee and Spectrum Usage Charges

Introduction 10.1 145

Audit Findings 10.2 145

Under assessment of GR due to omission of revenues disclosed in reconciliation statements

10.2.1 145

Lack of coordination between LF and WPF Wing 10.2.2 146

Issue of demand notes based on Special Audit and provisional assessment without proper due diligence

10.2.3 147

Delay in submission of documents by service providers and absence of proper policy on time schedule leading to delay in verification of deductions by CsCA

10.2.4 148

Non assessment of LF of NLD, ILD and ISP for the year 2006-07 to 2009-10

10.2.5 149

Non recovery of LF and SUC on international roaming claimed by the Telecom Service Providers

10.2.6 149

Lack of appellate mechanism resulting in high number of litigations 10.2.7 151

ANNEXURES

Annexure No. Chapter No. Page No.

1.01 Chapter I 157

3.01 to 3.24 Chapter III 158

4.01 to 4.10 Chapter IV 184

5.01 to 5.21 Chapter V 194

6.01 to 6.17 Chapter VI 220

7.01 to 7.21 Chapter VII 236

8.01 to 8.20 Chapter VIII 258

9.01 to 9.02 Chapter IX 278

10.01 to 10.03 Chapter X 280

Glossary 285


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PREFACE

This Report has been prepared for submission to the President under Article 151 of the Constitution of India.

The audit report aims to bring out the deficiencies noticed in the sharing of revenue by the Private Service Providers (PSPs) in telecom sector with the Government. Article 266 of the Constitution of India and Sections 13, 16 and 18 of Comptroller and Auditor General’s (Duties, Powers and Conditions of Service) Act, 1971 make it obligatory on the part of Comptroller and Auditor General of India to satisfy himself that the Government of India has received its complete and correct share of revenue. Accordingly, the books of accounts and other related records maintained by the Department of Telecommunication and PSPs were examined by the audit with the sole objective of ensuring that the revenue earned by the PSPs is shared with the Government in the spirit intended by agreements signed by the PSPs with the Government.

This audit has been conducted in conformity with the Auditing Standards issued by the Comptroller and Auditor General of India.


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EXECUTIVE SUMMARY

1. Revenue share model in Indian Telecom Sector

With a view to ensure availability of state of the art technology and services in the

communication market, the Government in 1999 introduced the New Telecom Policy

(NTP 99). NTP - 99 introduced the revenue sharing regime in which telecom licensees were

required to share a percentage of their Adjusted Gross Revenue (AGR) with the Government

as License Fee (LF). Mobile operators were also required to pay Spectrum Usage Charges

(SUC) for the use of the radio frequency spectrum allotted to them. To revive the slowing

down in the telecom sector and to help the financially constrained telecom service providers,

a bailout package was offered to them. All the existing service providers were permitted

to migrate to the new revenue share regime from the fixed license fee regime of National

Telecom Policy 1994 (NTP-94). All of the licensees accepted the bailout package and

moved over to the new regime. New licenses conditions were framed in 2001 defining the

revenue of the licensee companies and other terms and conditions for computation of the

AGR and payment of LF. These were accepted by all the service providers.

2. Rationale for audit by CAG of India on the correctness of revenue share paid

by private telecom operators

The revenue shared by Private Service Providers (PSPs) with Government of India (GOI) as

LF and SUC forms part of the Consolidated Fund of India. Article 266 of the Constitution

of India and Sections 13, 16 & 18 of Comptroller and Auditor General’s (Duties, Powers

and Conditions of Service) Act, 1971 make it obligatory on the part of CAG of India to

satisfy himself that the Government of India has received its complete and correct share.

Further, the ‘Telecom Regulatory Authority of India, Service Providers (Maintenance of

Books of Accounts and other Documents) Rules, 2002’, promulgated by the Government in

November 2002 contains enabling provisions for verification of all the accounting records

and documents maintained by the service providers that has a bearing on the Gross Revenue

(GR) of the service providers by the CAG of India. As the correctness of revenue share

is directly linked to the correctness of the GR of the service provider, it was imperative

to verify the accounting records of all the service providers to ensure that revenue due to

the Government was reported correctly. Consequently, it was decided to take up the audit

verification of the revenue shared by six major telecom service providers, in the first phase,

covering the accounts of four years from 2006-07 to 2009-10 and to conduct similar audit

of all the service providers every year in future.

3. Structure of the Report

This report consists of ten chapters and annexures. Chapter-I gives an overview of the genesis

of revenue sharing regime in the telecom sector and also presents important conditions


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stipulated by the Government, through the licence agreements with the service providers,

for reporting their revenue and payment of revenue share. It also covers the arrangements

in Department of Telecommunication (DoT) for collection of LF and SUC and their final

assessment. Chapter-II explains the audit scope, methodology and reasons for selecting

the operators covered in the first phase of audit. PSP wise audit findings are narrated in

Chapters-III to VIII. Chapter-IX deals with audit findings on process of verification of

deductions at the offices of the Controllers of Communication Accounts (CsCA). Chapter-X

deals with audit observations on assessment of LF and SUC by DoT.

4. Summary of important audit findings

(i) GR/AGR understated by all the PSPs by the amount of commission/discount

paid to their distributors/dealers/agents

PSPs employ distributors/dealers/agents/franchisees to sell their prepaid products and for

customer acquisition and pay commission/discounts etc. to them. All the six PSPs have

reduced the GR/AGR reported to DoT by the amount of commission/discounts etc. paid

to distributors/dealers/agents/franchisees. However, different PSPs have accounted these

transactions in different ways. While Airtel and Tata Teleservices Limited (TTSL) have

booked the amount of commission/discounts etc. as a debit entry to revenue, Reliance and

Aircel have booked the revenue per se after netting of discounts/commission. Different

LSAs of Vodafone and Idea have accounted it in either of the ways mentioned above

whereas Tata Teleservices Maharashtra Limited (TTML) has booked it as expenses. Since

commission/discounts etc. paid to distributors/dealers/agents/franchisees is in the nature of

business expense (marketing expense), netting off or reducing the revenue for the purpose

of reporting GR/AGR for computation of revenue share to GOI is against the license

agreement. Amount of discount/commission etc. netted off from revenue worked out by

audit comes out to be ` 5672.66 crore resulting in short payment of LF and SUC by

` 487.09 crore and ` 203.38 crore respectively.

(Para 3.2.1A, 4.2.1, 5.2.2 A, 5.2.3, 5.2.5, 5.2.6, 6.2.1A, 7.2.1, 7.2.4, 8.2.3)

(ii) GR/AGR understated by all the PSPs by the amount of promotional schemes

like Free Talk Time/Free Air Time

Tariff has been defined in the Unified Access Services License (UASL) agreement. PSPs

submit quarterly tariff plans to Telecom Regulatory Authority of India (TRAI). Audit

noticed that PSPs provide various offers like Free Talk Time/Free Air Time (FTT/FAT) to

their prepaid subscribers on different occasions. These are basically promotional schemes

by various names, over and above the tariff plans submitted to TRAI. UASL agreements

provide that service revenue (amount billable) shall be shown gross and details of discount/

rebate indicated separately. It was noticed by audit that promotional offers have not been


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recognised as revenue by all the six PSPs and they have accounted it differently in their

books of accounts. In the books of accounts of Airtel, Idea, Tata and Aircel, amount of

promotional FAT/FTT given to subscribers could be identified by audit as it had been

accounted as debit entries to revenue heads. No such information could be ascertained from

the books of accounts of Reliance as it has eliminated the value of promotional FAT/FTT

at the technical system (mediation level) itself without reflecting it in the financial systems

and the books of accounts. In respect of Vodafone, it could not be segregated as it has

booked such promotional offers, on both the prepaid & post-paid services, in one account.

Similarly, in case of Aircel, waivers to both prepaid and postpaid customers were accounted

together, the impact of such waivers on LF and SUC was calculated in entirety and included

here. Since such promotional offers are in the nature of business expenses, in accordance

with UASL agreements, they should be recognised as revenue for the purpose of GR/AGR

for computation of revenue share to GOI. Audit worked out understatement of GR/AGR

on this account by ` 8960.81 crore resulting in short payment of LF and SUC by ` 784.28

crore and ` 271.29 crore respectively.

(Para 3.2.1 B, 4.2.2, 4.2.4, 5.2.1, 6.2.1B, 7.2.2, 8.2.1)

(iii) Understatement of GR/AGR by netting-off of discounts/waivers given to

postpaid subscriber

Audit noticed that discounts/waivers given to post-paid subscribers by Airtel, Vodafone,

Idea, Tata and Aircel was deducted from their revenue. Such discounts/waivers, over and

above the tariff plan submitted to TRAI, granted to post paid subscribers are in nature of

business expense and their deduction from revenue for reporting GR/AGR for computation

of revenue share is not in accordance with the license agreements. Audit worked out

understatement of GR/AGR on this account as ` 1622.18 crore resulting in short payment

of LF and SUC by ` 148.94 crore and ` 66.66 crore respectively.

(Para 3.2.2, 4.2.7, 6.2.2, 7.2.3, 8.2.1A)

(iv) Understatement of GR/AGR by netting of discounts from revenue pertaining to

roaming services.

PSPs have arrangements with other International Operators for roaming services. It has

been noticed that the Inter Operator traffic (IOT) discounts paid/credited to the accounts of

these Operators were debited/deducted from the roaming revenue by Airtel, Vodafone and

Idea. Having roaming arrangement with other national/ international operators is a matter

of mutual agreement between two operators and giving discounts over and above the agreed

charges for roaming is part of overall commercial strategy to enhance business between the

two operators. As such, these discounts are in the nature of expenses and hence, in terms of

license agreements, should not be deduced from revenue. Audit worked out understatement


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of GR/AGR for computation of revenue share on this account as ` 437.02 crore resulting

in short payment of LF and SUC by ` 41.41 crore and ` 18.66 crore respectively.

(Para 3.2.3, 4.2.3, 6.2.3)

(v) Understatement of GR/AGR by netting of revenue from infrastructure sharing

UASL agreements provide that GR shall be inclusive of revenue from infrastructure sharing

without setting off of any related item of expenses. PSPs have arrangements with other

PSPs for sharing of their passive infrastructure. Audit has noticed that amount received

towards infrastructure sharing in the case of Airtel, Vodafone, Idea, Tata and Aircel has

not been taken to revenue in full, instead, part of it has been credited to expenses. This

has resulted in understatement of revenue from infrastructure sharing for computation of

GR/AGR for the purpose of revenue share. Understatement of GR/AGR on this account

was worked out by audit as ` 1175.45 crore resulting in short payment of LF and SUC by

` 101.60 crore and ` 46.36 crore respectively.

(Para 3.2.4, 4.2.5, 6.2.4, 7.2.5, 8.2.5)

(vi) Understatement of GR/AGR due to short/non-inclusion of forex gain by all

PSPs

In terms of definition of GR, forex gain should be included in GR/AGR for computation of

revenue share. Audit noticed that all the six PSPs have included forex gain in GR/AGR for

computation of revenue share in initial years. However, subsequently all the six PSPs either

stopped including forex gain in GR/AGR for computation of revenue share or partially

included forex gain in GR/AGR for computation of revenue share. Audit worked out

amount of non-inclusion of forex gain (realized) in GR/AGR as ` 2095.86 crore resulting

in short payment of LF and SUC by ` 174.48 crore and ` 51.19 crore respectively.

(Para 3.2.5, 4.2.6, 5.3.1, 6.2.7, 7.2.6, 8.2.6)

(vii) Understatement of GR/AGR by all PSPs by non- inclusion of interest income

License agreements expressly provide that interest income should be included in GR/

AGR for computation of revenue share. Audit noticed that the six PSPs have included

interest income in GR/AGR for computation of revenue share in initial years. However,

subsequently all PSPs either stopped including interest income in GR/AGR for computation

of revenue share or partially included interest income in GR/AGR for computation of

revenue share. Audit worked out amount of non-inclusion of interest income in GR/AGR

as ` 6299. 90 crore resulting in short payment of LF and SUC by ` 535.23 crore and

` 204.32 crore respectively.

(Para 3.3.1, 4.3.1, 5.3.2, 6.3.1, 7.3.1, 8.2.7)


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(viii) Understatement of GR/AGR by all PSPs by non-inclusion of profit from sale of

investment

License agreements provide that income from investments should be included in GR/AGR

for computation of revenue share. Audit noticed that Airtel, Reliance, Idea, Tata and Aircel

have not included income earned from investments in GR/AGR for computation of revenue

share. Audit worked out amount of non-inclusion of income from investments in GR/

AGR as ` 3111.45 crore resulting in short payment of LF and SUC by ` 271.70 crore and


(Para 3.3.3, 5.3.4, 6.3.2, 7.3.2, 8.2.8)

(ix) Understatement of GR/AGR by Reliance Communications Limited (RCL)

through an arrangement with its subsidiary

RCL is a Unified Access Service (UAS) Licensee. Reliance Communications Infrastructure

Limited (RCIL) which had got Category “A” ISP license, was a wholly owned subsidiary

of RCL during 2006-07 to 2009-10. RCL and RCIL entered into agreements for providing

Value Added Services (VAS) to RCL’s subscribers and selling/marketing products of RCL

by RCIL. Consequent to the agreements between RCL and RCIL, revenue from VAS was

accounted in the books of RCIL and only a portion of the total revenue was passed on to

RCL. Also the revenue earned towards sale of handsets, SIM cards and installation charges

from subscribers which should have been accounted in RCL’s books of accounts was

booked in RCIL accounts. Thus revenue that should be the revenue of RCL as per UASL

agreement had been accounted in the books of RCIL. Consequently, RCL did not pay the

correct amount of the revenue share to the Government. Total understatement of GR/AGR

by RCL owing to its arrangement with its subsidiary (RCIL) comes out to be ` 4424.12

crore. Its impact on short payment of LF and SUC comes out to be ` 405.08 crore and


(Para 5.2.2 B to 5.2.2 F)

(x) Understatement of GR/AGR due to non-inclusion of miscellaneous revenue and

profit on sale of fixed assets

License agreements provide that GR shall be inclusive of any other miscellaneous revenue,

without any set-off for related item of expense, etc. Audit noticed that five PSPs (Airtel,

Vodafone, Idea, Tata and Aircel) have included miscellaneous income/profit on sale of fixed

assets in GR/AGR for computation of revenue share in initial years. However, subsequently

they stopped including miscellaneous income/profit on sale of fixed assets in GR/AGR for

computation of revenue share. Audit worked out amount of non/short inclusion of such

income in GR/AGR as 640.76 crore resulting in short payment of LF and SUC by 54.99

crore and ` 20.44 crore respectively.

(Para 3.3.8, 3.3.9, 4.3.2, 6.3.3, 6.3.4, 7.3.3, 8.2.9, 8.2.10)


- xviii -

(xi) Understatement of AGR by claiming ineligible deductions from GR

UASL agreements provide specific deduction that can be made from GR to arrive at AGR.

Accordingly, deduction of lease line charges and port charges is not permissible. However,

Airtel claimed deduction for lease line charges in 2006-07 and Tata claimed deduction

of lease line charges and port charges in the years 2006-07 to 2009-10. Amount of such

ineligible deductions claimed came out to be 669.76 crore having impact on short payment

of LF and SUC comes out to be ` 58.86 crore and ` 22.43 crore respectively.

(Para 3.4.2, 7.4.2)

(xii) Understatement of AGR by amount of bad debts written off claimed as deduction

Bad debts written off are not an eligible deduction to be claimed from GR to arrive at AGR.

However, PSPs (Airtel, Vodafone, Idea, Tata and Aircel) have claimed deduction of bad

debts written off from GR to arrive at AGR. Amount of such ineligible deduction comes

out to be `1068.80 crore having impact on short payment of LF and SUC of ` 101.10 crore

and ` 40.15 crore respectively.

(Para 3.4.1, 4.4, 6.4.1, 7.4.1, 8.3.1)

(xiii) Understatement of AGR for computation of SUC

In terms of UASL agreements, revenue from sale/lease of bandwidth should be considered

in AGR for computation of SUC. Audit noticed that Bharti, Reliance and Tata, providing

wireline services in addition to wireless services, have not included revenue from sale/lease

of bandwidth for computation of SUC though the same was included for computation of

LF. No such exclusion has been made for PSPs providing wireless services only. Amount

of revenue not included in AGR for computation of SUC comes out to be ` 3092.14 crore

having impact on short payment of SUC of ` 89.41 crore.

(Para 3.4.3, 5.4.1, 7.4.3)

(xiv) Inconsistency in verification of deductions claimed by PSPs by Controllers of

Communications Accounts

UASL agreements specify the deductions to be made from GR to arrive at AGR that

includes Public Switched Telecom Network (PSTN) related call charges (Access Charges)

actually paid to other eligible/entitled telecommunication service providers within India,

Roaming revenues actually passed on to other eligible/entitled telecommunication service

providers and Service Tax on provision of service and Sales Tax actually paid to the


- xix -

Government if GR had included as component of Sales Tax and Service Tax. Verification

of deductions claimed by PSPs was delegated to the CsCA from 2006-07 and on completion

of the verification exercise, the CsCA convey their findings through ‘verification reports’

to the LF Wing of DoT. DoT has issued several sets of instruction to CsCA for verification

of deductions.

Audit noticed that there was no uniformity amongst CsCA while making allowance/

disallowance of deduction claims submitted by the PSPs. During the course of audit of

records maintained by CsCA for verification of deduction claims, discrepancies on various

issues were noticed among CsCA and also within the same CsCA. It was noticed that

different yardsticks were adopted for different operators due to failure in co-ordination

within CsCA/absence of proper monitoring of CsCA by DoT. It was also noticed that in

some cases whole amount of deductions claimed have been disallowed by CsCA without

proper justification. In a multi operator scenario, payment of access charges to other

operators is a reality and disallowance of whole/substantial amount of deductions claimed

by CsCA without proper analysis is not justified. Also, DoT’s instruction on disallowing

roaming deductions paid to international operators is not justified.

(Para 9.3, 10.2.6)

(xv) Discrepancies in assessment of revenue share by DoT and non-existence of

appellate mechanism leading to high number of litigations

LF wing of DoT carries out assessment of license fee based on audited annual accounts,

audited AGR statements, reconciliation statements submitted by the PSPs and verification

reports received from CsCA. Audit noticed that certain items of revenue though disclosed

by Vodafone were overlooked by DoT while assessing the GR of the Company. It was

also noticed that certain items of revenue reported by Airtel were included in Delhi LSA

alone instead of apportioning it among other LSAs while raising demands for 2006-07 and

2007-08.

Assessment of SUC is carried out by Wireless Finance Division of DoT based on

Assessment of GR finalized by LF wing of DoT. However, audit noticed that there is

lack of coordination among these two wings of DoT. Though the communications revenue

collected by DoT contributes significantly to the total Non Tax revenue of GOI, there is no

mechanism for appeal in the DoT which has led to increasing number of litigations by the

PSPs. Consequently, demands raised by DoT remained unpaid for years together.

(Para 10.2.1, 10.2.2, 10.2.3, 10.2.7)


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5. Consolidated statement of non-realisation of revenue noticed by Audit

Short/non-payment of LF as per the licence agreements is given in the following table:-

Audit observationsNon-realisation of LF (` in crore)

Airtel Vodafone Reliance Idea Tata Aircel

Revenue netted off by the amount of commission/discount etc. paid to distributors/ dealers/ agents

89.79 119.59 138.39 59.93 57.08 22.31

Promotional Free Airtime given to subscribers not recognized as revenue for revenue share

90.27 18.45 * 57.62 591.82

26.12Revenue netted off by the amount of waivers/discount given to post paid subscribers

104.54 0.63 - 17.80 25.97

Roaming revenue netted off by discount given to other operators

15.62 23.07 - 2.72 - -

Infrastructure sharing revenue netted off

19.30 46.90 - 27.69 2.26 5.45

Non-inclusion of forex gain 17.46 14.19 107.63 4.45 29.52 1.23

Non/short inclusion of interest income

28.51 250.73 153.44 44.59 51.22 6.74

Non-inclusion of profit on sale of investment

42.45 - 7.30 33.36 187.69 0.90

Revenue booked in subsidiary’s accounts instead of its own books of accounts by RCL

- - 405.08 - - -

Non-inclusion of miscellaneous revenue and profit on sale of assets

8.85 19.45 - 2.24 14.52 9.93

Ineligible deduction on account of lease line/port charges claimed

28.03 - - - 30.83 -

Ineligible deduction on account of bad debts written off claimed

25.55 29.55 - 16.89 26.64 2.47

Other issues 249.09 - 313.56 22.70 1.61 0.65

Total 719.46 522.56 1125.40 289.99 1019.16 75.80

*Not captured in financial system, eliminated at mediation level itself.


- xxi -

Short/non-payment of SUC as per the licence agreements is given in the following table:-

Audit observationsNon-realisation of SUC (` in crore)

Airtel Vodafone Reliance Idea Tata Aircel

Revenue netted off by the amount of commission/discount etc. paid to distributors/dealers/agents

45.40 53.30 47.95 29.74 17.35 9.64

Promotional Free Airtime given to subscribers not recognized as revenue for revenue share

44.29 9.27 * 25.82 180.19

11.72Revenue netted off by the amount of waivers/discount given to post paid subscribers

49.65 0.31 - 8.37 8.33

Roaming revenue netted off by discount given to other operators

7.22 10.23 - 1.21 - -

Infrastructure sharing revenue netted off

9.08 21.02 - 13.35 0.65 2.26

Non-inclusion of forex gain 6.74 6.12 26.93 2.00 9.09 0.31

Non/short inclusion of interest income

11.80 105.30 48.56 20.47 15.53 2.66

Non-inclusion of profit on sale of investment

17.45 - 3.94 14.49 56.95 0.37

Revenue booked in subsidiary’s accounts instead of its own books of accounts by RCL

- - 114.86 - - -

Non-inclusion of miscellaneous revenue and profit on sale of assets

2.57 8.72 - 1.01 4.48 3.66

Ineligible deduction on account of lease line/port charges claimed

12.63 - - - 9.80 -

Ineligible deduction on account of bad debts written off claimed

11.44 13.02 - 7.03 7.61 1.05

Revenue included in AGR for LF but not for SUC

20.70 - 40.66 - 28.05 -

Other issues 108.52 - 98.95 9.78 0.49 0.14

Total 347.49 227.29 381.85 133.27 338.52 31.81

* Not captured in financial system, eliminated at mediation level itself.


- xxii -

Short/non-payment of LF, SUC and interest due thereon as on 31 March 2015 as per the

licence agreements is given in the following table:-

Bharti Airtel Vodafone Reliance Idea Tata Aircel Total

LF 719.46 522.56 1125.40 289.99 1019.16 75.80 3752.37

SUC 347.49 227.29 381.85 133.27 338.52 31.81 1460.23

Total (LF+SUC) 1066.95 749.85 1507.25 423.26 1357.68 107.61 5212.60

Interest 1584.94 915.54 2221.29 541.63 1857.71 155.22 7276.33

Total (LF + SUC+Interest)

2651.89 1665.39 3728.54 964.89 3215.39 262.83 12488.93

Thus, the verification of records of six PSPs by audit indicated total understatement of AGR

of ` 46045.75 crore for the period from 2006-07 to 2009-10. Government of India was

deprived of a total revenue of ` 12488.93 crore on account of short/non-payment of LF

(` 3752.37 crore), SUC (` 1460.23 crore) and interest (` 7276.33 crore) due from the six

PSPs for the years 2006-07 to 2009-10.

6. Summary of recommendations:

(i) It was noticed that verification of deduction claims at CsCA level was not done

uniformly and CsCA have taken different approach in allowing/disallowing deduction

claims submitted by the PSPs. During the course of audit of records maintained

by CsCA for verification of deduction claims, discrepancies on various issues were

noticed among CsCA and also within CsCA it was noticed that different yard stick

was adopted for different operators due to failure in co-ordination within CsCA/

absence of proper monitoring of CsCA by DoT. Hence it is recommended that

proper monitoring of CsCA by DoT is required for uniform/systematic verification

of deduction claims at CsCA level. DOT also needs to strengthen its internal audit

mechanism to ensure that verification of deductions by CsCA are checked regularly.

(ii) Though DoT had revised the rates of LF and SUC from time to time as detailed in

Chapter I, the definition of GR/AGR was not reviewed despite disputes/litigation. It

is recommended that the definition of GR/AGR be revisited considering the drastic

change in the scenario since 1999 when spectrum was allocated administratively

to the present era where spectrum is allocated through bidding process and where

the PSPs have to pay considerable amount as one - time payment at the time of

allocation of spectrum.


- xxiii -

(iii) To minimize the litigations on the demands raised by DoT, it is recommended that

an appellate mechanism should be instituted to address the dispute between DoT

and the PSPs on demands raised by DoT. The absence of an appellate/redress

mechanism within DoT to address disputes with operators also contributes to the

increasing number of litigations.

7. Response of DoT to the audit observations

Audit observations on the sharing of revenue by the six selected PSPs, after the verification

of the accounting records at their premises, along with findings on the process followed at

the various offices of CsCA for verification of proof documents submitted by the PSPs and

the final assessment done by DoT, were communicated to DoT during the period May 2015

to November 2015. Response of the Ministry on the audit observations on Airtel, Vodafone

and Reliance was received in January 2016.

DoT in its reply to audit observations on understatement of GR/AGR due to netting off

related expenditures from prepaid and post paid revenues, netting of roaming revenue

by inter-operator traffic discount paid to other operators, non inclusion of infrastructure

sharing revenue in full, non inclusion of revenue/income from Forex gain, interest, sale of

investment, miscellaneous revenue and profit on sale assets stated that, based on the report

of Special Audit conducted in 2009, demands were raised on the three PSPs in 2012 for

the years 2006-07 and 2007-08 . However, the demands were challenged by the PSPs in

TDSAT/High Courts and action would be taken as and when the final court judgment would

be pronounced. It was also stated that some of the licensees had filed (2012) writ petitions

before various High Courts challenging the Section-4 of Indian Telegraph Act, 1885, as

violative of the Art.14 and 19(1) (g) of the Constitution of India. In respect of observations

not reported in the Special Audit but brought out in this Report, it was stated that responses

of the PSPs on them were under examination.

The response of DoT agreed, in general with the audit findings that the PSPs were deviating

from the conditions of mutually agreed licence agreement, in reporting their GR. The

prolonged litigations at different Courts was given as the reason for the Department’s

inability to collect the correct revenue share as envisaged in the license agreement. It would

be pertinent to mention here that when the Government decided to reduce the licence fee for

all operators by two per cent effective from April 2004, DoT expected that the reduction

would prompt operators to withdraw the legal litigation against the Government. However,

the reduction in the rates of LF did not have the expected impact and the operators continue

to institute litigations against the Government challenging the definition of GR/AGR and

demand notes. Thus the PSPs got the benefit of reduction in rate of LF but the Government

did not get the reciprocal benefit of reduction in litigations and receipt of full revenue due

to it from PSPs.


- xxiv -

The response of DoT on the audit observations pertaining to Idea, Tata and Aircel was

awaited (January 2016).

In conclusion, audit found that even after 16 years of the introduction of the revenue share

regime, the correctness and completeness of revenue flowing into the Consolidated Fund of

India could not be assured by DoT.


- 1 -

CHAPTER – IIntroduction

1.1. Genesis of revenue sharing regime in the Indian Telecom Sector

National Telecom Policy-1994 (NTP-94) introduced competition in the telecom sector as

private telecom service providers were permitted to set up communication networks. In the

first phase of NTP-94, eight licences for Cellular Mobile Telephone Service (CMTS) were

issued in the four Metro cities of Delhi, Mumbai, Kolkata and Chennai in November 1994.

Subsequently (during 1995 to 1998), 34 licences were issued for 18 telecom circles to 14

private companies. These licensees were selected through a bidding process and were to pay

to the Government a fixed amount as annual licence fee agreed during the bidding process.

1.2. New Telecom Policy-1999

Private sector participation in telecom sector did not take off as envisaged in NTP-94 as

the private telecom service providers complained of financial constraints and defaulted on

payment of the agreed licence fees. New Telecom Policy-1999 (NTP-99) introduced the

revenue share regime in which telecom service providers were required to pay a percentage

of their Adjusted Gross Revenue (AGR) as licence fee in place of the fixed licence fee.

The Government offered a migration package to existing licensee to migrate from fixed

licence fee regime to revenue sharing regime with effect from 1 August 19991 and 21

licensee companies2 migrated to the new regime (Annexure - 1.01). As per the migration

package, the licensees were to pay a one-time entry fee and licence fee (LF) at a percentage

of the AGR which was to be determined later on. Pending the finalisation of quantum of

revenue share and other terms and conditions, based on the recommendations of Telecom

Regulatory Authority of India (TRAI), the licence fee was initially fixed at 15 per cent of

the Gross Revenue (GR).

The country was divided into 233(presently 22) Licenced Service Areas (LSAs) categorised

into ‘A’, ‘B’ and ‘C’ LSAs as shown below:

Table 1.1Category of LSAs Names

A Delhi, Mumbai, Kolkata, Tamil Nadu (including Chennai), Andhra Pradesh, Gujarat, Karnataka, Maharashtra,

B Haryana, Kerala, Madhya Pradesh, Punjab, Rajasthan, Uttar Pradesh (E), Uttar Pradesh (W), West Bengal,

C Assam, Bihar, Himachal Pradesh, Jammu and Kashmir, North East, Odisha.

1 ThebenefitsextendedtotheprivateserviceprovidersthroughthemigrationpackagewasauditedbyCAGandfindingswerereportedinReportNo6of2000

2 20privatecompaniesandonePSU-MahanagarTelephoneNigamLimited3 Thecountrywasdividedinto23serviceareasconsistingof19telecomcirclesand4metrocircles.Subsequently,Chen-

naiserviceareawasmergedwithTamilNaduserviceareaw.e.f15September2005andhencethenumberofserviceareasis22atpresent.


- 2 -

In 2001, the Government finalised the terms and conditions including the definition of GR

and AGR and fresh licences were issued. Further, the rate of licence fee was also reduced

from provisional rate of 15 per cent across all circles to 12 per cent, 10 per cent and 8 per

cent for Category A, B and C LSAs respectively.

In addition, the National Long Distance (NLD) services and International Long Distance

(ILD) services were also opened up for private sector from August 2000 and April 2002

respectively.

1.3. Unified Access Service Licence (UASL) and Unified Licences (UL)

Under NTP-94 and NTP-99, separate licences were issued for providing Basic and CMTS

services in a LSA. In 2001, “Basic Service Operators” (BSOs) in India were permitted to

offer “limited-mobility” services over Wireless in Local Loop (Mobile) (WLL(M)) using

Code Division Multiple Access (CDMA) technology in their coverage areas.

As the popularity of WLL (M) services offered by BSOs grew, a dispute emerged involving

the BSOs and Global System for Mobile communication (GSM) based CMTS operators. On

11 November 2003, the Government approved Unified Access Services Licensing (UASL)

regime mooted by the TRAI that called for a single licence for Basic and Cellular services.

A Unified Access Services licensee can provide wireline as well as wireless services in a

service area using any technology.

Existing BSOs and CMTS operators were given option (November 2003) to continue with

the existing licences or to migrate to UASL regime4. Henceforth only UAS Licences were

issued for access services. From August 2013 onwards, Unified Licences regime was

introduced under which a licensee could provide all telecom services (Access Services,

Carrier Service and Data Services).

1.4. Provisions in the Licence agreements on definition of Gross Revenue (GR)/

Adjusted Gross Revenue (AGR)

Prior to introduction of Unified licences, separate licences were issued for different telecom

services viz. Unified Access Services (UAS), National Long Distance (NLD) services,

International Long Distance (ILD) services, Very Small Aperture Terminal (VSAT) services

and Internet Services. Definition of Gross Revenue (GR), Deductions and Adjusted Gross

Revenue (AGR) as provided in related licences are as follows:-

a) GR and permissible deductions to arrive at AGR were defined under clause 19

of the UASL Agreement. In terms of clause 19.1, the GR shall be inclusive of

installation charges, late fees, sale proceeds of handsets (or any other terminal

equipment etc.), revenue on account of interest, dividend, value added services,

4 AlltheCMTSlicenseesdidnotmigratetoUASLregime.Further,theconditionsforrevenuesharingwereidenticalforbothUASLandCMTSlicences.


- 3 -

supplementary services, access or interconnection charges, roaming charges, revenue

from permissible sharing of infrastructure and any other miscellaneous revenue,

without any set-off for related item of expense, etc.

Further, to arrive at AGR, following shall be excluded from the GR as mentioned

in clause 19.2 of the agreement-

i) PSTN5 related call charges (Access Charges) actually paid to other eligible /

entitled telecommunication service providers within India;

ii) Roaming revenues actually passed on to other eligible/entitled

telecommunication service providers, and

iii) Service Tax on provision of service and Sales Tax actually paid to the

Government, if GR had included Sales Tax and Service Tax.

b) The GR/AGR for NLD services was defined under clause 31 of Annexure-II of the

NLD Agreement which provides that “Revenue for the purpose of levying Licence

Fee as a percentage of revenue shall mean the Gross total revenue income accruing to

the licensee by way of providing NLD service under the licence including the revenue

on account of supplementary/value added services and leasing of infrastructure,

interest, dividend, etc. as reduced by the component part of a pass through nature

payable to other service providers to whose network licensee’s NLD network is

interconnected for carriage of calls”.

c) The GR/AGR for ILD services was defined under clause 36 of definition and

interpretation forming part of ILD Agreement which provides that “Gross Revenue

shall include all revenue accruing to the licensee on account of goods supplied,

services provided, leasing of infrastructure, use of its resources by others, application

fee, installation charges, call charges, late fees, sale proceeds of instruments (or any

terminal equipment including accessories), handsets, bandwidth, income from value

added service, supplementary services, access or interconnection charges, any lease

or rent charges for hiring of infrastructure etc, and any other miscellaneous items

including interest, dividend, etc. without any set-off for related item of expense,

etc”.

AGR for the purpose of levying LF as a percentage of revenue shall mean the GR

as reduced by:

i) Call charges (Access charges) actually paid to other telecom service providers for carriage of calls.

ii) Service tax for provision of service and sales tax actually paid to the Government, if Gross Revenue had included the component of service tax and sales tax.

5 PublicSwitchedTelephoneNetwork


- 4 -

d) Definition of GR for Internet Services including Internet Telephony (ISP-IT) as per licence agreement provides that “GR shall be inclusive of Internet Access service, Internet Content service, Internet Telephony service, installation charges, late fees, sale proceeds of terminal equipment, revenue on account of interest, dividend, value added services, supplementary services, revenue from permissible sharing of infrastructure and any other miscellaneous revenue, without any set-off for related item of expense, etc”.

For the purpose of arriving AGR, the following shall be excluded from the GR-

i) Charges from Internet access, Internet content and Internet access related installation charges.

ii) Service tax for provision of service and sales tax actually paid to the Government, if GR had included the component of service tax and sales tax.

e) In terms of the definition of GR specified in the VSAT Licence agreement, “The Gross Revenue shall include all revenues accruing to the LICENSEE on account of goods supplied, services provided, leasing/hiring of infrastructure, use of its resources by others, application fees, installation charges, call charges, late fees, sale proceeds of instruments (or any terminal equipment including accessories), VSAT hardware/software, fees on account of Annual Maintenance Contract/Annual Comprehensive Maintenance Contract, income from value added services, supplementary services, access or interconnection charges, etc. and any other miscellaneous item including interest, dividend, etc. without any set-off of related item of expense, etc.”

Revenue for the purpose of levying licence fee as a percentage of revenue shall include the gross total revenue accruing to the licensee by way of providing VSAT service under this licence but excluding:-

i) Charges of pass through nature actually paid to other Telecom service provider to whose network, the licensee’s network is interconnected for carriage of data.

ii) Service tax paid to the Government, if gross revenue had included the

component of service tax.

1.5. Stipulations in UASL Agreements on reporting revenue and payment of LF

The licence agreement between Department of Telecommunications (DoT) and the service providers contained distinct and specific clauses/norms for the preparation of the accounts of the licensee companies, their reporting and payment of licence fee to the Government. These clauses/norms underlined that while it was the prerogative of the licensee company to prepare their accounts complying with the provisions of the Companies Act, Accounting Standards etc., the provisions of licence agreement would be central for the purpose of computing the LF payable to Government. Appendix – II to Annexure – II of UAS Licence agreement prescribed the format of Statement of Revenue and Licence Fee while Annexure – III


- 5 -

specified the norms for preparation of the Statement. The licence agreement also stipulated that reconciliation between the figures appearing in the quarterly statements with those appearing in annual accounts to be submitted along with a copy of the published annual accounts, audit report and duly audited quarterly statements. The licence conditions also envisaged that the Statement of Revenue and LF, also referred as AGR statements of the licensee, should disclose all the adjustments made in recording the revenues offered for revenue share.

Important clauses in the agreements in this regard are shown in the below tables:

Table 1.2

Preparation of accountsStipulations Clause

While calculating AGR for limited purpose of levying Spectrum Usage Charges based on revenue share, revenue from Wireline Subscribers shall not be taken into account.

18.3

Computation of revenue and Licence fee payable should be shown in a prescribed Statement (AGR Statement) and should be audited by the Auditors of the Licensee appointed under Section 224 of the Companies Act, 1956.

20.4

Final adjustment of the Licence fee for the year shall be made based on the GR figures duly certified by the Auditors in accordance with the provisions of the Companies Act, 1956.

20.6

A reconciliation between the figures appearing in the quarterly statements with those appearing in annual accounts to be submitted along with a copy of the published annual accounts, audit report and duly audited quarterly statements.

20.7

• Service revenue (amount billable) should be shown gross and details of discount/rebate indicated separately.

• ServiceTaxandSalesTaxbilled,collectedandremittedtotheGovernmentshallbe shown separately.

• Sales to be shown gross and details of discount/rebate allowed and of salesreturns be shown separately.

• Incomefrominterestanddividendtobeshownseparatelywithoutanyrelatedexpenses being set-off against them.

• Item-wise details of income that has been set-off against correspondingexpenditure.

• Roaming charges should indicate operator-wise receivables and payables,roaming commission received and paid and any other variable charges collected/passed on to other operators.

Annexure-III of UASL agreement (Norms for preparation of annual financial statements)

Accounts should be maintained separately for each telecom service operated by the licensee company.

22.1

The licensor may, on forming an opinion that the statements or accounts submitted are inaccurate or misleading, order audit of the accounts of the licensee by appointing auditor at the cost of the licensee and such auditor(s) shall have the same powers which the statutory auditors of the company enjoy under Section 227 of the Companies Act, 1956. The licensor may also get conducted a ‘Special Audit’ of the licensee company’s accounts/records.

22.5 and 22.6


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Table 1.3

Payment of licence fee

Stipulations ClauseLF shall be payable in four quarterly instalments during each financial year. This fee

shall be paid on the basis of actual revenue (on accrual basis).

20.2

Any difference between the payment made and actual amount duly payable (on

accrual basis) for the last quarter of financial year should be adjusted and difference

paid within 15 days of the end of the quarter.

20.3

Any delay in payment of LF payable beyond the stipulated period will attract interest

at a rate which will be two per cent above the Prime Lending Rate (PLR) of State

Bank of India existing as on the beginning of the Financial Year.

The interest would be compounded monthly and a part of the month would be

reckoned as a full month for the purposes of calculation of interest. A month shall be

reckoned as an English calendar month.

20.5

The Fee/royalty payable towards Wireless Planning and Co-ordination (WPC)

Charges (SUC etc.) should be payable at such time(s) and in such manner as the

WPC Wing of the DoT may prescribe from time to time.

20.9

1.6. Rates of licence fee

The rate of licence fee prevailing during the period from 2006-07 to 2009-10 for various

kinds of services is detailed below:

Table 1.4

Access Services NLD ILD VSAT ISP -IT ISPService Area

Cat A Cat B Cat C (in per cent) (in ` per annum)

10 8 6 6 6 6 6 1

Note: The rates of LF for Access Services are inclusive of Universal Service Obligation (USO) levy of five per cent across the LSAs. Further, with effect from 01 April 2004, the first two cellular operators were granted rebate of two per cent in LF for four years in telecom circles subject to minimum rate of LF being equivalent to USO levy i.e. five per cent.

However, no licence was required for Infrastructure Provider Category I (IP I) services and

only registration with the DoT was sufficient.

1.7. Allocation of Spectrum and Spectrum Usage Charges

Initially, with the grant of UASL/CMTS Licence start up spectrum of 2x4.4 MHz to GSM

operators and 2x2.5 MHz to CDMA operators was to be allotted by the DoT. Additional

allotment of spectrum beyond this start up spectrum was linked to subscriber base. This

process of allotment was termed as administrative allocation and continued till 2010.


- 7 -

In addition to the LF, licensees offering mobile (wireless) services are required to pay

Spectrum Usage Charges (SUC) to the DoT. The rates of SUC payable are linked to the

type and quantity of Spectrum allotted. Rates in force upto 31 March 2010 were as shown

below:

Table 1.5

SUC as percentage of AGR (excluding Revenue from Wireline Subscriber)

GSM services CDMA services

From 1 August 1999 to 31 March 2010 From 25 January 2001 to 31 March 2010

Spectrum Rate (in per cent) Spectrum Rate (in per cent)

2x4.4 MHz 2 2x5.0 MHz 2

2x6.2 MHz 3 2x6.25 MHz 3

2x10.0 MHz 4 2x10.0 MHz 4

In addition to above main spectrum, Microwave Access and Microwave Backbone spectrum6

was also allotted to Cellular operators. Rate of SUC for Microwave Access and Microwave

Backbone spectrum were revised with effect from 3 November 2006, but the same was

challenged by GSM operators whereas it was accepted by CDMA operators and the matter

was sub-judice.

1.8. Revenue share collected by DoT

Year wise details of revenue share collected by DoT from 2002-03 to 2009-10 are given

below:

(Source: DoT Annual Reports)

6 Microwavetransmissionreferstothetechnologyoftransmittinginformationusingradiowaves.Microwavetechnologyiswidelydeployedinmobilecommunicationstoprovidepoint-to-point(PTP)RadioFrequency(R.F.)linksinmobilebackhaulaswellasinthebackbonenetwork.Mobilebackhaulisthatportionofthenetworkinfrastructurethatprovidesinterconnectivitybetweentheaccessandcorenetworks.Thebackbonenetworkisusedtointerconnectdifferentnodessituatedatdifferentgeographicallocations.


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1.9. Arrangements in DoT for collection and accounting of licence fee and SUC

The process of revenue share realization from telecom service providers involves the

following important activities:

• Collection of licence fee and spectrum charges - deposit at Controllers of

Communication Accounts (CsCA) office.

• Verificationofproofdocumentssubmittedbytelecomserviceprovidersforclaiming

deductions from Gross Revenue by the CsCA.

• AssessmentofRevenueShare(RS)andissueofdemandnotesbyDoTbasedonthe

annual audited accounts of the operator and the verification reports submitted by

CsCA.


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CHAPTER - IIAudit Approach

2.1 Scope of Audit

Revenue share payment is linked to the GR earned by service providers. The correctness

and completeness of the revenue share paid to Government entails that the computation of

GR/AGR by the operator was as per the licence conditions and the systems put in place by

DoT was conducive for verifying/assessing the correctness of the same.

Comptroller and Auditor General of India took up verification of the basic accounting

records and documents of six telecom service providers in 2014-15 covering the accounts

of four years from 2006-07 to 2009-10 as mandated under Section 16 of the Comptroller

and Auditor General’s (Duties, Powers and Conditions of Service) Act, 1971 and Rule 5

(ii) of Telecom Regulatory Authority of India, Service Providers (Maintenance of Books

of Accounts and other Documents) Rules, 2002 as upheld by Hon’ble Supreme Court of

India’s Judgement dated 17 April 2014. The service providers selected were:

• M/sBhartiAirtelLimitedanditssubsidiaryBhartiHexacomLimited

• M/sVodafoneIndiaLimitedanditssubsidiaries

• M/sRelianceCommunicationsLimited and its subsidiaryM/sRelianceTelecom

Limited

• M/sIdeaCellularLimitedanditssubsidiaryAdityaBirlaTelecomLimited

• M/sTataTeleServicesLimitedanditsassociatedcompanyM/sTataTeleservices

(Maharashtra) Limited

• M/sAircelLimitedanditssubsidiariesAircelCellularLimitedandDishnetWireless

Limited

The primary consideration in selecting the above mentioned six operators for this phase of

audit was the fact that they were the early entrants into the telecom business after the sector

was opened up for private participation. Again, these operators are the dominant players

in the market and account for a significant share of the total licence fee receipts of the

Government. Market shares of these Companies as of March 2007 and March 2010 were

as shown below:


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March 2007 March 2010

(Sourtce: TRAI/COAI)

Further, audit of M/s Bharti Airtel Limited and M/s Bharti Hexacom Limited (BAL/BHL)

was taken up first while commencing the audit of telecom revenue paid by private service

providers considering their highest market share/revenue share. While preparing the report,

audit view on the common issues identified has been deliberated in detail in the Chapter –III

on BAL/BHL. To avoid repetition of the audit’s view in the other chapters, reference has

been made to the detailed view of the audit given in Chapter-III.

The scope of audit also included examination of the process of verification of deduction to

arrive at AGR, collection of Revenue Share (LF and SUC) and assessment of GR done by

DoT.

2.2 Audit methodology

A) Prior to the commencement of audit, meetings were held with all the service

providers separately wherein the scope and coverage of audit were explained. Company

representatives explained to Audit their revenue recognition policies, system of recording

revenue and preparation of AGR statements.

Audit at premises of these Private Telecom service providers was basically an IT system

based audit. Access to General Ledger (GL) Enquiry Module of their financial system

(Oracle Financial or SAP) was provided to audit. Audit scrutinized the account codes which

had a bearing on the Gross Revenue on test check basis and the deductions for revenue share

purpose in terms of the licence agreement to identify the issue for detailed examination. The

licensee also provided reconciliations between AGR statements and Service Revenue, Other

income and Finance income of Profit and Loss Accounts duly mapped with Trial Balances

(TBs). Additional data, information and clarifications, if required, were obtained through

issue of Audit queries and discussion with the respective operators.


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B) The corporate income has been apportioned among the licences on the basis of

percentage of GR as corporate income pertains to all service areas at the rates applicable

to UAS Licence. LF and SUC has been calculated on the basis of rates applicable for

respective services.

Audit considers this to be the most suitable and conservative method of determining the

under reporting of revenue share.

In terms of clause 20.2 and 20.5 of Licence conditions, calculation of interest on unpaid

amount of LF and SUC is due from next quarter. However, audit has calculated unpaid

dues from beginning of next financial year and therefore; interest figures indicated in this

report are lower than actual interest due as per licence conditions.

2.3 Audit criteria

Important criteria used in audit are:

Provisions of Licence agreements as amended from time to time

Various instructions issued by DoT on collection of licence fee and spectrum

usage charges

2.4 Acknowledgement

We place our sincere appreciation for the cooperation extended by the Management of all

the six telecom service providers and the Department of Telecommunications in facilitating

this audit.


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CHAPTER – IIIRevenue shared by M/s Bharti Airtel Limited and

M/s Bharti Hexacom Limited

3.1 Brief Profile of M/s Bharti Airtel Limited and M/s Bharti Hexacom Limited

Bharti Airtel Limited (BAL), formerly known as Bharti Televenture Limited (BTVL), was

one of the first private telecom companies who was awarded licences for providing cellular

services in November 1994 (licence was issued to the then entity named as “Bharti Cellular

Limited). BAL had only two CMTS licences till January 2000. By the year 2004 the

company was having a pan India presence with licences in all 23 LSAs. BAL was the first

Indian Telecom service provider (TSP) to obtain the Pan India CMTS/UAS licence. The

turnover of the company also grew continuously. BAL maintained its leadership position in

Indian private telecom sector.

3.1.1 Licences granted to M/s Bharti Airtel Limited and M/s Bharti Hexacom Limited

BAL was awarded licences for providing cellular services in metro Licenced Service Area

(LSA) of Delhi in November 19941 and later on for Himachal Pradesh LSA in December

1995.

BAL further acquired CMTS licences as detailed below:

Table 3.1

Period Details of licences acquired

1999-2002 CMTS licences in five service areas by acquiring three companies2

2001 CMTS licences in eight3 service areas

2004 UASL licences in six4 service areas

M/s Bharti Hexcom Limited (BHL), a subsidiary of BAL, acquired CMTS licences in

North East and Rajasthan service areas in 2004. Hence, by the year 2004, BAL/BHL was

having a pan India presence with licences in all 23 LSAs.234

1 Licencewasissuedtothethenentitynamedas“BhartiCellularLimited”2 JTMobile(Punjab,AP,Karnataka),Skycell(Chennai)andSpiceCell(Kolkata)3 UP(W),,Maharashtra,Haryana,Gujarat,Kerala,Mumbai,MPandTamilNadu4 Orissa,J&K,Bihar,UP(E),WestBengalandAssam


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The details of other licences held by BAL and its subsidiaries are as on 1 April 2006 as

given in Table below:

Table 3.2

Sl No Services Remark

1 NLD Original licence issued to Bharti Telesonic Limited (BTSOL) which merged with BAL.

2 ILD Original licence issued to Bharti Telesonic Limited (BTSOL) which merged with BAL.

3 ISP-IT Original licence issued to Bharti BT Internet Limited which merged with BAL. 4 VSAT Original licence issued to M/s Wipro Infotech Limited which merged with

BAL.5 ISP Original licence issued to Comsat Max which was taken over by Bharti

Broadband Limited (BBL). BBL was merged with BAL.Original licence issued to M/s Bharti Acquanet Limited (BAqL)which merged with BAL.

6 VSAT Original licence issued to Comsat Max which was taken over by Bharti Broadband Limited (BBL). BBL merged with BAL.

7 IP I Originally registered with Bharti Telesonic Limited (BTSOL) which merged with BAL.Originally registered with Bharti Telenet Limited which merged with BAL.Registered with M/s Bharti Infratel Limited, a subsidiary of BAL.

3.1.2 Spectrum allotted to BAL/BHL

BAL/BHL are Global System for Mobile communication (GSM) operators. Initial start-up

spectrum for subscriber access (Main Radio Spectrum) to a GSM operator was 2x4.4 MHz.

LSA wise spectrum allotted to BAL/BHL as on 31 March 2010 were as follows-

Table 3.3

LSA wise spectrum allotted

Sl.No. Spectrum Licenced Service Area

1 2×10 MHz Andhra Pradesh, Delhi, Karnataka

2 2×9.2 MHz Bihar, Mumbai, Tamil Nadu (including Chennai)

3 2×8.2 MHz Maharashtra, Rajasthan

4 2×8.0 MHz Kolkata, Orissa

5 2×7.8 MHz Punjab

6 2×7.2 MHz UP East

7 2×6.2 MHz Assam, Gujarat, Haryana, Himachal Pradesh, Jammu and Kashmir, Kerala, Madhya Pradesh, North East, UP West, West Bengal


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3.1.3 Subscriber base of BAL/BHL

The cellular subscribers of BAL and BHL grew from 3.71 crore as on 31 March 2007 to

12.76 crore as on 31 March 2010 registering a growth of 244 per cent. Wireline subscribers

increased from 0.19 crore as on 31March 2007 to 0.31 crore as on 31 March 2010. Bharti

group remained on top of all the cellular operators during the years 2006-07 to 2009-10 and

its market share was around 21 per cent as on 31 March 2010.

3.1.4 Gross Revenue, Deduction, Adjusted Gross Revenue reported and revenue

share paid by BAL/BHL

As brought out in Para 1.5, Telecom Service Providers are required to pay LF and SUC

at a percentage of AGR on quarterly basis on self-assessment basis. GR, Deductions, AGR

reported and revenue shared (LF and SUC) by BAL/BHL during these years are as follows:

Table 3.4

(` in crore)

Year GR Deductions AGRPercentage of AGR to GR

Revenue share

(LF+SUC)

2006-07 20133 5452 14681 72.92 1687

2007-08 29222 7139 22084 75.57 2516

2008-09 40997 11082 29915 72.97 3689

2009-10 43649 11357 32292 73.98 3889

Total 134001 35030 98972 73.86 11781

3.2 Under reporting of revenue by BAL/BHL

As mentioned in para 1.4 (a),the GR shall be inclusive of all types of revenue stated therein

without any set-off for related item of expense, etc. and as brought out in Para 1.5, service

revenue (amount billable) shall be shown gross and details of discount/rebate indicated

separately.

Audit examination of records/Books of accounts (Vouchers, General Ledger, Trial Balance,

Profit and Loss Accounts, Balance Sheet, etc.) of BAL/BHL revealed that these companies

had not adhered to the provisions of the Licence Agreement as brought out in the succeeding

paras:


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3.2.1 Under reporting of revenue due to netting off of revenue pertaining to

Commission/offers/discounts to dealers/subscribers for prepaid services

From the examination of data/records pertaining to prepaid services furnished by BAL/BHL

for the period from 2006-07 to 2009-10, it was observed that –

The margin/commission given to distributors/agents was netted off from revenue

pertaining to prepaid services.

Offers to the subscribers viz. Free Air Time (FAT) to customers, Free of Cost

(FOC) Coupons/Cards/SIMs to customers, Promotional offers to customers, Full

talk time offered to customers, Adjustments offered to customers, etc, were set-off

from the revenue pertaining to prepaid services.

The item wise details are furnished below-

A) Margin/Commission:

The licensee company appoints distributors/franchises/dealers for selling telecom services

on commission basis. The company supplies to the distributors/franchises/agents the

prepaid recharge coupons/e-top up for sale to subscribers and pays commission/margin to

them. During review of data/records offered by BAL/BHL for the period from 2006-07 to

2009-10, it was observed that the Primary commission/margin paid to the distributors/

franchises/dealers at the time of sale of prepaid recharge coupons/e-top up were deducted

from the revenue. This resulted in revenue getting set-off of commission/margin in the books

and as a result, Net Revenue was considered in AGR statements submitted to DoT. It was

also noticed that Post sale Commission/Incentive paid to the distributors/franchises/dealers

were booked in expenditure head under description “Sales Commission and Incentives”.

Total amount deducted from revenue on account of commission/margin to the distributors/

franchises/agents/dealers during 2006-07 to 2009-10 was ` 1070.78 crore.

Since, the commission/margin paid to the distributors/franchises/dealers is in the nature of

business expenses (marketing expenses), therefore, set-off of such expenses with revenue

was against the licence condition.

On being pointed out by audit, it was stated by Management that-

• TherelationshipbetweenthecompanyanddistributorswasonaPrincipaltoPrincipal

basis and accordingly the company was required to account for the transactions with

such distributors as such on the amount realized from the distributors.

• Further,TDSATinits judgmentdated23April2015heldthat“Inourviewthe

definition of “gross revenue” cannot be construed as to bar the licensee from fixing

a wholesale price for the service which is lower than its MRP. The test is how the


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actual transaction takes place. If the sale and invoicing is on MRP and any discount

is given separately, then in terms of clause 19.1, such discount is not deductible even

if the revenue booked in the Profit and Loss account is after netting off the discount.

On the other hand, if the sale is on a stated/agreed price, invoiced at that agreed

price and booked under the revenue in the Profit and Loss account accordingly

without netting off any discount, the actual selling price would be the revenue and

the difference between the MRP and this selling price cannot be added to “gross

revenue”.

• OutofCommission/Marginaspointedoutbyaudit,` 8.78 crore was knocked with

the corresponding credit/contra entry.

Audit’s view on the management reply is as follows-

Total amount deducted from revenue on account of commission/margin has been revised to

` 1062.00 crore (Annexure - 3.01) on the basis of the Management’s reply. Resultantly,

LF and SUC amounting to ` 89.79 crore and ` 45.40 crore respectively were not paid on

the said revenue by the Company (Annexure - 3.01).

Regarding other issues, reply of the management is not tenable as -

• BALisrenderingtheservicesultimatelyandhadBALsoldthecardsdirectlytothe

customers, revenue would have been accounted for full value of service rendered and

selling expenses would have been accounted as expenditure. On the same analogy,

discount/commission accorded to distributors would be in the nature of Marketing

Expenditure and thus, should not be deducted from Revenue. This is in accordance

with stipulation in clause 19.1. Further, Audit opines that this transaction is not

covered under Principal to Principal since the ultimate responsibility of rendering

the service to the customer rests with BAL/BHL and not with the distributors.

• While the matter is sub-judice at Hon’ble Supreme Court, Audit view is that

commission/margin paid to the distributors/franchises/dealers is in the nature of

marketing expenses, therefore, set-off of such expenses with revenue was against the

licence condition.

B) Offers/Discount/Rebates to customers/dealers: -

• FreeAirtime (FAT): Subscriber account is credited on major festivals/occasions

with extra talk time by the Company without any charge. The extra talk time so

credited was referred to as Free Air Time (FAT).

• FreeofCost(FOC)Coupons/Cards/SIMstocustomers/dealers:Similarly, free

of cost coupons/cards/SIMs were given to customers/dealers on major festivals/

occasions.


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• Promotionalofferstocustomers:Subscriber account was credited with additional/

extra talk time by the Company without any charge as promotional offers.

• Fulltalktime(FTT)offeredtocustomers:Subscriber account was credited with

full talk time by the Company as part of promotions.

• Adjustments offered to customers (Negative processing fee/Initial talk-time/

Upsize or upfront hit on talk-time/various adjustments): Subscriber account was

credited with talk time by the Company more than the face value of the RCs/

e-recharge or sometimes adjustments were made to facilitate the subscribers/dealers

to gain talk-time as part of promotions.

During review of data/records furnished by BAL/BHL for the period from 2006-07 to

2009-10, it was observed that the cost of above offers provided to the subscribers was

deducted from prepaid services revenue upfront and as and when the same was used by

subscriber, the revenue was credited by the said amount. Resultantly, the Revenue on

account of these offers to subscribers were not recognised in the GR/AGR. It was also

observed that FOC/Promotional offer/Upsize etc. were also booked in the expenditure

heads.

Since offers to customers (FAT/FTT/FOC/Extra talk time, etc.) were part of overall

commercial strategy to enhance business, the cost of such offers/discounts/rebate were in

the nature of expenses. Further, as per licence agreement, service revenue should be shown

in gross without any set-off. Thus, the action of the Management in setting off the cost

of offers/discounts/rebate from revenue was against the licence agreement and resulted in

short payment of LF and SUC as detailed below:

Table 3.5

(` in crore)

Offers/Discount/Rebates to customers

Under reporting of GR

LF Impact

SUC Impact

Remarks

Free Airtime (FAT) 598.57 54.71 26.97 Annexure – 3.02

Free of Cost (FOC) Coupons/Cards/SIMs

40.62 3.61 1.58 Annexure – 3.03

Promotional offers to customers

74.76 5.88 2.88 Annexure – 3.04

Full Talk Time (FTT) 10.63 1.35 0.63 Annexure – 3.05

Negative processing fee/ Upsize /various adjustments

282.65 24.72 12.23 Annexure – 3.06

Total 1007.23 90.27 44.29


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On being pointed out by audit, it was stated by Management that:-

• Thecompanyoffersadditionaltalktimetoitscustomersbasedonmarketdemand/

Management decision as an additional benefit over and above the normal talk time

based on various schemes run by company from time to time. Such additional talk

time is known as Free Air time. FAT is provided on Start up Kit (SUK), Recharge

Coupon (RC) or by way of Initial credit to prepaid customer. It is generally given

during festival season to popularize new rate plans, to attract new subscribers, etc.

Similarly, the amount of negative processing fee (which arises due to FAT) is in fact

discount offered to the customer.

• FATisinthenatureofPlannedDiscountandpartofTariffplanfiledwithTRAI.

It is given upfront to customers and such notional amount cannot be subject to LF.

• IntermsofAS-9,“Revenueisthegrossinflowofcash,receivableorconsideration

arising in the course of the ordinary activities of the enterprise from the sale of

goods, from the rendering of services, and …..”

• OutofFAT/FTT/FOC,etc,aspointedoutbyAudit,` 48.49 crore was knocked

with the corresponding credit/contra/duplicate entry.

Audit views on the reply of the Management are as given below:-

• Contraentriesamountingto` 48.38 crore (out of ` 48.49 crore as stated by the

management in its reply) in respect of initially commented FAT/FTT/FOC, etc. of

` 1055.60 crore have been considered and the figures have been accordingly revised

to ` 1007.23 crore. Amount of ` 0.11 crore (` 48.49 crore - ` 48.38 crore ) of

management reply was not considered by audit, as this entry were not included in

initially commented FAT/FTT/FOC, etc, of ` 1055.60 crore.

• TheManagementhasacceptedthatAdditionalTalkTime/FreeAirTimeetc.was

generally given during festival season to popularize new rate plans, to attract new

subscribers, etc. Therefore, such offers/discounts/rebate was in the nature of expenses

and hence, in terms of licence agreements should not be deducted from GR.

• ThecopyoftheprepaidtariffplanssubmittedtoTRAI(providedtoaudit),didnot

include any kind of FAT/discount etc. whether billable or otherwise.

• AuditisnotquestioningtheaccountinginaccordancewithAS-9butcontendsthat

Airtime is not a free commodity, had an intrinsic value and by giving FAT/FTT/

FOC etc, the licensees are foregoing the revenue instead of booking these as expenses

resulting in avoidance of LF and SUC.

Thus, netting off of offers/discount/rebate amounting to ` 1007.23 crore given to pre-paid

subscribers has resulted in understatement of GR/AGR, which ultimately resulted in short

payment of LF and SUC to DoT amounting to 90.27 crore and 44.29 crore respectively.


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C) Short accounting of revenue due to upfront debit in the revenue heads

As per the procedure followed by the company for accounting of revenue, while the revenue

received in advance was accounted under liability, the Margin/Commission paid/FAT/FOC

on this amount was debited to the current revenue. Due to this, the current revenue was

short accounted to the extent of Margin/Commission paid/FAT/FOC resulting in deferment

of LF and SUC on this amount.

On being pointed out by audit, the Management replied that these were already covered

under reply to set-off/upfront charges para {para 3.2.1(A) and (B)}. However, from the

accounting perspective, the revenue is being recognized on the basis of actual usage.

Audit is not questioning the accounting on the basis of actual usage. However, the fact

remains that the upfront debit of Margin/Commission paid/FAT/FOC of revenue received

in advance to the current revenue results in short payment of LF and SUC on the current

revenue to the extent of amount debited.

3.2.2 Under reporting of revenue due to netting off of discounts/waivers granted to

post-paid subscribers

From the examination of data/records pertaining to post-paid services furnished by BAL/

BHL for the period from 2006-07 to 2009-10, it was observed that –

Waivers (Installation Charges Waiver/Air Time Waiver/Other Fees and Charges

Waiver/Rental Waiver/VAS Revenue Waiver) and Rental/Airtime/other discounts

were offered to post-paid customers by the company. It was also noticed that the

company debited the cost of discounts and waivers to Post-paid revenue heads

instead of expense heads as a result of which the revenue considered for AGR was

understated by ` 180.74 crore and ` 842.12 crore respectively (Annexures- 3.07

and 3.08).

During reconciliation of revenue shown in AGR statements vis-a-vis Financial

Statements of the company (TB/reconciliation statement given to audit), it was

further observed that ` 112.93 crore was deducted from GR ab-initio to arrive at

AGR on account of waivers. Detailed analysis revealed that these amounts were

booked under expenditure heads pertaining to ‘Waivers on account of goodwill

gesture’, Customer care expenditure, etc. (Annexure - 3.09).

Further, Rental/Airtime/other discounts and Waivers were part of overall commercial

strategy to enhance business and therefore, such offers/discounts were in the nature

of expenses. Hence, in terms of licence agreements, these should not be deducted

from GR.


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On being pointed out by audit, it was replied that:-

• Servicerevenuewasrecognizedastheserviceswererenderedandstatednetoffof

billable discounts, process waivers and taxes. As per Annexure-III of the licence

agreement under the Norms of preparation of annual financial statements, accrued

revenue shall include “all amounts billable for the period”, thereby all such amounts

(billable discounts, process waivers, etc.) shall be excluded from the revenue while

computing the GR.

• Processwaiverwerebeinggranteddue toerrors inbillingandwerenotbillable

under the category of accrued revenue as per Annexure-III of the licence agreement,

as the services have not been rendered or incorrectly billed. The process waiver

(` 842.12 crore) included billable discount of ` 624.44 crore, hence the actual

process waiver was ` 217.67 crore.

• Goodwillwaiverswereinthenatureofdiscountsofferedforcustomerretentionand

maintaining relationship. Although they form part of service revenue, the company

has reduced the amount of such waivers in the nature of goodwill waivers from the

GR.

• BillablediscountarepartoftarifffilingwithTRAI,hencenotpartofrevenuefor

the purpose of AGR as per the licence agreement.

• OutofBillablediscountof` 206.55 crore as pointed out by audit, ` 25.81 crore was

knocked with the corresponding credit/contra entry.

Audit views on the reply of the Management are as given below:

• Contraentriesamountingto` 25.81 crore in respect of initially commented discount

of ` 206.55 crore, as stated by the Management in its reply have been considered

and the figure revised to ` 180.74 crore.

• NormsofpreparationofannualfinancialstatementsundertheLicenceagreement

states that Service revenue (amount billable) shall be shown gross and details of

discount/rebate indicated separately. This indicates that service revenue should be

shown in gross, however the Management netted off the discounts/rebate while

preparing the annual financial statements which was against the licence agreement.

Further, Annexure-III of the licence agreement did not indicate that discounts,

waivers, etc. shall be excluded from the revenue while computing the GR.

• Thecontentionof theManagement thatwaiver(` 842.12 crore) included billable

discount of ` 624.44 crore was not in line with the Trial Balance (TB) submitted to

audit and data extracted from Oracle Finance system as analysis of head of accounts

of TB as well as the data extracted from general ledgers pertaining to these waivers


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clearly indicated that these were Installation Charges Waiver/Air Time Waiver/

Other Fees and Charges Waiver/Rental Waiver/VAS Revenue waivers. It was not

mentioned that these entries were due to wrong billing. In respect of remaining

` 217.67 crore it was observed that in case of billing to the post-paid customers

if it is subsequently confirmed that there was a mistake in the bill, the same was

reversed/adjusted in the respective revenue codes. It was noticed that there were

several reversal and adjustment entries in the general ledger to this effect. Further,

the Management did not furnish any document in support of its contention that these

waivers were due to errors in billing.

• TheManagementacceptedthatGoodwillwaiverswereinthenatureofdiscounts

offered for customer retention and maintaining relationship and although they formed

part of service revenue, same was reduced from GR. Since this was a part of

overall commercial strategy to enhance business, therefore, they were in the nature

of expenses and set-off for related items of expenses were not allowed as per the

licence agreement. Hence these should be added back to GR.

• CopyofthetariffplanssubmittedtoTRAI(providedtoaudit)didnotincludeany

kind of discount, whether billable or otherwise.

Thus, netting off of discounts and waivers amounting to ` 1135.79 crore given to post paid

subscribers resulted in understatement of GR/AGR and short payment of LF and SUC to

Government of India of ` 104.54 crore and ` 49.65 crore respectively (Annexures - 3.07,

3.08 and 3.09).

3.2.3 Under reporting of Roaming Revenue due to set-off of Inter Operator traffic

(IOT) Discounts paid/credited to other Operators

Volume discount is a financial incentive for individuals or businesses that purchase goods/

service in multiple units or in large quantities. In telecommunications scenario, roaming

agreements between operators provide for allowing discounts in case of the subscribers

of a particular service provider using the ‘sellers’ network in bulk. Mutual allowance of

discounts results in net payment of the incentive.

BAL and BHL have arrangements with other International Operators for providing roaming

services. It was noticed that the Inter Operator Traffic (IOT) Discounts paid/credited to

these Operators accounts was debited to/deducted from the revenue heads.

Having roaming arrangement with other national/international operators was a matter of

mutual agreement between two operators and giving discounts over and above the agreed

charges for roaming was part of overall commercial strategy to enhance business between

the two operators. As such, these discounts were in the nature of expenses and hence, in

terms of licence agreements, should not be deduced from revenue.


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It was observed that Inter Operator Traffic (IOT) Discounts amounting to 165.59 crore during

the period from 2006-07 to 2009-10 were debited to roaming revenue (Annexure 3.10).

On being pointed out by audit, it was stated by BAL Management that:-

• Internationalroamingtransactionsareinnatureofagreedvolumebaseddiscounts.

• International Roaming Revenue is generated based on negotiation adopted by

business. Further, the Operators agree on volume of traffic to be provided amongst

them on any of the methodology based on volume discount. It is in the nature of

trade/volume discounts and the same should not be considered as an expense.

• OutofIOTdiscountof` 168.24 crore (initially pointed out by Audit), ` 2.58 crore

was knocked with the corresponding credit/contra entry, 0.07 crore was considered

twice and the entries pertaining to IOT amounting to ` (-50.89) crore not considered

by Audit.

Audit views on the reply of the Management are as given below:-

• Contraentriesandduplicatereflectionsamountingto` 2.58 crore and ` 0.07 crore

respectively as stated by the Management in its reply have been considered and the

figures have been revised from ` 168.24 crore to ` 165.59 crore (` 168.24 crore -

` 2.58 crore - ` 0.07 crore).

• As alreadybrought out in the para, givingdiscounts over and above the agreed

charges for roaming was part of overall commercial strategy to enhance business

between the two operators; hence these discounts were in the nature of expenses.

Since the licence agreement does not permit any netting off, such expenditure cannot

be deducted and therefore, have to be included in the GR.

• RegardingnonconsiderationofentriespertainingtoIOTamountingto` (-50.89)

crore as mentioned in the Management reply, it was observed that these entries

were of the nature of IOT receipts (viz. Vodafone IOT compensatory receipt, etc.)

and not in the nature of IOT discount paid to the other operators. They were not

considered by audit, as no netting off was permissible under clause 19.1 of the

licence agreement.

Netting off of IOT discounts amounting to ` 165.59 crore (Annexure - 3.10) given to in-

ternational roaming operators resulted in reduction of GR/AGR and short payment of LF

and SUC of ` 15.62 crore and ` 7.22 crore respectively.

3.2.4 Under reporting of revenue from Infrastructure sharing with other telecom

operators for GR/AGR by BAL/BHL

As mentioned in para 1.4 (a),the GR shall be inclusive of revenue from permissible sharing

of infrastructure and any other miscellaneous revenue without any set-off for related item

of expense, etc.


- 24 -

Telecom infrastructure (towers, network equipment’s etc.) owned by BAL/BHL were being

shared with other telecom companies. BAL/BHL entered into agreements with other telecom

companies for infrastructure (cell site) sharing. In terms of the agreements entered with the

other operators, charges for sharing sites recoverable from other operators was based on a

percentage of CAPEX5 cost of the sites and OPEX6 cost incurred by BAL/BHL.

Review of data/records pertaining to Infrastructure sharing charges furnished by BAL/BHL

for the period from 2006-07 to 2009-10 revealed that:-

a) Infrastructure sharing charges which were in the nature of Rent, recoverable/

recovered were booked in the revenue heads relating to Infrastructure sharing partly

and the remaining were netted off from the respective expense heads.

b) Other Infrastructure sharing charges recoverable/recovered on account of Fuel

(Diesel), Electricity, Repairs and Maintenance and Security were netted off from the

expenses head and not included in the revenue at all.

The total amount netted off from the expense on account of site sharing revenue (Rent,

Diesel, Electricity, Repairs and Maintenance and Security) during 2006-07 to 2009-10 was

` 224.22 crore (Annexure – 3.11). This amount should have been taken to GR/AGR.

On being pointed out by audit, it was replied by BAL/BHL that -

• theprocedureofrevenuebookinginrespectofInfrastructuresitesharinghastwo

elements-

a) OPEX Reimbursement- Commercial Power, Fuel (Diesel), Security and

AMC, which was in the nature of reimbursement of actual expenses incurred,

was credited under the respective head.

(b) CAPEX Recovery- This amount, which was in the nature of rent was

recognized by Bharti Airtel under “Infrastructure Sharing Income”.

It was further stated that the part of rent which was credited in the expense head was in

nature of OPEX recovery only and as per AS-29, the expenses relating to a provision may

be presented net of the amount recognized for a reimbursement in the Profit and Loss

statement.

• ItwasalsostatedthatasperTDSATjudgmentofAugust2007,reimbursementof

cost/expenses received from other companies should not form part of AGR.

Reply of the BAL Management is not tenable due to following reasons:

• Intermsoflicenceagreement,GRspecificallyincludesrevenuefrompermissible

sharing of infrastructure without any set-off for related item of expense. Further,

5 CapitalExpenditure6 OperatingExpenditure


- 25 -

licence agreements do not distinguish infrastructure sharing revenue between CAPEX and OPEX. Hence, set-off of revenue from Infrastructure sharing against the expenses is not allowed. Further, licence agreement permits only three permissible deductions and no such deduction (i.e. on account of reimbursement of costs of Infrastructure sharing) was allowed.

• TDSATjudgmentdated30August2007referredinthereplywassetasidebytheHonourable Supreme Court vide judgement dated 11 October 2011.

• Auditisoftheviewthatrevenuetowardsdieselexpenses,securityexpenses,repairand maintenance expenses and electricity charges did not constitute reimbursement since they had to be incurred irrespective of whether the towers were shared or not. In fact, by sharing the expenditure the Company benefited through additional income.

Thus, netting off site sharing revenue received/receivable from other telecom operators from the cost during the period from 2006-07 to 2009-10 resulted in understatement of GR/AGR by ` 224.22 crore and short payment of LF and SUC by ` 19.30 crore and

` 9.08 crore respectively by BAL/BHL (Annexure – 3.11).

3.2.5 Under reporting of revenue from Forex gain for GR/AGR by BAL/ BHL

As per accounting policy adopted by BAL/BHL for the years 2006-07 and 2007-08, the resultant foreign exchange differences arising on payment or conversion of liabilities were recognized as income or expense in the year in which they arise except in respect of liabilities for acquisition of fixed assets where such exchange difference was adjusted in the carrying cost of the respective fixed asset.

Further, both the companies changed their policy with effect from 1 April 2008 to charge/credit fluctuation gain/loss in respect of loan/liabilities for acquisition of fixed assets directly to the P&L Account.

Review of data/records of BAL/BHL for the period from 2006-07 to 2009-10 revealed that the Realized gain during 2006-07 to 2009-10 was ` 221.58 crore out of which forex gain of ` 5.93 crore only was considered in GR/AGR during 2006-07 under UASL/NLD/ILD licences of BAL (Annexure - 3.12).

It is pertinent to mention here that the above realised gain calculated from the data extracted from the reports generated from Oracle Financial System did not represent the actual gain of that particular item since the company recasts the value of all the items included under the foreign exchange gains/losses head every year, the matured items are accounted under realised gains and the un-matured items remain under unrealised gain. Thus, the realised gain of a particular item in that year would not be the actual gain due to accounting of the

gains /losses of that item during the intermediate period under unrealised. Audit could not

arrive at the actual value of items accounted under realised gain every year for want of


- 26 -

original value of each item. Further, audit has considered the quarterly net gain, head of

account-wise and LSA-wise, as it was not possible for audit to segregate/collect the figures

of gains only from the data made available. The operator should calculate the gain of each

item with reference to its initial value of accounting and include the total forex gain in GR/

AGR.

On being pointed out by audit, it was stated by the Management that:-

• ForexGain was not Revenue:As per the Accounting Standard 9 on Revenue

Recognition, Foreign Exchange Gain has been specifically excluded from the

definition of Revenue.

• ForexGainwasNotional:The realized forex was nothing but an overall business

risk which each company would assume in foreign currency transactions. Such

notional gains/losses on account of reduction/increase in the liabilities/loans cannot

be considered to be revenue from operations and should not be included in the GR/

AGR.

• ForexGainsandlosseswasdynamicandindeterminable:TRAI Recommendations

dated 6 January 2015 on Definition of Revenue Base (AGR) states that the revenue/

profit arising on account of fluctuation of foreign exchange should not be part of

AGR for the purpose of computation of LF and SUC. Also TDSAT (August 2007)

did not view forex gain/loss differently from TRAI.

• NotrelatedtoTelecomactivities:The Notional foreign exchange fluctuation was a

contingency which had impact on every business and was not specific and unique to

telecom business. Also, as per TRAI recommendation dated 13 September 2006 on

the AGR matter, forex was not related to telecom activities.

• Further, BAL intimated that ` 73.49 crore was the amount of realised forex gain

during the years from 2006-07 to 2009-10.

Reply of the management is not tenable as -

• IntermsofthelicenceagreementGRshallbeinclusiveofanyothermiscellaneous

revenue and audit is of the view that any gain incidental to PSPs should be considered

for GR.

• The company has been following mercantile method of accounting and as per

commercial principle of accounting, “the profit/loss” is to be arrived after taking

into account all accrued receipts and expenses and comparing of trading assets

between two different dates. Under the mercantile system of accounting a forex

gain (revenue)/loss (expenditure) incurred as a result of exchange differences are

rational and cannot be considered as contingent/notional in nature. Further, audit has

considered the realised gain only.


- 27 -

• Even as per accounting policy adopted by BAL/BHL during the years from

2006-07 to 2009-10, the resultant foreign exchange differences arising on payment

or conversion of liabilities are recognized as income or expense in the year in which

they arise. Further, company was reporting exchange differences (on net basis) in

their financial statement.

• TDSAT judgment dated 30 August 2007 and TRAI recommendation dated

13 September 2006 referred in the reply has no relevance in the light of the Hon’ble

Supreme Court judgement dated 11 October 2011 which stated “the TRAI and the

Tribunal had no jurisdiction to decide on the validity of the definition of AGR in

the licence agreement and to exclude certain items of revenue which were included

in the definition of AGR in the licence agreement between the licensor and the

licensee”. Audit is of the view that forex gain is incidental to telecom activity for

telecom operators.

• Itisnottruethatforeignexchangegains/lossesareneithercoveredinthedefinition

of GR in the Licence Agreement nor disclosed in the Statement of AGR, as Licence

Agreement provides that “GR shall be inclusive of …… any other miscellaneous

revenue, without any set-off for related item of expense, etc,” and forex gain was

part of Miscellaneous Revenue.

• TRAIRecommendationdated6January2015referredtointhereplyhasnotfinally

been accepted by DoT.

• Aforesaidrealisedforexgainof` 73.49 crore has been arrived by the TSP after

considering yearly net gain only of all the account codes booked for forex gain/

loss in a business unit/licences. However, audit considered the quarterly net gain

LSA-wise as the LF and SUC are payable LSA-wise every quarter and hence, the

difference in figures.

Thus, non-inclusion of foreign exchange gains pertaining to period from 2006-07 to

2009-10 resulted in understatement of GR/AGR by ` 216.84 crore. Resultantly, LF and

SUC amounting to ` 17.46 crore and ` 6.74 crore respectively was not paid by BAL/BHL

(Annexure - 3.12).

3.3 Under reporting of revenue in the Statements of Revenue and LF (AGR

Statements) though reported in the books of accounts.

3.3.1 Non consideration of Interest Income for GR/AGR.

Review of data/records furnished by BAL/BHL for the period from 2006-07 to 2009-10

revealed that interest income accounted in the books of accounts of BAL was partially


- 28 -

considered for GR/AGR in the years 2006-07 and 2007-08 but not considered at all

in the years 2008-09 and 2009-10. Amount of interest income accounted in the books

were ` 340.74 crore out of which ` 1.61 crore only was considered for GR/AGR during

2006-07 to 2009-10 resulting in non-consideration of interest income amounting to ` 339.13

crore for the purpose of GR/AGR. Business unit/ licences wise details are furnished in

Annexure 3.13.

Similarly, interest income accounted in the books of accounts of BHL was fully considered

for GR/AGR in the year 2006-07 and partially considered in the year 2007-08 but not

considered at all in the years 2008-09 and 2009-10. In the year 2007-08, out of total interest

income of ` 2.37 crore accounted, ` 1.74 crore was considered for GR/AGR and ` 0.63

crore was not considered. In the years 2008-09 and 2009-10, interest earned amounting to

` 1.23 crore and ` 3.96 crore were not considered for GR/AGR.

BHL Management stated that –

• Interestincomeaccountedundercorporatetrialbalances(TBs)wasnotconsideredas

it was not related to telecom operations. It further stated that the interest accounted

in the corporate TBs was earned from deployment of surplus funds/borrowed funds

and it being a non-telecom revenue needed to be excluded from AGR.

• ItalsostatedthatsometimesfundsborrowedforCAPEXwereinvestedandinterest

earned and this interest being always less than the interest payable/paid on borrowings,

no interest income was left for inclusion in AGR for levy of revenue share.

• ConsideringtheTDSATjudgementdated30August2007,interestincomeaccounted

under Trial balances of UASL/NLD/IP1/ILD/ISP/VSAT were not considered for

AGR.

BAL/BHL’s Management contention for non-inclusion of interest income for AGR is not

tenable as

• AuditisoftheviewthatdefinitionofGRinlicenceagreementsexpresslyprovides

for inclusion of interest income for GR/AGR for computation of revenue share;

• TDSATjudgementdated30August2007hasbecomenullandvoidafterHonourable

Supreme Court judgement dated 11 October, 2011.

Thus non-inclusion of Interest income pertaining to period from 2006-07 to 2009-10 resulted

in understatement of GR/AGR by ` 344.95 crore. Impact on short payment of LF and SUC

due to non-consideration of interest income in GR/AGR was ` 28.51 crore and ` 11.80

crore respectively (Annexure - 3.13).


- 29 -

3.3.2 BAL’s interest free loan to subsidiary resulted in avoidance of payment of LF/

SUC

Audit observed that BAL gave ` 1487.95 crore as interest free un-secured loan in 2009-10 to M/s Bharti Telemedia Ltd (BTL), a 95 per cent subsidiary of the BAL. Grant of interest free unsecured loan was in violation of Section 372(A) of Companies Act, 1956 and not in line with the arm’s length relation to be maintained between the holding company and subsidiary company.

As a result, BAL’s revenue was lower by the amount of interest receivable from BTL and ultimately the LF and SUC thereon was short-paid to the Government of India to that extent. The impact on short payment of LF and SUC could not be quantified since the date of release of loan and period for which above interest free loan remained outstanding was not available.

3.3.3 Non consideration of Profit on sale of Investment for GR/AGR for payment of

revenue share by BAL.

Format of Statement of Revenue and LF (AGR Statement) prescribed as Appendix II to Annexure -II as referred in Clause 20.4 of the UASL agreement is an integral part of the Licence Agreement. In the Statement, item 4 has been prescribed to reflect the “Income from Investment”.

Review of data/records furnished by BAL/BHL for the period from 2006-07 to 2009-10 revealed that gross income on account of Income from Investments were ` 34.14 crore, ` 57.75 crore, ` 235.48 crore and ` 183.82 crore in the year 2006-07, 2007-08, 2008-09 and 2009-10 respectively (Annexure - 3.14). Above income had not been considered in GR/AGR for computation of revenue share.

BAL Management stated that considering the TDSAT judgement dated 30 August 2007, income from investment accounted under corporate trial balance was not considered for AGR. It further stated that this corporate income was generated from treasury function which was a separate and distinct function from licenced activity and this income was a non-licenced activity/non-operational income. Therefore such corporate income should not form part of GR.

BAL’s Management contention for non-inclusion of income from investment for GR is not tenable as TDSAT judgement dated 30 August 2007 became null and void after Honourable Supreme Court judgment of 11 October 2011. Further, Audit opined that licence agreements provide for inclusion of income from investment in GR/AGR for computation of revenue share.

Thus non-inclusion of Income from investment pertaining to period from 2006-07 to 2009-10 resulted in understatement of GR/AGR by 511.19 crore. Impact on short payment of LF and SUC due to non-consideration of income from investment in GR/AGR was

` 42.45 crore and ` 17.45 crore respectively (Annexure - 3.14).


- 30 -

3.3.4 Different standards for payment of dividends

As mentioned in para 1.4 (a) GR shall be inclusive of dividend along with other revenue stated therein. Thus the revenue from investment (dividend) was to be included for the purpose of revenue share. An analysis of the annual accounts of BAL for the period from 2006-07 to 2009-10 indicated that BAL’s investments in form of equity shares in its subsidiaries, Joint Ventures, associates and others (Annexure - 3.15 ) increased by more than 19 times from ` 580.24 crore in 2006-07 to ` 11,153.51 crore in 2009-10 (Annexure - 3.16).

BAL was the majority shareholder in most of these subsidiaries, Joint Ventures, associates, subsidiary’s subsidiary and other entities. However, BAL did not receive any return on these investments during this period in form of dividend or otherwise in spite of the fact that the total profit of these companies after tax was ` 157.04 crore, ` 415.64 crore, ` 905.44 crore and ` 893.68 crore during each of the four years from 2006-07 to 2009-10 respectively (Annexure - 3.17).

It was seen in audit that BAL had adopted different standards for declaration of dividend in respect of BAL itself and for other non-licensee companies where it had investments and majority shareholdings. While BAL had declared a dividend of 20 per cent on face value of shares for 2008-09 and 2009-10, no dividend was declared by any of the subsidiaries, Joint Ventures, associates and others where BAL had a majority shareholding. While dividend paid by BAL was an expense for it and was not subject to LF and SUC, the dividends received by it from companies/entities it had invested in would have attracted imposition of LF and SUC as per terms of the licence agreement.

Thus non-declaration of dividend by subsidiaries, Joint Ventures, associates and other entities in which BAL had invested was not in accordance with BAL’s own action of declaration of dividend and resulted in reduction of revenue of BAL and consequently lower payment of LF and SUC.

3.3.5 Non Consideration of revenue accounted under Global Operations (BILGO) for LF

BAL had set up its own branch at USA under brand name BILGO which carries the hubbing of traffic and does the switching of traffic arising out of bilateral agreements between BAL (ILD division) and various foreign operators located across the globe. BAL maintains a separate book of accounts to book the income/expenses relating to BILGO. The details of the operation carried out by BILGO and mechanism between the two segments (BILGO and BAL-ILD) are as follows-

(a) For call traffic originating from USA – BILGO switch hands over the outgoing traffic from other operator’s to BAL-ILD’s network for terminating anywhere in the world. For this service, BILGO retains five per cent and transfers 95 per cent of the

amount billed to the foreign telecom operators to BAL – ILD.


- 31 -

(b) For call traffic terminating in the USA – BILGO switch handles the call traffic from

BAL-ILD and hands over the same to other operators in the USA. For this service,

BILGO charges to BAL-ILD at 105 per cent of what is payable by BILGO to the

foreign terminating operators and retains five per cent.

However it was noticed that during 2006-07 and 2007-08, this margin was 2.87 per cent

and 4.03 percent only. Amount of revenue and access charges booked in BILGO’s books

of accounts are as follow-

Table 3.6

(` in crore)

Year Total revenue Total Access Charges

Excess revenue over access charge

(Margin)

Margin(in per cent)

{Percentage of “d” w.r.t “c”}

(a) (b) (c) (d) (e)

2006-07 285.48 277.51 7.97 2.87

2007-08 340.73 327.53 13.20 4.03

2008-09 230.10 218.76 11.34 5.18

2009-10 312.62 297.23 15.39 5.18

Total 1168.93 1121.03 47.90 4.27

Revenue over access charges amounting to ` 47.90 crore was not considered for GR/AGR.

BAL’s Management stated that –

• BILGOwas operating on a foreign soil (USA) as a gateway station (POP) for

which licence/permission had been obtained from USA authorities, not from Indian

authorities and it had a separate identity from US Tax and regulatory perspective and

• This fiveper cent retention by BILGO was taxable in the USA as per Tax and

regulatory laws. As such revenue and access charges accounted in BILGO’s books

of accounts should not be considered for GR/AGR for LF.

BAL’s Management contention is not tenable as:

• SettingupoftheBILGOisonlyatechnicalarrangementmadebyBALtomanage

its ILD traffic and BAL had got ILD licence from the Indian authorities. BAL is

providing telecom service under the name of BILGO and was not a separate legal

entity. Even the transactions accounted in BILGO’s books of accounts are part of

telephone traffic of BAL’s ILD network and included in the financial statements of

BAL. Further, as per the definition of GR, GR shall include all revenue accruing to

the Licensee without any set-off for related item of expense. Hence the revenue of

BILGO should be included for GR.


- 32 -

• Auditdoesnotdisputethetaxabilityoffiveper cent retained by BILGO in USA as

per Tax and regulatory laws but contends that since this constituted the income of

BAL, the same should be a part of the sharable revenue under ILD licence.

Accordingly, BAL’s ILD AGR was under reported by ` 47.90 crore (` 7.97 crore,

` 13.20 crore, 11.34 crore and 15.39 crore for the years 2006-07, 2007-08, 2008-09 and

2009-10 respectively) which should be added back to AGR for computation of LF for

BAL’s ILD licence. Impact on short payment of LF (ILD) due to non-consideration of

BILGO revenue was ` 2.87 crore (` 0.48 crore, ` 0.79 crore, ` 0.68 crore and ` 0.92 crore

for the years 2006-07, 2007-08, 2008-09 and 2009-10 respectively).

3.3.6 Non Consideration of revenue of erstwhile SBEL

Satcom Broadband Equipment Limited (SBEL) was a subsidiary of BAL prior to

1 October 2005. SBEL was in the business of selling VSAT hardware. SBEL got

amalgamated with BAL effective from 1 October 2005 as per certificate of registration

received on 27 July 2007. Though SBEL was amalgamated with BAL, BAL maintained

separate trial balances for accounting transactions relating to erstwhile SBEL’s domestic and

international transactions. The total revenue amounting to 116.24 crore booked under these

trial balances was not considered for GR/AGR under any licence during the period from

2006-07 to 2009-10 except in the year 2008-09 when Service Revenue amounting to

` 0.18 crore was considered in the GR of VSAT.

BAL’s Management stated that SBEL was incorporated as a separate legal entity and prior

to its merger with BAL, it was engaged in –

i) trading in telecom equipment,

ii) trading in VSAT equipment across the world, and

iii) turn-key project for VSAT installations.

These are mainly trading and international activities and not governed by the Telecom

licence. Post-merger, the accounts of BAL included the accounts for activities undertaken

by Satcom for which separate books of accounts were maintained. Further, the activities

carried on by Satcom are not linked with the telecom services being provisioned by units

of BAL. Activities were continued to be carried on by Satcom under BAL as were being

carried on prior to merger. Management further stated that merger changed the structure

of the entity but it did not change the nature of transaction being carried on. An activity

which was a non-licenced activity cannot become a telecom service post merger. Thus,

just because two companies have merged does not make a non-telecom activity a telecom

activity thereby subjecting it to LF. Post-merger, its business (which is non-telecom in

nature) was being carried on by BAL. Thus, the company is under no obligation to pay LF

on such activities/transactions as were carried on by Satcom.


- 33 -

Reply of the Management is not tenable as SBEL was a separate legal entity prior to

1 October 2005 and it had not got any licence from Government of India for its activities

which were primarily dealing in VSAT equipment. However, it got merged with BAL with

effect from 1 October 2005 and transactions recorded in its books of accounts show that

revenue accounted are from telecom services (bandwidth charges, IRU charges, installation

charges, data services, equipment rental etc.) as well as sales of hardware to foreign/

domestic telecom companies. This revenue also formed part of revenue of BAL and in

terms of definition of GR, GR shall include all revenue accruing to the Licensee without

any set-off for related item of expense. Accordingly the revenue of ` 20.85 crore, ` 36.04

crore, ` 22.70 crore (out of it ` 0.18 crore already considered) and ` 36.65 crore accounted

under the books of accounts for the years 2006-07, 2007-08, 2008-09 and 2009-10 of

erstwhile SBEL should be included in the GR. Impact on short payment of LF (VSAT)

due to non-consideration of revenue booked in erstwhile SBEL accounts was ` 1.25 crore,

` 2.16 crore, ` 1.35 crore and ` 2.20 crore for the year 2006-07, 2007-08, 2008-09 and

2009-10 respectively.

3.3.7 Non consideration of revenue accounted under Infrastructure Provider (IP)-1

service for computation of revenue share by BAL

BAL had got two registrations for Infrastructure Provider 1 (IP1) from DoT (October

2000 and February 2001)7 for providing infrastructure services. The scope of services

under IP1 registration covers the business of providing assets such as Dark Fibre, Right of

Way, Duct Space and Towers on lease/rent out/sale basis to Telecom licensees. However,

BAL had maintained separate books of accounts (TBs) for recording transactions of IP1

services. Revenues booked under IP1 include Service Revenue, Interest Income and Other

Income which form part of Profit and Loss Account of BAL. Further, service revenue for

the period from 2006-07 to 2009-10 pertaining to IP1 services (` 435.73 crore) includes

revenue from BAL’s NLD division (` 221.40 crore), ISP division (` 9.13 crore) and from

other operators (` 205.20 crore).

However, the whole service revenue accounted under IP1 Trial Balances was not considered

for AGR for payment of LF despite the fact that this revenue formed part of revenue of

BAL and in terms of definition of GR, it shall include all revenue accruing to the Licensee

without any set-off for related item of expense.

BAL’s Management stated that the IP1 registration had nothing to do with the licence

agreement and the activities taken there under. The IP1 registration enables any company

incorporated in India to install and provide passive infrastructure to the Telecom Service

Providers and as per the existing policy, there was no imposition of LF on the companies

7 OriginalregistrationswereinfavourofBhartiTelesonicLimited(BTSOL)andBhartiTelenetLimited(BTL).BhartiTelesonicLimitedandBhartiTelenetLimitedweresubsumedinBAL{FormerlyBhartiTeleventureLimited(BTVL)}.


- 34 -

having IP1 registration. The income earned from these services was accounted for separately

which therefore resulted in separate trial balances maintained by the company so as to

distinguish the same from other licenced income.

Audit accepts that the revenue from NLD division included in IP1 revenue is not subject to

LF but contends that income from ISP division and other operators should be considered

for revenue sharing. Accordingly, ` 214.33 crore (` 47.03 crore, ` 54.01 crore, ` 65.26

crore and ` 48.03 crore for the years 2006-07, 2007-08, 2008-09 and 2009-10 respectively)

should have been considered in AGR for the calculation of LF. Impact on short payment of

LF (NLD) due to non-consideration of IP1 revenue was ` 12.86 crore (` 2.82 crore, ` 3.24

crore, ` 3.92 crore and ` 2.88 crore for the years 2006-07, 2007-08, 2008-09 and 2009-10

respectively).

3.3.8 Non consideration of miscellaneous income for AGR for computation of LF/

SUC by BAL

As per schedule of Other Income forming part of Profit and Loss Account of BAL,

Miscellaneous Income for the years 2006-07, 2007-08, 2008-09 and 2009-10 was ` 79.87

crore, ` 200.61 crore, ` 87.08 crore and ` 45.28 crore respectively. Service area wise

details of such miscellaneous income are furnished in the Annexure - 3.18. From the

AGR statements vis-à-vis Trial Balances/Reconciliation statements furnished to audit, it was

noticed that an amount of ` 96.19 crore being the miscellaneous income was not included

in GR/AGR for computation of revenue share.

BAL’s Management stated that -

• Miscellaneousincomeonaccountofinsuranceclaim,noticepay,scrapsale

in UASL and NLD/ILD/ISP/VSAT/Corporate segments was not included in

GR/AGR as per TDSAT judgment of August 2007.

• Itisanincomefromnon-licencedactivity.

• Miscellaneous/OtherIncome(insuranceclaim)of2006-07ofUASLsegment

is not subject to LF as it is a capital receipt and it cannot be termed as

revenue in ordinary course of business.

• Miscellaneousincomeof` 2.37 crore in 2006-07 in ISP and VSAT segment

were in the nature of liability written back.

Audit view on the management reply is as follows:-

• Income from insurance claim has been excluded and the Miscellaneous

income considered by audit revised from ` 140.21 crore to ` 96.19 crore.

• TDSAT judgmentofAugust2007was set asideby theHon’bleSupreme

Court of India (October 2011)


- 35 -

• Management contention that these miscellaneous incomes are from

non-licenced activity and hence not liable to be included in AGR is not

acceptable since definition of GR expressly provides that miscellaneous

income should be included in GR for computation of revenue share.

• ` 2.37 crore had been booked in miscellaneous Income in Trial Balances of

2006-07 related to ISP and VSAT segments. Whereas amount in the nature

of liability written back were booked in separate account heads. Hence, it

cannot be stated to be in the nature of liability written back.

As such, items of miscellaneous income as stated above amounting to ` 96.19 crore

not considered in respective AGR should be included in AGR for computation of

LF/SUC. Impact on short payment of LF and SUC due to non-consideration of

miscellaneous income in GR/AGR was ` 6.94 crore and ` 1.74 crore respectively

(Annexure - 3.18).

3.3.9 Non consideration of Income from profit on sale of fixed assets for AGR for

payment of revenue Share by BAL

From the examination of data/records furnished by BAL/BHL for the period from 2006-07

to 2009-10, it was observed that revenue on account of “Profit on sale of Fixed Assets”

was ` 8.75 crore, ` 12.04 crore, ` 7.24 crore and ` 1.92 crore during the years 2006-07,

2007-08, 2008-09 and 2009-10 respectively.

From the AGR Statements, it was found that amount of Profit on Sale of Fixed Assets was

considered for computation of AGR in the year 2006-07 but such income of ` 21.20 crore

was not considered for AGRs in the later three years i.e. 2007-10.

BAL’s Management stated that -

• ConsideringtheTDSATjudgementdated30August2007,therevenueonaccount

of profit on sale of fixed assets had not been considered for AGR.

• Thisrevenuewasinnatureofcapitalrevenueanditwasnotderivedfromlicenced

activity and hence it should not be included in AGR for computation of LF.

The contention of the BAL’s Management is not tenable since-

• TDSATjudgementdated30August2007hasbecomenullandvoidafterHon’ble

Supreme Court judgment dated 11 October 2011.

• Licenceagreementsdidnotdifferentiatebetweenlicencedactivityandnon-licenced

activity. In terms of definition of GR, GR shall include all revenue accruing to the

Licensee without any set-off for related item of expense and the company had also

considered it for inclusion in AGR in the year 2006-07. Thus, income of ` 21.20

crore on account of profit on sale of fixed asset accounted in the books of accounts


- 36 -

of the company should be included in GR/AGR for computation of Revenue Share

payable by the company to Government of India.

Impact on short payment of LF and SUC due to non-consideration of profit on sale of fixed

asset in GR/AGR was ` 1.91 crore and ` 0.83 crore respectively (Annexure - 3.19).

3.4 Short/ non-payment of revenue share due to other issues.

3.4.1 Irregular Deduction of Bad debts written off from GR to arrive at AGR by

BAL/BHL


revealed that the amount of “Bad debts Written Off” accounted during the year 2006-07

to the tune of ` 105.51 crore in UASL segment had not been deducted from GR to arrive

at AGR. However, in the years 2007-08, 2008-09 and 2009-10, “Bad debts Written Off”

accounted in UASL segment of 181.13 crore, 63.18 crore and 41.13 crore respectively

was deducted while arriving at AGR.

Similarly, as per AGR Statements and TBs of BHL, it was found that no amount of “Bad

debts Written Off” had been deducted from GR in 2006-07 and 2007-08. However, in the

years 2008-09 and 2009-10, amount of “Bad debts Written Off” accounted in UASL/CMTS

segments of ` 2.25 crore and ` 0.03 crore was deducted while arriving at AGR.

Management stated that -

• ConsideringtheTDSATjudgementdated30August2007,theamountof“Baddebts

Written Off” had been deducted from GR.

• Bad debt was revenue not realized by the company and as per AS-9, revenue

includes gross inflow of economic benefits received and receivable by the entity on

its own account.

• Whenaparticularreceivableisknowntobebadandunrecoverable,suchbaddebts

during the particular period must be excluded from GR.

The contention of the Management is not tenable since

• TDSAT judgement dated 30 August 2007 has become null and void after

Hon’ble Supreme Court judgment dated 11 October 2011.

• WhileauditdoesnotquestionaccountingasperAS-9,itcontendsthatanyamount

of revenue becoming unrecoverable is treated as bad debts which form part of

Administrative and other expenses in the Profit and Loss Account.

• ThelicenceagreementdoesnotprovidedeductionofbaddebtfromGRtoarriveat

AGR. The licensee itself did not deduct the bad debts written off from GR to arrive

at AGR during the year 2006-07 and 2007-08.


- 37 -

Thus, bad debts written off amounting to ` 287.72 crore and deducted from GR to arrive at

AGR in UASL/CMTS segments should be added back to AGR for computation of Revenue

Share payable by the companies to DoT. Impact on short payment of LF and SUC due to

deduction of bad debts from GR to arrive at AGR was ` 25.55 crore and ` 11.44 crore

respectively (Annexure - 3.20).

3.4.2 PSTN Deduction claimed against Leased Line Charges in 2006-07.


revealed that Lease Line charges payable by UASL Circles (Mobile and Fixed services)

of BAL/BHL to BAL’s NLD division was claimed under PSTN deduction in the year

2006-07 to the tune of ` 327.09 crore. LSA wise details are furnished in the

Annexure - 3.21.

Management stated that in terms of TRAI’s Interconnect Usage Charges Regulation (sixth

amendment) (February 2006), TSPs have been given liberty to decide carriage charges

to be paid to NLDO and hence they are under forbearance. TRAI has left the rates to be

charged on the mutual agreement between the service providers based on various service

elements being offered by NLDO which may include some fixed/minimum commitment in

terms of traffic minutes and creation of Point of Interconnection (POI). It was also stated

that the above transactions were in nature of a minimum commitment charge which can be

attributable to minute based carriage charge and the charges for setting up the POI.

The reply of the Management is not acceptable as in terms of UASL agreement (clause

19.2) and clarifications issued by DoT, lease line charge is not to be deducted from GR to

arrive at AGR. Further, TRAI Interconnect Usage Charges Regulation (sixth amendment)

provides that carriage charges per minute for long distance calls within India would be as

per mutual agreement between the service providers subject to a ceiling of 0.65 per minute

irrespective of the distance. As evident, it does not mention about any fixed/minimum

commitment charges but prescribes only minutes’ based charges which were claimed as

IUC deduction payable to NLD in addition to above mentioned lease line charges. Also, the

BAL/BHL themselves stopped claiming such deduction from 2007-08 onwards.

Inclusion of Lease Line Charges under PSTN deduction resulted in understatement of AGR

of UASLs of BAL/BHL by ` 327.09 crore for the year 2006-07. Resultantly, LF and

SUC was short paid in the year 2006-07 by ` 26.47 crore and ` 11.71 crore respectively

in respect of BAL and ` 1.56 crore and ` 0.92 crore respectively in respect of BHL

(Annexure - 3.21).

3.4.3 Non consideration of revenue from sale/lease of bandwidth charges for AGR for payment of SUC.

UASL agreement provides that “While calculating AGR for limited purpose of levying

Spectrum Charges based on revenue share, revenue from Wireline Subscribers shall not be


- 38 -

taken into account”. Further, in the format of statement of revenue and licence fee (AGR

Statement) prescribed for the UASL agreement-

• Item1Ahasbeenprescribedtoreflectthe“RevenuefromWirelineSubscribers”

and

• Item8hasbeenprescribedtoreflectthe“Revenuefromsale/leaseofbandwidth,

links, R and G cases, turn key projects etc.”

During the review of the AGR Statements, it was noticed that “Revenue from sale/

lease of bandwidth, links, R and G cases, turn key projects etc.” amounting to ` 93.29

crore, ` 98.67 crore, ` 188.57 crore and ` 92.81 crore in the years 2006-07, 2007-08,

2008-09 and 2009-10 respectively was included in the AGR Statements for computation

of LF but not considered in the AGR for computation of SUC which was in contravention

of the provisions of the Licence agreements. LSAs wise details are furnished in the

Annexure - 3.22.

Management stated that above revenue were pertaining to wireline services and hence it was

not considered for levy of spectrum charges.

Management contention is not tenable as in terms of clause of 18.3 of UASL agreement,

revenue from wireline subscribers only needs to be excluded for spectrum charges. As

provided in the AGR statement, revenue from wireline subscriber is in item 1A and

Revenue from sale/lease of bandwidth, links, R and G cases, turn key projects, etc. is in

item 8. Thus, revenue from sale/lease of bandwidth is different from revenue from wireline

subscribers. As such, above revenue should be considered for computation of spectrum

charges also.

Thus, revenue from sale/lease of bandwidth, links, etc. amounting to ` 473.34 crore

should be added back in AGR for computation of SUC. Resultantly, SUC amounting to

` 20.70 crore was not paid on the said revenue by the company (Annexure-3.22).

3.5 Transfers of telecom infrastructure assets by BAL to its subsidiary (BIL) at NIL

value

M/s Bharti Infratel Limited (BIL) was incorporated as a subsidiary of BAL on

30 November 2006 with the object of inter-alia, setting up, operating and maintaining

wireless communication towers, provide network development services and to engage in

video, voice, data and internet transmission business in and out of India. BIL received the

certificate of commencement of business on 10 April 2007 from the Registrar of Companies.

Audit observed from BAL’s Annual Report for the year 2007-08 that the Scheme of

Arrangement8 between BAL and BIL was approved by the Hon’ble High Court of Delhi

8 Undersections391to394oftheCompaniesAct,1956,fortransferoftelecominfrastructureassetsfromBALtoBIL


- 39 -

on 26 November 2007 and filed with the Registrar of Companies, Delhi and Gurgaon on

31 January 2008 i.e. the Effective Date of the Scheme. Pursuant to the scheme, the telecom

infrastructure of BAL was transferred to and vested with BIL with effect from 31 January

2008. BAL transferred the Telecom Infrastructure worth ` 5739.60 crore to BIL at Nil

value and BIL recorded the value of assets received from BAL at fair value of ` 8235.97

crore.

BAL and BIL being separate entities and also BIL was not a fully held subsidiary of BAL9,

transfer of assets was not a transaction at arm’s length. As the market value of the assets

was ` 8235.97 crore as revalued by BIL, the difference between the book value and the

value as accounted by BIL was profit foregone (` 2496.37 crore) on transfer of asset. In

accordance with licence agreement, this profit foregone on transfer of asset should be

considered for computation of LF and SUC.

Thus non consideration of the amount of ` 2496.37 crore resulted in short payment of

LF and SUC of ` 226.40 crore and ` 108.52 crore respectively for the year 2007-08

(Annexure 3.23).

3.6 Interest on short/non-payment of LF and SUC

On issues raised above (from paras 3.2 to 3.5) short/non-payment of LF and SUC

worked out to ` 719.46 crore and ` 347.49 crore respectively. The interest on this short/

non-payment of LF and SUC is ` 1584.94 crore (Annexure- 3.24). The calculation of

interest was based on the rate prescribed in the Licence agreement i.e. 2 per cent above the

Prime Lending Rate of State Bank of India existing as on the beginning of the financial year

and the period considered for the calculation was from the end of the concerned financial

year up to March 2015. The interest has been compounded monthly as prescribed in the

licence agreement.

3.7 DoT’s response to the audit observations

Audit observations on the revenue shared by M/s BAL were communicated to DoT in

May 2015. DoT in reply (January 2016) informed that demands for understatement of GR

were raised on the PSP in 2012 for the years 2006-07 and 2007-08, based on the report of

Special Audit conducted in 2009. These pertained to issues raised in paras on commission/

discount to dealers netted off from revenue and free airtime given to prepaid subscribers not

recognized as revenue (3.2.1(A)); understatement of GR due to non-inclusion of revenue

from infrastructure sharing in full (3.2.4); under reporting of revenue due to non-inclusion

of revenue/income in GR/AGR from forex gain (3.2.5), interest income (3.3.1), profit

from sale of investment (3.3.3), revenue from BILGO (3.3.5), revenue from IP-1 services

(3.3.7), miscellaneous revenue (3.3.8), profit on sale of assets (3.3.9); deduction of bad

9 BALwasholdingonly92.89per centoftheShareinBILason31March2008.


- 40 -

debts from GR (3.4.1) and gain on successive transfer of passive infrastructure (3.5).

However, the demands were challenged by the operator in TDSAT/High Courts. It was

also informed that action would be taken as and when the final court judgement would be

pronounced.

Thus, DoT, without disputing the issues raised by Audit, has stated that the demands

could not be realized as the matter was sub-judice. The fact that DoT could not get/obtain

the revenue due indicated to the need for a more pro-active approach on part of DoT as

substantial amount of government revenue was involved.

DoT also stated that there were differences in the amounts objected to by DoT consequent

to the Special Audit and that pointed out by CAG audit. These variations may be on account

of differences in methodology adopted in quantifying the understatement of revenue for

which details of working paper of Special Auditors were not seen by CAG audit. However,

CAG audit has quantified the amount of short/non realization of revenue (LF and SUC) on

the basis of the actual entries identified through clear description in the books of accounts

of BAL for 2006-07 to 2009-10.

In respect of paras pertaining to netting off of discount/waiver given to post paid subscribers

from revenue (3.2.2); roaming revenue understated due to netting off inter-operator traffic

discount paid to other operators (3.2.3) and non-inclusion of revenue of erstwhile SBEL

(3.3.6), DoT stated that replies received from the PSP were under examination.

In respect of paras pertaining to different standards for payment of dividends (3.3.4);

irregular deduction claimed for lease line charges (3.4.2) and non-consideration of bandwidth

charges for SUC (3.4.3), it was stated that replies from respective wings of DoT were

awaited.

In respect of para pertaining to interest free loan to subsidiary (3.3.2), it was stated that

DoT had taken a decision in 2005, in consultation with Ministry of Law and learned AG,

that notional interest can neither be reckoned nor included in AGR.

Audit view is that DoT’s decision of not reckoning the due interest on interest free loan

given to subsidiaries which are not fully owned, for AGR purpose was not in line with

the provisions of the Companies Act, 1956. By providing interest free loan to other than

fully owned subsidiary, BAL’s revenue was lower by the amount of interest receivable

and ultimately the LF and SUC thereon was short-paid to the Government of India to that

extent.

DoT’s response to para 3.2.1 (B) and (C) on under reporting of revenue due to offers/

discounts to customers and dealers for pre-paid services and short reporting of revenue due

to upfront debits in revenue heads was awaited (January 2016).


- 41 -

DoT also stated that the basic definition of GR and AGR was challenged by the TSP’s

in 2002-03. Since then, there has been protracted litigation and is continuing till date.

Also, some of the licensees have also filed (in 2012) writ petitions before various High

Courts invoking the writ jurisdiction under Article 226 of the Constitution challenging the

Section-4 of Indian Telegraph Act, 1885, as violative of the Article14 and 19(1) (g) of the

Constitution of India. The process of deduction verification by the CCA offices and the

LF assessment work by the DoT Headquarters was adversely impacted due to this. DoT

admitted that the numerous disputes are causing delays in assessment of the revenue share

due from the operator.

The response of DoT proves that though the revenue share regime was introduced as part of

NTP-1999, the Department has not been able to realise its due revenue share as envisaged

in the Licence agreement even after more than 16 years of its implementation.

It would be pertinent to mention here that when the Government decided to reduce the

LF for all operators by two per cent effective from April 2004, DoT expected that the

reduction would prompt operators to withdraw the challenges against the Government.

However, the reduction in LF did not have the expected impact and the operators continue

to institute litigations against the Government challenging the definition of GR/AGR and

demand notes. Thus the PSP got the benefit of reduction in rate of LF but the Government

didn’t get the reciprocal benefit of reduction in litigations.


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CHAPTER – IVRevenue Shared by Vodafone India Limited

4.1 Brief Profile of M/s Vodafone India Ltd

Brand Vodafone was launched in India in 2007 when Vodafone Plc, the British multinational

communications company, acquired majority stake in M/s Hutchinson Essar which was

providing GSM based cellular mobile services in sixteen1 licenced service areas in the

country. The decision of the Government of India in 2005 to raise the Foreign Direct

Investment (FDI) in telecom sector to 74 per cent helped the British company to make

major foray into the Indian telecom space. By 2007-08, the operator was allotted seven2

more licences and had established pan India presence with operations in all existing twenty

three Licensed Service Areas (LSA) in the country. Vodafone India provides wireless

mobile telephone services which include voice/data and total high-quality, innovative

communication solutions.

4.1.1 Licences held by Vodafone Group

In addition to access service licence in 23 service areas, Vodafone Group has carriage

licences i.e. National Long Distance (NLD) as well as International Long Distance (ILD)

and Internet Service Provider (ISP) licence.

The LSA/Circle wise service provision and related accounting activities are performed under

the aegis of the Corporate Head Office of Vodafone India Limited (erstwhile Vodafone

Essar Ltd) at Mumbai and its seven subsidiary Companies.3

4.1.2 Radio frequency spectrum held by Vodafone

All Vodafone group companies are GSM operators. LSA-wise quantum of spectrum allotted

to them as on 31 March 2010 were as follows-

Table 4.1Sl.No Spectrum (in MHz) Names of LSA

1 2 × 10 Delhi, Mumbai2 2 × 9.8 Gujarat, Kolkata3 2 × 8.2 UP(E)4 2 × 8.0 Chennai, Karnataka5 2 × 7.2 Tamil Nadu6 2 × 6.2 Andhra Pradesh, Haryana, Kerala, Maharashtra, Punjab, Rajasthan,

UP(W),West Bengal7 2 × 4.4 Assam; Bihar, Himachal Pradesh, Jammu & Kashmir, Madhya

Pradesh, North East, Odisha

1 Mumbai,Delhi,Kolkata,Gujarat ,Karnataka,AndhraPradesh,Chennai,Rajasthan,UP(E),Haryana,Punjab,UP(W),WestBengal,TamilNadu,Kerala,Maharashtra

2 Orissa,Bihar,NE,Assam,J&K,HimachalPradesh,MadhyaPradesh3 VodafoneEssarCellularLtd,VodafoneEssarDigilinkLtd,VodafoneEssarGujaratLtd,VodafoneEssarLtd,Vodafone

EssarMobileServiceLtd,VodafoneEssarSouthLtd,VodafoneEssarSpacetelLt/d.


- 44 -

4.1.3 Subscriber base growth - 2006-07 to 2009-10

As on March 2007, with a subscriber base of 2.64 crore, Vodafone occupied third place

behind Bharti Airtel and the combined strength of the PSUs (BSNL and MTNL). By

2007-08, the Company established its foot print in all 23 LSAs and consolidated its position

to become the second largest GSM based cellular mobile service provider in the country.

By March 2010, the subscriber base grew to 10.09 crore with market share of 16 per cent

registering a growth of 281 per cent from 2006-07.

4.1.4 Financial data on GR/Deductions/AGR and revenue share paid by Vodafone

India Limited

Telecom Service Providers (TSPs) are required to pay LF and SUC at a percentage of AGR

on quarterly basis on self-assessment basis. The combined GR reported and revenue share

paid by Vodafone India Limited (VIL) for the four years from 2006-07 to 2009-10 is as

shown below:

Table 4.2

(` in crore)


Revenue share

(LF+SUC)

2006-07 10399 1853 8545 82.17 1153

2007-08 16063 3713 12350 76.88 1606

2008-09 22217 5897 16320 73.46 2221

2009-10 25289 6695 18594 73.53 2399

Total 73968 18158 55809 75.45 7379

(Source: DoT records)

4.2 Audit verification of accounting and reporting of GR by Vodafone

As mentioned in para 1.4 (a), the GR shall be inclusive of all types of revenue stated therein


Further as mentioned in Annexure III of UASL agreements, service revenue (amount

billable) shall be shown gross and details of discount/rebate indicated separately.

Audit examination of the records alongwith the books of accounts of Vodafone revealed

incidences of non-compliance with the conditions of the licence agreement in recording

and reporting revenue. The occurrence was not universal throughout the different LSAs as

there was no uniform procedure for accounting revenue for the purpose of revenue share

payment. The nature of non-compliances were-

• Setting-offrelatedexpendituresfromrevenue.

• Non-inclusionofrevenueearnedfromallcategoriesinGR.


- 45 -

Audit findings on GR computation by Vodafone for the period from 2006-07 to 2009-10 are

discussed below As no separate GLs were maintained for pre-paid and post-paid services,

no segregation of service wise understatement of revenue and revenue share impact was

done.

4.2.1 Commission/discounts to dealers netted of from pre-paid and post-paid revenue

Vodafone provides prepaid and post-paid services in their licenced network using Subscriber

Identification Module (SIMs). The sale of SIMs, Prepaid recharge vouchers (ECV), e-top

ups, etc. are through retailers/agents (dealers, franchisees, distributors) who are allowed

discounts by the Company. As per the licence conditions, GR has to include revenue from

sale of SIM/ECV, etc. without set-off.

Verification of General Ledgers (GL) of LSA-wise accounts revealed debits under certain

revenue account heads on account of expenses described as payment of ‘commission,

discount, additional margin to retailers, franchisees/dealers/agents/distributors’, ‘trade

margin’, etc., related to the sale of SIM/RCV (recharge vouchers)/Top up cards, etc.

All debits with the above descriptions under various revenue GLs were identified for

all the four years to ascertain the total amount netted off from revenue and it was seen

that a total amount of ` 1352.75 crore was debited from revenue during the period from

2006-07 to 2009-10 (Annexure- 4.01). It is important to mention here that details of cases

where revenue was captured in the Company’s financial system after net offs could not

be identified and hence audit had quantified only those transactions where the LSAs had

recorded them manually in the books of accounts with clear narratives on the nature of the

debits. Though the Company was required to report the amount netted off to DoT along

with the AGR statement it was seen that none of the LSAs except VCL4 in 2006-07 had

disclosed the amount netted off as discounts.

Management stated (May/August 2015) that the Company appoints distributors/dealers/

franchisees depending on the business needs and the arrangement with them is on

Principal-to-Principal basis from January 2007. Discounts given to them at the time of

primary billing were debited to revenue. As per the accounting policy followed, the actual

inflow to the Company i.e. the amount paid by the distributor only is carried to the Profit

and Loss Account (P & L account) and not the Maximum Retail Price of the product sold

through the distributor/franchisee/dealer. It was also explained that the sale of products to

the franchisee was on agreed price and that price is reflected in the P & L account and

there is no netting off of any expense and TDSAT also in their judgment of April 2015 had

held that there was no netting off in cases where revenue is recorded on the agreed price.

It was further informed that appeals have been filed in the Hon’ble Supreme Court, both by

the Operators and DoT, against the TDSAT judgment and hence the above positions of the

Company were subject to the final ruling by the highest Court.

4 Maharashtra&Goa,TamilNaduandKeralaLSAs


- 46 -

Audit view on the reply of the management is as explained in para 3.2.1 (A).The amount

brought out in Audit is only a portion of the actual amount paid by the Company as discount/

commission to franchisees/dealers, etc. Reply confirming the LSA wise facts and figures

brought out by Audit and details on total value of upfront discounts/free air time allowed

from revenue on the discount/commission paid for the four years was awaited from the

Management (December 2015).While the matter is sub-judice at the Hon’ble Supreme

Court, Audit is of the view that netting of commission/discounts given to dealers from

revenue was a deviation from the UASL agreement and has resulted in understatement of

revenue by ` 1352.75 crore for the period 2006-07 to 2009-10 leading to short payment of

LF & SUC amounting to ` 119.59 crore and ` 53.30 crore respectively (Annexure - 4.01).

4.2.2 Airtime Discounts to customers

From the audit scrutiny of Trial Balances, furnished to audit by Vodafone, it was noticed

that the airtime discount offered to post paid subscribers as well as promo talk time given to

pre-paid subscribers were debited to a revenue heads. These heads would invariably reflect

a debit balance at the end of the year. Debit balances under a revenue GL head thus would

have the effect of a set-off from the total revenue. The total amount of set-off on account

of this accounting treatment worked out to ` 444 crore for the four years from 2006-07 to

2009-10.

The Company intimated that discounts in post-paid airtime were nothing but the amount

of usage by the customer against post-paid rental. As an illustration it was stated that if a

subscriber opts for a rental plan of ` 100 and the Company offers free talk time ` 100, the

Company would book ` 100 as rental revenue, ` 100 as usage revenue and ` 100 as Airtime

discount and there was no debit in revenue.

Free airtime given to post-paid subscriber against the rental as per tariff plans submitted to

TRAI as illustrated above was justified. Debit to revenue heads for the amount of promo

talk time given to prepaid subscribers not covered under tariff plans submitted to TRAI was

not consistent with the provisions of the licence agreement as explained in para 3.2.1 (B).

However, amount of promo talk time given to prepaid subscribers and free airtime given

to post paid subscribers could not be segregated easily as the Company had accounted it in

one GL code only.

4.2.3. Roaming revenue understated due to netting of Inter Operator traffic (IOT)

Discounts paid/credited to other Operators

Revenue earned by the different LSAs of Vodafone from roaming services was disclosed

under item no. 3 of the AGR statement. On a review of the revenue accounted under

various heads operated to account roaming revenue, debits on account of ‘discounts were

seen effected. These discounts were ultimately credited under provision for contingencies

(roaming), which was further set-off with roaming commission receivable from other


- 47 -

operators. During the four years, 2006-07 to 2009-10, ` 242.69 crore, as confirmed by the

Management, was debited from revenue (Annexure - 4.02).

On being pointed out, the Company, replied that the revenue recognition on account of

roaming discount was as per AS-9 where Revenue was defined as “Revenue is the gross

inflow of cash, receivables or other consideration arising in the course of the ordinary

activities of an enterprise from the sale of goods, from the rendering of services, and

from the use by others of enterprise resources yielding interest, royalties and dividends.

Revenue is measured by the charges made to customers or clients for goods supplied and

services rendered to them and by the charges and rewards arising from the use of resources

by them…”Accordingly, the Company did not include discount allowed on International

roaming charges to international operators in the GR as such discounts were not in the nature

of revenue but were discounts on volume of international roaming traffic as agreed with the

roaming partners. Revenue from both in-roaming and out-roaming calls are recorded net

off discounts offered/received. It was also informed that TDSAT in its judgment of April

2015 had held that discounts are to be added to the revenue and the Company has preferred

an appeal against it in the Hon’ble Supreme Court of India.

Audit view on the reply of the Management is as explained in para 3.2.3 of this Report.

Further, regarding revenue recognition as per AS-9 stated by Management, Audit was not

challenging the accounting methodology adopted by the Company but for the purpose of

Licence fee, the revenue is to be recognised “Gross” without set-off of related expenses as

mandated under licence agreement. While the issue is sub-judice at the Hon’ble Supreme

Court, Audit view is that setting off discounts paid to international roaming partners from

roaming revenue was in violation of the licence conditions.

Taking into account the amount accepted by the Management as roaming discounts the

LF and SUC short paid worked out to ` 23.07 crore and ` 10.23 crore respectively

(Annexure - 4.02).

4.2.4 Understatement of GR due to Service Tax being set-off from revenue on schemes

like ‘Full Pe Full’, ‘Full Talk Time’ etc.

When the validity on the prepaid card was extended through recharge, additional talk time

through schemes like ‘Full Pe Full’/ ‘Full Talk Time’ etc., was allowed to the subscribers as

an incentive to retain the potentially floating subscriber base. As per the revenue recognition

policy of the Company, revenue from sale of recharge coupons, was recognized exclusive

of service tax and if free air time was given to customers as part of any scheme, the Service

Tax component was borne by the Company. For example, in a recharge of ` 120 customer

would be getting talk time of ` 120 where as in other normal plans the Service Tax (ST)

component would be deducted from the recharge value. So apparently, even though talk

time was allowed in full, the liability of Service Tax was being borne by the Company.


- 48 -

It was seen that the revenue from schemes (Full Pe Full, Full Talk Time etc.), where FAT

was given to users, the liability of Service Tax (ST) was being deducted from outgoing

call/access revenue and revenue on account of FAT was not being recognised in GR. This

was not consistent with clause 19.1 of the UAS licence agreement. ST being allowed to

be deducted from revenue when its receipt in full for services rendered was not accounted

in GR was equivalent to revenue being understated to the extent ST paid and resulted in

Government dues being short paid.

Vodafone Management responding to the audit observation stated that the Company offers

full talk time schemes to selected customers as per various marketing schemes and these

schemes were generally informed to TRAI. In cases where full talk time was offered

customer got talk time for the full value of the recharge and revenue recorded is after

providing for service tax from the value of recharge. Talk time offered to the subscriber

was not relevant in such cases as the receipt of the amount from customer was recorded in

books as such and included in revenue and service tax paid on it.

The reply was not tenable as Audit opines that the value of the talk time availed by the

user was to be reckoned as call revenue and the admission that revenue component was

recognised after providing for service tax substantiated the fact that expenditure towards

service tax was set-off from the revenue received for the services provided by the Company.

Thus the Service Tax absorbed by the Company was the revenue foregone since it would

have been recovered from the end-users. Audit could identify the amount of service tax

paid by debiting revenue in 12 LSAs during the four years covered and this worked out to

` 222.54 crore resulting in short collection of LF and SUC amounting to ` 18.45 crore and

` 9.27 crore respectively(Annexure - 4.03).

Management (December 2015) confirmed the amount of understatement worked out in

audit.

4.2.5 Understatement of GR due to non-inclusion of revenue from Infrastructure

sharing in full

As mentioned in para 1.4 (a),the GR shall be inclusive of revenue from permissible sharing


of expense, etc.

Audit noticed that during the four years from 2006-07 to 2009-10, Vodafone had invoiced

` 807 crore towards Cell sites sharing revenue but the amount included in the AGR

statements for these years was only ` 253 crore leading to understatement of GR by ` 554

crore. Audit quantified infrastructure revenue only in LSAs where invoice details were

clearly available in the accounting system. Those accounts had shown income from renting/

leasing infrastructure net of amounts received towards OPEX.


- 49 -

Vodafone Management responded (September 2015) stating that the Company had entered

into arrangements with other telecom operators for sharing of infrastructural facilities and

the operational expenditure for running and maintaining such facilities were shared between

Vodafone and other operators. The arrangement was meant to defray the cost incurred

for operating the infrastructural facilities and hence the amount received from the other

operators was in the nature of their contribution towards operational expenditure and hence

do not qualify as revenue. Amount received on account of CAPEX was being included

in the GR. It was also stated that the TDSAT in its ruling of April 2015 had held that

reimbursements were not to be included in the revenue. The issue is sub- judice as appeals

have been filed in the Hon’ble Supreme Court of India on the TDSAT judgment.

Reply of the Management was not tenable in view of the following:

• Intermsoflicenceagreement,GRspecificallyincludesrevenuefrompermissible

sharing of infrastructure without any set-off for related item of expense and licence

agreements do not distinguish infrastructure sharing revenue between CAPEX and

OPEX. Hence, set-off of revenue from infrastructure sharing against the expenses

is not allowed. Revenue towards diesel expenses, security expenses, repair &

maintenance expenses and electricity charges did not constitute reimbursement since

they had to be incurred irrespective of whether the towers were shared or not. In

fact, by sharing the expenditure the company benefited through additional income.

• Further,itwasnotedthatDoThadfiledanappealbeforeHon’bleSupremeCourt

against the TDSAT Judgment dated 23 April 2015 as referred in the reply. While

the matter is sub-judice at the Apex Court, Audit view is that as UASL does not

provide for any deductions from revenue other than those permitted under Clause

19.2 deducting OPEX from infrastructure sharing revenue was not in conformity

with the UASL agreement.

The Management informed (December 2015) that the OPEX reimbursement was ` 514.49

crore in respect of cases pointed out by Audit and the reason for mismatch between the

amount worked out by Audit and validated by the Management was on account of inclusion

of service tax element also by Audit. While the fact of inclusion of service tax was accepted,

on an analysis of the reply it was seen that the amount confirmed by the Management was

short by 21.78 crore as information on one LSA (UP-W) was not included. Thus, the total

amount of OPEX not included in GR worked out to 536.27 crore leading to short payment

of LF and SUC of ` 46.90 crore and ` 21.02 crore respectively (Annexure - 4.04).

4.2.6 Under reporting of revenue from forex gains for GR/AGR

Audit noted that the Company accounted its gain/loss under five account heads (in four

revenue heads and one expenditure head). Audit scrutiny of the Trial Balances, Audited


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AGR statements Auditors Report, Notes on Accounts/Statements and Revenue Reconciliation

Statements etc. revealed that different LSAs of the Company followed different methods in

recording their Forex transactions as detailed below:

• AmountsnetofgainorlosswereshownintheRevenueReconciliationStatements

only

• Net forex loss was debited in the AGR under different types of income viz.,

miscellaneous income, any other income etc.

• AnetamountwasshownintheirAGRinwhichcaseithadadirectimpactonthe

revenue share paid.

Foreign exchange gain realised by the various LSAs during 2006-07 to 2009-10 was

` 155.44 crore but these gains were not offered for revenue share in these years. Audit could

not arrive at the actual value of items accounted under realised gain every year for want of

original value of each item as brought out in para 3.2.5. Further, Audit has considered the

net gain, head of account-wise and LSA-wise, as it was not possible for Audit to segregate/

collect the figures of gains only from the data made available. Interim gains if any, was not

considered. Vodafone Management replied (September 2015) that-

• The income from fluctuations in foreign exchange(s)was notional in nature and

not revenue. The accounting standards require this notional gain or loss on forex

fluctuations to be accounted at the end of the year so that the profit/loss of the

company was fairly stated as on the balance sheet date. It is reiterated that in

respect of cost or purchase items like operating expense on account of consultancy,

purchase of equipment or loan taken in foreign currency, the fluctuations due to

foreign currency do not form part of revenue as such fluctuations ultimately result

in increase or reduction in cost or purchase price and have no linkage with the

revenues.

• TDSAT(April2015)hadruledthatForexgainsarenottobeincludedintheAGR.

Contention of the Management was not acceptable. Audit view on the treatment of forex

gains for revenue share has been explained under Para 3.2.5 of this Report. Audit noted that

DoT had gone on appeal against the TDSAT judgement of April 2015. While the matter is

sub-judice at the Hon’ble Supreme Court, Audit view is that forex gains should be a part

of the GR computed for payment of revenue share since it falls within the broad definition

of GR given in the UASL agreement.

Short payment of LF and SUC on account of the deviation from licence conditions worked

out to ` 14.19 crore and ` 6.12 crore respectively (Annexure - 4.05).


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4.2.7 Debits from revenue as Waiver- Goodwill waiver, rebates etc.

Review of revenue of Vodafone revealed debits on account of ‘waiver’ from revenue

captured under ‘Access Fee’; ‘Itemized Billing Rental’; ‘Caller Tune Rental’ etc. leading

to understatement of revenue. During the four years under audit coverage, an amount of

` 105 crore was seen set-off from revenue in eleven LSAs5.

Waiver was an inducement or supplemental reward given by the Management of a Company/

service provider- to a client/subscriber which serves as a motivational device for a desired

action or behaviour. This could be in the form of concession in rates, waiver of a percentage

of the dues etc. Deducting the revenue foregone in this process from GR was a deviation

from the conditions of licence agreement. Management (December 2015) confirmed that

only ` 7.87 crore was set-off towards Waiver but year wise/LSA wise details of the amount

was not provided to audit. It was also informed that waivers as pointed in audit pertained

to billing disputes and the same were not added to revenue. TDSAT also had ruled that in

case a subscriber was billed wrongly, discounts given for such wrong billing was a revision

of bill and hence cannot be a part of GR.

The justification that all the waivers were on account of wrong billing is not accepted by

audit as in no cases the descriptions of the transactions as appeared in the documents/

records made available to Audit mentioned billing errors. Waivers on other accounts should

not be deducted from revenue as explained under para 3.2.2 of this Report. The setting

off of waivers from different GL codes led to short payment of ` 0.63 crore towards LF

and ` 0.31 crore towards SUC (Annexure - 4.06). In the absence of year wise/LSA wise

details, Audit computed the LF and SUC impact by apportioning the amount confirmed by

the Management amongst the LSAs where the set-off was noticed proportionate to their GR

for the relevant years. DoT may get the details from the PSP for the balance amount of

` 97.13 crore as seen in audit and ensure that there was no short payment of revenue share.

4.3 Other Income not included in Gross Revenue

Review of the reconciliation statements with the trial balances, audited AGR statements and

notes on accounts prepared by the Statutory Auditors submitted along with Auditors’ Report

and comparing them with primary accounting records of all the LSAs for the years 2006-07

to 2009-10 showed that income under some categories appearing in the company’s accounts

were not considered for computation of GR/AGR and payment of revenue share. These

revenues, though should have been a part of GR for revenue share payment was included

separately in reconciliation statements thereby avoiding payment of revenue share on them.

Income thus excluded are discussed below:

5 GLcodesinLSAswithclearmentionas‘waiver’onlyhasbeenincluded.Hencetheamountset-offcannotbetakenasabsolute


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4.3.1 Interest Income

Vodafone had accounted Interest income under different account heads. Audit noticed that

Vodafone had included interest Income in full in the GR/AGR in the year 2006-07 but

during the years 2007-08 and 2008-09 the income was only partially captured in the GR. In

the year 2009-10, income on this account was not at all included for payment of LF/SUC.

The extent of interest income not included in the GR/AGR during the four years from 2006-07

to 2009-10 worked out to ` 2741.37 crore.

Vodafone management replied that the company was of the view that interest on

inter-corporate loans and interest from banks on short term deposits cannot be treated

as revenue generated from service. The matter was sub-judice (September 2015) as the

Company had filed an appeal in the Hon’ble Supreme Court of India against the TDSAT

ruling (April 2015) which held that interest income was to be added to revenue.

Vodafone management (December 2015) accepted that interest income of ` 2738 crore was

not offered for revenue share against the figure of ` 2741.37 crore as pointed out by audit.

However, the Management did not provide details of the difference in figures as pointed out

in audit and confirmed by it. In the view of Audit, licence agreement expressly provides for

inclusion of interest income for GR/AGR for computation of revenue share. LF impact due

to the non-inclusion of interest income of ` 2741.37 crore worked out to ` 250.73 crore and

the impact on SUC worked out to ` 105.30 crore (Annexure - 4.07).

While the matter is sub-judice at the Hon’ble Supreme Court, Audit view is that interest

income should be part of the GR of the Company as per the conditions of UASL.

4.3.2 Income received on profit of Sale of fixed assets not included in GR

Audit observed from the LSA-wise books of accounts6 that ‘profit on sale of fixed assets’

by Vodafone during the years 2006-07 to 2008-09, was not considered for computation

of GR/AGR in the respective years and was reported only in the ‘Revenue Reconciliation

Statement’. Further, as income was taken net of loss from sale under the category, in cases

where loss exceeded gains in any year, the gains were not included in the GR. Total “profit

on sale of fixed assets” received during the years 2006-07 to 2008-09 but not considered

for payment of revenue share worked out to ` 200.81 crore.

Vodafone management stated that in the financials, the net profit or loss on sale of capital

assets during a year was shown as one net item and profits if any, were in the nature of

capital assets. It was also stated that TDSAT had upheld the views of the Company in its

ruling of April 2015. The management confirmed (December 2015) that an amount of

` 200.76 crore was not considered while computing GR for revenue share payment against

6 Company Trial Balance, Audited AGR statements, Auditors Report, Notes on Accounts / Statements and Revenue Rec-onciliation Statements etc.


- 53 -

` 200.81 crore as pointed out by audit. However management did not provide details of the

difference in figures.

The opinion of the company was not acceptable as:

• Thesourcefromwhichanassetwaspurchasedhasnorelevanceinthecontextof

the conditions in the licence agreement.

• Definition of GR in licence agreements expressly provides for inclusion of

miscellaneous income in GR/AGR for computation of revenue share.

• RegardingTDSATjudgmentof23April2015,auditnotedthatanappealwasfiled

by DoT before Hon’ble SC against the judgment.

While the matter is sub-judice at the Hon’ble Supreme Court, Audit view is that profit from

sale of fixed assets should be a part of the GR of the Company as per the conditions of

UAS licence.

Non-consideration of profit from sale of fixed assets in the GR had led to short payment of

` 19.45 crore towards LF and ` 8.72 crore towards SUC (Annexure - 4.08).

4.4 Bad debts deducted from GR

On a review of the AGR statements submitted by Vodafone during 2007-08 to 2009-10, it

was noticed that deduction on account of bad debts were being claimed and revenue share

was being paid only on the AGR arrived at after such deduction.

Total amount of bad debts deducted from revenue came to ` 311.91 crore which had an

adverse impact of ` 29.55 crore on LF and ` 13.02 crore on SUC paid for the three years

(Annexure - 4.09).

Definition of GR/AGR does not permit for deduction of expenses on account of bad debts

written off.

The Management, in response, stated that:

• Underthelicenceagreement,baddebtsarenotrequiredtobeaddedtoAGR.Bad

debts represent income that has not been received and is notional in nature and hence

cannot be considered as revenue.

• TDSAThadheld(April2015)thatbaddebtsaretobeaddedtorevenueandthe

Company had filed appeal in the Supreme Court against the TDSAT ruling.

The contention of the Management was not tenable, as:-


AGR.


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• Though theCompany has filed an appeal against the TDSAT judgment and the

matter is subjudice at the Hon’ble Supreme Court, Audit is of the view that since the

licence agreement permits only three deductions from the GR, deducting bad debts

from the AGR was not in conformity with the licence conditions.

4.5 Transfer of assets to subsidiary Company

Vodafone Essar Infrastructure Limited (VEIL) was incorporated in 2007 as a fully owned

subsidiary of Vodafone India Limited. The main objective VEIL was to provide infrastructure

service to telecommunication operators, including construction, leasing and maintenance of

passive infrastructure assets. As per the Scheme of Arrangements approved by the various

jurisdictional High Courts, Vodafone East Limited (VEL) (20 October 2009) and Vodafone

Cellular Limited (VCL) (17 November 2009), the passive infrastructure assets of these two

companies were to be transferred to VEIL without any consideration.

The appointed date of the Scheme was from April 2009. Though the effective date for the

transfer of assets for the two companies was November 2009, the financial impact of the

transfer of passive infrastructure was not reflected in their 2009-10 annual accounts as per

the Annual Reports of VCL, VEL and VEIL.

Further, the assets transferred to VEIL were yet to be revalued as of 31 March 2010 as

seen from the Annual Report of VEIL. Due to non-revaluation of the assets transferred as

of 31 March 2010, the difference between the fair value (after revaluation) and book value

could not be ascertained as in case of BAL (Para No. 3.5). In the absence of the same,

profit foregone on transfer of assets that would have accrued to VEL and VCL could not

be ascertained. Further, transfer of assets at NIL consideration was not an arm’s length

transaction.

Audit could not ascertain the impact of the transfer of assets at NIL consideration on

computation of LF and SUC for want of details.

4.6. Interest on revenue share short paid


worked out to ` 522.56 crore and ` 227.29 crore respectively. The interest on this short/

non-payment of LF and SUC was ` 915.54 crore (Annexure-4.10). The calculation of

interest was based on the rate prescribed in the Licence agreement i.e. 2 per cent above the

Prime Lending Rate of State Bank of India existing as on the beginning of the financial year



licence conditions.


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4.7. DoT’s response to the audit observations

Audit observations on the revenue shared by Vodafone India were communicated to DoT

in August 2015. DoT in reply (January 2016) informed that demands for understatement of

GR as pointed out in paras pertaining to Commissions/discounts to dealers netted off from

revenue (4.2.1); understatement of GR on airtime discount to subscribers (4.2.2); roaming

revenue understated due to netting of inter-operator traffic discounts paid to other operators

(4.2.3); understatement of GR due to non-inclusion of revenue from Infrastructure sharing

in full (4.2.5); under reporting of revenue due to non-inclusion of revenue/income in GR/

AGR from forex gain (4.2.6) and Interest Income (4.3.1) were raised on the PSP in 2012

for the years 2006-07 and 2007-08, based on the report of the Special Audit conducted

in 2009. But the demands have been challenged by the operator in TDSAT in 2012. The

matter was sub-judice. It was also informed that action will be taken as and when the final

court judgment is pronounced.

Thus, DoT agreed to the issues raised by Audit. However, it pleaded helplessness in

realising the revenue from Vodafone India on account of these issues being sub-judice.

Considering that a substantial amount of government revenue is blocked for many years on

account of litigation, DoT should play a proactive role in getting these legal issues settled

at the earliest.

DoT also pointed out to the variation in the amounts quantified by CAG and the demands

raised by DoT as a consequence of the Special Audit in its reply. These variations could

be on account of the differences in methodology adopted in quantifying the understatement

of revenue. Audit has determined the understated amounts on the basis of actual entries

identified through clear descriptions in the books of accounts of Vodafone India for

2006-07 to 2009-10. However, details of working papers of Special Auditors were not seen

by CAG audit.

In respect of paras 4.2.4 and 4.2.7 of this Report, pertaining to understatement of GR due

to service tax being set-off from revenue on schemes like ‘Full Pe Full’, ‘Full Talk Time’

etc. and debits from revenue as Waiver - goodwill waiver, rebates etc. respectively, DoT

stated that it has sought the response of the Company on the audit observations and action

would be taken after examining them.

On the audit observation mentioned under Para 4.3.2 on Income received on profit of sale

of fixed assets not included in GR, it was informed that demands in respect of seven LSAs

have been prepared and are in the process of issue to the Operator and demands for the

remaining circles would be issued soon.

For Para 4.4 on bad debts deducted from GR, DoT stated that “as correctly pointed out

in CAG report the deductions on account of bad debts is not permitted in the revenue and


- 56 -

licence fee statement..... DoT does not permit such deductions at the time of verification

and the amounts so claimed are being added back to GR/AGR at the time of assessment”.

In respect of para relating to transfer of passive infrastructure (4.5), reply from DoT was

awaited.

DoT also stated that the basic definition of GR and AGR was challenged by the TSP’s in

2002-03. Since then, there has been protracted litigation and is continuing till date. Also,

some of the licensees have filed (in 2012) writ petitions before various High Courts invoking

the writ jurisdiction under Article 226 of the Constitution challenging the Section-4 of

Indian Telegraph Act, 1885, as violative of the Article 14 and 19 (1) (g) of the Constitution

of India. The process of deduction verification by the CCA offices and the LF assessment

work by the DoT Headquarters was adversely impacted due to this. DoT admitted that

the numerous disputes are causing delays in assessment of the revenue share due from the

operator.

The response of DoT prove that though the revenue share regime was introduced as part of

NTP 1999, the Department has not been able to realise its due revenue share as envisaged

in the licence agreement even after more than 16 years of its implementation.


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Chapter VRevenue shared by M/s Reliance Communications Limited and

M/s Reliance Telecom Limited

5.1 Brief Profile of M/s Reliance Communications Limited (RCL) and Reliance

Telecom Limited (RTL).

Reliance Infrastructure Developers Private Limited was incorporated on 15 July 2004 as

a private limited company. During July-August 2005, the company changed its name to

Reliance Communication Ventures Limited (RCoVL) and converted into a public limited

company. In March 2006, RCoVL merged with Reliance Infocomm Limited (RIC) which

had originally obtained telecom licences in 1997 and renamed as Reliance Communications

Limited (RCL) (June 2006).

Reliance Telecom Limited (RTL) was incorporated on 1 March 1994.

5.1.1 Licences granted to RCL and RTL

RIC obtained its first licence for Basic Services (Basic licence) in Gujarat in September

1997 and basic licences in eighteen1 more LSAs in July 2001. These basic licences migrated

to UASL in November 2003. It obtained UASL for Jammu and Kashmir in September

2004. Thus by September 2004, RCL (formerly RIC) held UASL in all LSAs except Assam

and North East. It also obtained NLD and ILD licences in January-February 2002.

RTL obtained original CMTS licences in seven2 LSAs in December 1995 (migrated

to UASL in October 2007) and acquired one more CMTS licence in Kolkata in

September 2001 (migrated to UASL in April 2009). Thus, both RCL and RTL were

simultaneously holding UAS and CMTS Licences respectively in six LSAs of Bihar, HP,

MP, Kolkata, Orissa and WB.

Reliance Communications Infrastructure Limited (RCIL) and Reliance WiMax Ltd, both

subsidiaries of RCL, hold ISP licences and another subsidiary, Reliance Infratel Ltd (RITL)

(Formerly in 2006-2007 known as Reliance Telecom Infrastructure LTD (RTIL)) had

registration for IP-I services.

5.1.2 Spectrum allotted to RCL/RTL

Initially RCL was a CDMA operator whereas RTL was a GSM operator. In 2008, RCL

obtained GSM spectrum and RTL got CDMA spectrum and hence they provide services

on dual technology3. LSA wise spectrum allotted to RCL/RTL as on 31 March 2010 was

as follows:

1 AP, Bihar, Delhi, Haryana, HP, Karnataka, Kerala, Kolkata, MP, Maharashtra, Mumbai, Orissa, Punjab, Rajasthan, Tamil Nadu, UP (E), UP (W), WB,

2 Assam,Bihar,HP,MP,NE,Orissa,WB.3 ThoughRTLobtainedCDMAspectrumbutitdidn’tprovideservicesusingCDMAspectrum.


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Table 5.1

Reliance Communications LimitedSl.No. Technology Spectrum Licenced Service Area1 GSM 2 × 4.4 MHz Andhra Pradesh, Delhi, Gujarat, Haryana, J&K,

Karnataka, Kerala, Maharashtra, Mumbai, Punjab, Rajasthan, TN, UP(E) and UP(W)

2 CDMA 2 × 5 MHz Andhra Pradesh, Bihar, Delhi, Karnataka, Kerala, Kolkata, MP, Maharashtra, Mumbai, TN, UP(E) and UP(W)

3 CDMA 2 × 3.75 MHz Gujarat, Haryana, Orissa, Punjab, Rajasthan, WB

4 CDMA 2 × 2.5 MHz HP, J&K

Reliance Telecom Limited

1 GSM 2 × 8 MHz Bihar

2 GSM 2 × 6.2 MHz HP, Assam, MP, Orissa, Kolkata, NE, WB

3 CDMA 2 × 2.5 MHz Assam, NE

5.1.3 Subscriber base of RCL/RTL

RCL provides both wireless and wireline services whereas RTL provides only wireless

services. Wireless subscribers of RCL/RTL increased from 2.80 crore as on March 2007 to

10.24 crore as on March 2010 and wireline subscribers of RCL increased from 0.06 crore

to 0.12 crore during the period. The market share of Reliance Group was 14 per cent as on

March 2007 which increased to 17 per cent as on March 2010.

5.1.4 Gross Revenue (GR), Deduction, Adjusted Gross Revenue (AGR) reported and

revenue share paid by RCL/RTL


at a percentage of AGR on quarterly basis on self-assessment basis. The GR, Deductions

and AGR of RCL/RTL for the years 2006-07 to 2009-10 are as shown in the table below.

Table 5.2

(` in crore)


Revenue Share (LF + SUC)

2006-07 14264 4229 10035 70.35 1043

2007-08 16997 5158 11839 69.65 1229

2008-09 17507 5557 11950 68.26 1249

2009-10 17392 6000 11392 65.50 1163

Total 66160 20944 45216 68.34 4684


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5.1.5 Arrangement between RCL and its subsidiary RCIL for Value added Services,

Selling/Marketing and Billing:

RCL and its subsidiary RCIL entered into Value Added Services (VAS) and Selling/Marketing

agreements as detailed below to carry out their business:

i) Value Added Services (VAS) agreement:

Reliance Communications Infrastructure (RCIL) is a subsidiary having ‘A’ category ISP

licence and is in the business of providing internet, miscellaneous applications, content and

other allied services under the brand names R Connect, R World, Reliance World, 1234,

2345 and SMS content services. An agreement was signed between RCL (UAS Licence

holder) and RCIL in April 2006 for three years and was subsequently extended up to March

2012.

As per this agreement, RCIL was to provide all the above services to RCL’s subscribers

and RCL would provide the access services required to facilitate the same.

‘R Connect’ is an internet service and the same is provided to RCL subscribers through

dial up. As per the agreement, the revenue was to be shared between RCIL and RCL for

‘R Connect’ services.

‘R world’ is a one-stop-shop for applications and content which include mobile TV, videos,

games, cricket updates, music and ring tones, etc. As per the agreement, revenue was to

be shared between RCL and RCIL for applications and content services (including ‘SMS’

or ‘MMS’ based applications and content services).

ii) Selling and marketing agreement:

RCIL also entered into a selling and marketing agreement with RIC (subsequently RCL) in

October 2004 valid up to September 2007. This agreement was renewed in October 2007

between RCIL and RCL for a further period of 3 years.

The term ‘business’ was defined under Section I of the agreement as the means of marketing

of RCLs services or various tariff plans relating to telecommunications services offered by

RCL including fixed wireless terminals/fixed wireless phones, etc., and any other services

to be provided by RCL from time to time.

Clause 2.3 stated that while marketing the services, RCIL was free to bundle the tariff

plans of RCL with other products or services as it deemed fit and offer composite schemes

to customers.

Clause 2.4 stated that RCIL, if required could enter into agreements with distributors,

retailers or any other person for promotion of the schemes and services.

As per Clause 2.8, nothing contained in the said agreement shall deem RCIL to be a telecom

service provider and in no circumstances shall RCIL be a reseller of RCLs services.


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Under Clause 3.9, RCIL shall on behalf of RCL, bill and collect the amount due from

RCL’s subscribers. For this purpose, RCIL shall procure and install all billing and other

software and necessary infrastructure as directed by RCL from time to time.

The fees for the marketing, billing and collection were detailed in Clauses 7.1 and 7.2

of the agreement. Thus through this arrangement RCL effectively diverted a significant

non determinable portion of revenue to a subsidiary resulting in avoidance of payment of

LF and SUC on such diverted revenues.

5.2 Under reporting of Gross Revenue in the books of accounts of Reliance

Communications Limited (RCL)/Reliance Telecom Limited (RTL)


without any set-off for related item of expense, etc, and as brought out in Para 1.5, service

revenue (amount billable) shall be shown gross and details of discount/rebate indicated

separately.

Audit examination of records/books of accounts of RCL/RTL and its related subsidiaries

revealed that these companies had not adhered to the provisions of the licence agreement as

discussed in following paragraphs.

5.2.1 Booking of Prepaid Revenue net of Free Air Time/Commission by RCL/RTL

Audit examination of records/books of accounts of RCL/RTL for the years 2006-07 to

2009-10 revealed that

• FreeAirTime(FAT)giventosubscriberswasnotaccountedforinthefinancial

systems at all.

• Revenueaccountedwasnetofcommissiongiventodistributors/agentswhichwasin

violation of the licence agreement.

On being pointed out by audit, Management replied that

• Tariffmeansratesandrelatedconditionsw.r.t.rentals,deposits, installationfee,

free call usage charges and any other related fees or service charge. This shows that

while any tariff was introduced, it was essential that tariff should include details

of free minutes. As free minutes were not chargeable and billable, same cannot be

considered for revenue. Company are not generating any revenue from such free

minutes hence no question of any revenue/business promotion expenses does arise.

• Freetalktime/freeairtimewerenotinnatureofdiscountsandrebatehencethere

was no need to account for or to show the same in accounts. It’s a service to

subscriber free of cost and no revenue was earned from free talk time/free air time

and hence cannot be considered as rebate/discount.


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• Hencesuchminuteswereeliminatedinbillingcycleforchargingtosubscriberas

the same were offered free of charge to subscribers.

• Consideringvalueoffreetalktime/freeairtimewasnotcorrect.TDSATalsovide

its judgement dated 23 April 2015 very categorically held that inflow should be real

and income should not be notional.

• InthiscasenorealinflowtotheCompanyandnovaluewasearnedbytheCompany;

hence it was justified not to include free minutes in billing to subscribers.

The reply of the management is not tenable as –

• Freetalktime/freeairtimeoverandabovethetariffplanssubmittedbytheCompany

to TRAI was in the nature of business promotion activity, cost of such offers amount

to expenses. Further in view of provisions of UASL agreement, service revenue

should be shown in gross without any set off. It should be booked separately in the

books of accounts and should not have been eliminated at “Mediation level4”. While

noting that the TDSAT judgment dated 23 April 2015 referred by the Management

in its reply has been challenged in the Hon’ble Supreme Court by DoT in July 2015,

Audit is of the view that elimination of free talk time at mediation level itself and

not showing it in books of accounts was in violation of the licence agreement.

• Similarly,nettingoffofcommissiongiventodistributors/agentswasalsoinviolation

of the agreements.

Though DoT was aware of the accounting of RCL/RTL through the notes/schedules of

annual reports, no action was found to be taken to prevail upon the Company to furnish the

GR as mandated in the Annexure III of the licence agreement.

5.2.2 Booking of revenue by RCL net of commission given to its subsidiary (RCIL)

and booking of revenue in the subsidiary (RCIL) books of accounts instead of

RCL’s accounts

Reliance Communications Infrastructure Limited (RCIL) which had got Category “A” ISP

licence was a wholly owned subsidiary of RCL during the years 2006-07 to 2009-10. As

detailed in para 5.1.5, RCL and RCIL entered into agreements for providing Value Added

Services (VAS) to RCL’s subscribers and Selling/ Marketing products of RCL by RCIL.

Consequent to these agreements, revenue from VAS was accounted in the books of RCIL

and only a portion of the total revenue was passed on to RCL. By this arrangement, RCL

paid LF only on the portion of revenue passed on by RCIL and not on GR earned from

subscribers of VAS which was in violation of the licence agreement.

4 A mediation device is a network component in Telecom network that receives, processes, reformats and sends infor-mation to other formats between network elements and are commonly used for Billing and Customer Care systems.


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Also, the revenue earned towards sale of handsets working under CDMA technology which

cannot be independent from telecom service, Subscribers Identity Module (SIM) cards and

installation charges from subscribers which were essential telecom services, was accounted

in RCIL’s books of accounts. Total understatement of GR by RCL owing to its arrange-

ment with its subsidiary (RCIL) worked out to ` 5594.63 crore. The income booked in the

RCIL’s accounts instead of RCL’s has been apportioned among the UAS licences on the

basis of percentage of GR for calculation of impact on short/non-payment of LF and SUC

on the basis of rates applicable for respective service areas. Audit considers this to be the

most suitable and conservative method of determining the under reporting of revenue share.

Details are furnished in following paragraphs:-

(A) Commission/discount paid to RCIL by RCL for selling and marketing of its

services netted off from its revenue for computation of GR/AGR.

As per the marketing agreement between RCL and RCIL, RCIL was an agent and autho-

rized person for selling the product of RCL. As per the agreement, RCL would sell the

prepaid vouchers to RCIL at the rate as agreed from time to time and RCIL would sell the

same to its distributors at the same net price.

From the books of accounts of RCIL for the period from 2006-07 to 2009-10, it was found

that the discount/commission received by RCIL from RCL amounting to ` 1170.51 crore

for selling its product was shown as “Billing Income” which was in turn the commission

paid to the distributors by RCIL. However, RCL had netted of the commission/discount

paid to RCIL on sale of prepaid cards and only the net realized value was accounted as

revenue that was considered for AGR.

The value of commission/discount given to distributors/agents for sale of pre-paid products

(SIM cards/recharge vouchers) was to be treated as business expenses by RCL and the gross

value of the prepaid cards i.e. the value of the telecommunications service being provided

by the operator (RCL) was required to be considered as revenue without any set off.

On being pointed out by Audit, it was replied by the management that-

• Thearrangementwasprincipaltoprincipal.Theinvoiceswereissuedtothedistributor

on agreed price and the same is considered as revenue.

• InclusionofnotionalincomeintheformofdiscountonprepaidvouchersinAGR

was not tenable. Only realized value to be considered in the AGR.

The reply of the management is not tenable as

• RCILwasanagentofRCLunderamarketingagreementandasclearlymentioned

in the agreement, RCIL shall not be deemed to be a telecom service provider and

in no circumstances RCIL be a reseller of RCLs services. The transaction between


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RCIL and RCL were in the nature of distributor acting on behalf of the company and

in substance there exists a principal to agent relationship only as explained in para

3.2.1 (A).

• Discount paid on prepaid vouchers was not a notional income as stated by the

Management in its reply. Discount paid was marketing expenses.

While the matter is sub-judice at Hon’ble Supreme Court, Audit view is that netting of

commission/discount paid to RCIL on sale of prepaid cards was against the UAS licence

agreement and hence GR/AGR of RCL for the years 2006-07 to 2009-10 was understated

by ` 1170.51 crore resulting in short payment of LF and SUC by ` 106.88 crore and

` 30.88 crore respectively (Annexure - 5.01).

(B) Non consideration of gross value of revenue on account of R world and SMS

content services in the GR/AGR of RCL

As mentioned in para 1.4 (a), the GR shall be inclusive of revenue from VAS along with

other revenues stated therein without any set-off for related item of expense.

RCL provides telecommunication services under UASL. RCIL, a wholly owned subsidiary

of RCL, having ISP licence provided internet, miscellaneous content and other allied services

under the brand names ‘R Connect’, ‘R world’, ‘Reliance world’, ‘1234’, ‘2345’, and

‘SMS content services’. As stated in para 5.1.5, RCL and RCIL have entered into agreement

for providing VAS to RCL subscribers.

On scrutiny of the books of accounts of RCIL and RCL, it was observed that as against

revenue from RCL’s subscribers on account of VAS (R World and SMS content services)

amounting to ` 1273.45 crore booked in the accounts of RCIL, only ` 265.58 crore was

passed on to RCL. Hence ` 265.58 crore only was considered in GR/AGR of RCL for

computation of revenue share.

On being pointed out by audit it was replied by the Management that VAS (R world and

content SMS) providers are neither regulated nor licenced and they mainly act as channel

partners to mobile network. RCIL had paid relevant access charges to RCL on which RCL

had already paid the licence fee and hence question of additional licence fee does not arise.

The reply of the management is not tenable as R World and SMS content services are varied

bundle of VAS over SMS, voice etc. When the content delivery was not over the internet

but over SMS and voice etc., the same was not within the scope of ISP licence held by

RCIL. VAS to subscribers could be provided by only UAS/CMTS licensee. Hence, the

GR from subscribers on account of VAS should be booked in RCL’s accounts and to be

included in the GR for computation of revenue share. Any amount payable to RCIL, being

VAS/ content service provider, should be charged to expense in RCL’s accounts.


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Hence, the revenue of ` 1007.87 crore (` 1273.45 – ` 265.58) should have been included

in GR/AGR by RCL.

The Impact on short payment of LF and SUC on this account was ` 91.99 crore and


(C) Non-inclusion of revenue from Caller Ring Back Tones for computation of GR/

AGR by RCL.

Caller Ring Back Tones (CRBT) is a type of VAS that was introduced by RCL for its

subscribers and intimated to TRAI (May 2006). As explained in above paragraph, revenue

from VAS should be included in GR/AGR.

On scrutiny of the books of accounts of RCIL and RCL for the years 2006-07 to 2009-10, it

was observed that the revenue of ` 540.84 crore pertaining to CRBT was booked in RCIL’s

books of accounts. No revenue from CRBT was found to be booked in RCL’s books of

accounts. Thus, non accounting of ` 540.84 crore in the books of RCL resulted in under

reporting of GR/AGR.

On being pointed out by Audit, it was replied by the Management that the CRBT service

was introduced by RCL for its subscribers in May 2006 for only one month on promotional

basis. When this service was launched on commercial basis, the same was provided by

RCIL under VAS/content services (R World services). RCIL was providing content

services on standalone basis as separate legal entity. No licence is required to provide

content services.

The reply is not tenable as CRBT is a VAS provided over SMS and voice, etc. and

Audit opines that this could be provided only by UASL/CMTS licensee. Thus revenue from

CRBT (VAS) should be included in GR for computation of revenue share.

Hence, the revenue of ` 540.84 crore from CRBT should have been included in GR/AGR

by RCL. The impact on short payment of LF and SUC on this account was ` 49.34 crore

and ` 14.40 crore respectively (Annexure - 5.03).

(D) Non-inclusion of revenue from sale of SIM cards for computation of GR/AGR

by RCL.

As stated in para 5.1.5, RCIL, a wholly owned subsidiary of RCL and having Category

“A” ISP licence entered into an agreement with RCL for selling/ marketing products of

RCIL.

During the course of audit of accounts of RCL and RCIL for the years from 2006-07 to

2009-10, it was found that the revenue from sale of SIM cards amounting to ` 103.17 crore

were booked in the accounts of RCIL for the years 2008-09 and 2009-10.


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SIM card is an integral part of telecom services without which service cannot be activated.

SIM cards cannot be sold as goods, independent from the services provided by the UAS

licensee. SIM cards on its own without the services would hardly have any value. Further,

even in terms of selling and marketing agreement between RCIL and RCL, RCIL was not

a telecom service provider and in no circumstances RCIL would be a reseller of RCL’s

services.

Hon’ble Supreme Court of India in its judgment dated 4 August 2011, in an appeal by

IDEA Mobile Communications Ltd. versus Commissioner of Central Excise and Customs,

Cochin held that the amount received by the cellular company from its subscribers towards

SIM card would form part of the taxable value for levy of service tax, for the SIM cards

were never sold as goods independent from services provided.

In view of all the above facts, the value of SIM cards sold should form part of the GR of

RCL who was a telecom service provider and not with RCIL, an ISP licence holder and a

subsidiary of RCL.

The impact of short payment of LF and SUC on this account was ` 9.40 crore and


Reply to an Audit observation issued to the company (May 2015) in this regard was awaited

(January 2016).

(E) Non-inclusion of revenue from sale of handsets for computation of GR/AGR by

RCL

As mentioned in para 1.4 (a), the GR shall be inclusive of sale proceeds of handsets (or any

other terminal equipment etc.), along with other revenues stated therein without any set-off

for related item of expense.

As stated in para 5.1.5, RCIL, a wholly owned subsidiary of RCL and having category

“A” ISP licence, had entered into an agreement with RCL for selling/ marketing products

of RCIL.

During the course of audit of accounts of RCL and RCIL for the years 2006-07 to 2009-10,

it was found that the revenue from sale of CDMA handsets amounting to ` 2523.95 crore

were booked in the accounts of RCIL for the years 2006-07 to 2009-10. No revenue on

account of sale of handsets was booked in RCL.

It was observed from the tariff plans submitted to TRAI during April/June 2006 that

RCL offered bonus talk time to prepaid customers on selected handsets (CDMA) models.

Further, internal correspondences within the Company during 2006, 2007 and 2009 showed

that the handsets were bundled with schemes offered by RCL.


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On being pointed out by Audit, it was replied by the Management that-

• RCLwasnotdealinginhandsetsale.AllsalesarebyRCILthroughitsdistributors/

dealers and not to any customers.

• NofreeminutesaregivenbyRCILtothedistributors/dealers.RCLprovidesfree

promotional minutes on activation by the subscribers as a promotional offer. Since

these are free minutes, no revenue was accrued to RCL.

• Saleofhandsetsdoesnotrequireanytelecomlicence.RCILhadnotdonebundling

as RCIL had not shared any handset revenue with RCL.

• AsperAugust2007judgmentofTDSAT,‘bundlingoftelecomserviceswillmean

that if somebody buys from a company and that company give concession in services

or reduce monthly rental’.

• AsperHon’bleSupremeCourtverdict,itisopentothelicenseesnottoundertake

activities for which they do not require telecom licence and shall transfer these

activities to any other person, firm or company.

The reply is not tenable as-

• ThoughRCILsoldthehandsetsonbehalfofRCLasperthemarketingagreement

entered between them, sale of handsets and rendering of services under the CDMA

technology were not independent activities but an integral part of telecom activity

under UAS Licence. Hence sale of handsets (CDMA) by RCIL in the guise of

selling and marketing agreement between it and its holding company RCL could not

be termed as an independent non licenced activity. Hence the entire revenue on sale

of handsets should be considered for revenue sharing.

• RCLprovided various concessions to the customers/distributors and bundled the

services and RCIL is only selling the handsets on behalf of RCL as per the marketing

agreement.

• Auditisnotstatingthatsaleofhandsetswasalicencedactivitybutcontendsthatunder

CDMA technology, sale of handsets and rendering of services were inseparable.

• TDSAT judgment of August 2007 was set aside by Hon’ble Supreme Court in

October 2011.

Hence, the revenue from sale of handsets (CDMA) of ` 2523.95 crore should be included

in the GR/AGR of RCL. The impact on short payment of LF and SUC on this account was



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(F) Non-inclusion of revenue from installation charges of Fixed Wireless Phone/

Terminal (FWP/T) in subscribers’ premises for computation of GR/AGR

by RCL.

As mentioned in para 1.4 (a), the GR shall be inclusive of installation charges along with

other revenues stated therein without any set-off for related item of expense.

From scrutiny of the books of accounts of RCL and RCIL for the period from 2006-07 to

2009-10, it was observed that the revenue on account of installation charges of FWP/T at

the subscribers’ premises amounting to 248.29 crore was booked in the accounts of RCIL.

FWP/T instruments were integral to the provision of telecom service to be provided by

RCL to its subscribers. Since RCL was a UAS licensee, the revenue of ` 248.29 crore

pertaining to instrument cost, installation and upfront charges received from the subscriber

should be part of GR of RCL.


• RCLenteredintoanagreementwithRCILforprovidingFWP/Tinstallationservices.

RCIL provides services of installation of the instruments at subscriber’s premises

for which RCIL receives amount directly from the subscriber. It was carried out by

RCIL at its own risk. Therefore, revenue accrued from this activity rightly belongs

to RCIL. The activity of installation can be undertaken by anybody i.e. even by

the persons who do not have any telecom licence. TDSAT in its judgment in May

2010 held that the installation charges are given back to the person who does the

installation work and hence it would not come in the purview of AGR.

• AsperHon’bleSupremeCourtjudgment,itwasopentothelicenseesnottoundertake

activities for which they do not require licence.

The reply of the management is not tenable-

• As it is evident from the letter dated 1April 2006 fromRIC toRCIL that the

FWP/Ts were the property of RIC (later changed into RCL) and it had requested

RCIL to install it in the premises of the subscriber. Though RCIL could undertake

the job of installation of FWP/T but it would be only an agency function and in terms

of UASL agreement, GR from subscribers for installation of terminal equipment

(FWP/T) should be revenue of UAS licensee (RIC/RCL) and charges payable to

installation agency (RCIL) should be expense of the licensee. TDSAT judgment

of May 2010 referred in management reply is not related to telecom operators but

related to Direct to Home (DTH –related to TV broadcast) operators.

• Auditdoesnotquestionwhowasundertakingtheactivitybutcontendsthatrevenue

from installation charges of FWP/T should be considered for Revenue Share in

accordance with Licence Agreement.


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Hence, the entire revenue of ` 248.29 crore accounted in RCIL’s books on account of

installation of FWP/T should have been taken to the GR/AGR of RCL. The impact on short

payment of LF and SUC on this account was ` 22.71 crore and ` 6.50 crore respectively

(Annexure - 5.06).

5.2.3 Netting of commission from the revenue by RCL for computation of GR/AGR

On scrutiny of the records furnished by RCL, it was noticed that the commission paid on

broadband prepaid vouchers amounting to ` 1.11 crore was netted off from the revenue and

the net revenue was booked in the accounts of RCL.

On being pointed out by audit, it was replied by the Management that it was just the

discount given on prepaid vouchers which was netted off with the GR and was not liable

to LF payable to GOI.

The reply of the Management is not tenable as netting of commission from revenue was not

in conformity with the licence agreement. The impact on short payment of LF and SUC on

this account was ` 0.09 crore and ` 0.03 crore respectively (Annexure - 5.07).

5.2.4 Netting of revenue earned from channel partners/Franchisees from expenses

for computation of GR/AGR by RCL

On scrutiny of the books of accounts of RCL for the years 2006-07 to 2009-10, it was

noticed that the income from the provision of broadband connectivity to channel partners/

franchisees amounting ` 4.50 crore were credited to expense heads. This resulted in

non-consideration of the revenue in the GR/AGR.

On being pointed out, it was replied by the Management that the adjustments involve setting

off reimbursement of one cost, viz. cost of access from another cost viz. commission

payable by the Company. It was not a case where an item of revenue and an item of cost

were netted off so that revenue was recorded short or not recorded.

The reply is not tenable as the franchisees were paid commission for their activities. While

cost of access actually was a cost to the franchisee and revenue to the licensee, on the other

hand commission payable by company was an expense of licensee. Therefore contrary to

licensee’s claim, it was indeed pairing off an item of revenue with an item of cost.

The impact on short payment of LF and SUC on this account was ` 0.42 crore and


5.2.5 Netting of revenue by discount given to distributors/dealers/franchisees on sale

of prepaid products for computation of GR/AGR by RTL

As per the Accounting Policy of Reliance Telecom Limited (RTL) for the year 2006-07

“Revenue is recognized as and when the services are provided on the basis of actual usage

of the company’s network.” This policy was revised for the years 2007-08 to 2009-10


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which states that Revenue from telecommunication services is recognized on the basis of

actual usage of the company’s network in accordance with contractual obligations and is

stated net of taxes and trade discounts.

It was observed during audit that a sum of ` 11.95 crore (` 10.69 crore in respect of

RTL and ` 1.26 crore in respect of Reliable Internet Services Limited (RISL) which later

merged with RTL in September 2007), was shown under expenses as discount granted to

distributors/dealers/franchisees for sale of prepaid cards and recharge vouchers for the first

quarter of 2006-07. However, this discount was netted off with the “Billing Revenue” in

the Annual Accounts of the Company and also with the GR in the AGR statement (for the

year 2006-07).

From 1 July 2006 onwards, the revenue on sale of prepaid cards and recharge vouchers was

accounted net of discounts given to distributors/dealers and the netted off revenue only was

considered for GR/AGR instead of including the gross value.

Based on the amount of discount booked and corresponding prepaid revenue (net) submitted

under AGR statements for eight LSAs of RTL/RISL for the quarter I of 2006-07, the

quantum of discount was projected by audit for the years 2006-07 (for quarter II to IV),

2007-08, 2008-09 and 2009-10. Total amount of discount netted off from revenue for the

years 2006-07 to 2009-10 worked out to ` 392.99 crore.

The above amount of ` 392.99 crore was calculated after taking into account the ratio of

discount to prepaid revenue (net) booked for the first quarter of 2006-07 as the booking of

discount was dispensed with from the second quarter of 2006-07 onwards by the company.

On being pointed out by Audit about the netting of discount from revenue, it was replied

by the Management that-

• Therevenuefromprepaidvoucherwasrecognizednetofdiscount.Thearrangement

with distributors was Principal to Principal. The invoices were issued to distributor

on agreed price and the same was considered as revenue. Only realized revenue was

to be considered in the AGR.

• Overaperiodoftimevariousrangesofprepaidproductswerelaunchedandapplying

same ratio for all years was not correct.

The reply of the management is not tenable in view of audit explanation given in para

3.2.1 (A). Regarding projection of amount of discount by Audit, since the Company

dispensed with the booking of discount from the second quarter of 2006-07 and also the

details of the actual GR figures was not disclosed either to the DoT or Audit, therefore,

Audit had to take recourse to the application of the ratio of discount to prepaid (net)

pertaining to the quarter I of 2006-07 to project the amount of discount for the quarters II

to IV of 2006-07 and for the years 2007-08 to 2009-10.


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While the matter is sub-judice at Hon’ble Supreme Court, Audit view is that netting of

commission/discount paid to distributors/dealers on sale of prepaid products was against the

UAS licence agreement and hence GR/AGR of RTL for the years 2006-07 to 2009-10 was

understated by ` 392.99 crore resulting in short payment of LF and SUC by ` 25.72 crore


5.2.6 Non-inclusion of value of Free of Charge (FOC) recharge vouchers given to

distributors for computation of GR/AGR by RTL

Examination of the books of accounts of RTL for the period 2006-07 to 2009-10 revealed

that service tax of ` 12.12 crore paid on free of cost recharge vouchers given to the

Distributors was booked under expense as ‘service tax paid – not billed’.

Also ` 85,218 and ` 11,09,799 were booked under expense as “Channel Associative –SE

Incentive” for 2006-07 and 2007-08 respectively representing the service tax paid on Free

Recharge coupon given to distributors. Though the service tax was paid, the gross value of

FOC vouchers was not found to be included in the GR of RTL.

On being pointed out by Audit, it was replied by the Management that

• TheLFwaspayableonrealizablerevenueonly.NoLFwaspayableonthenotional

income. Income which was not accrued to Licensee cannot be charged for LF. In

the aforesaid cases, company has not earned any revenue from these vouchers and

no inflow was there. Hence notional revenue from these vouchers cannot be included

in the revenue of the company.

• TDSATvideitsjudgmentdated23April2015alsoheldthatinordertobecounted

as “GR”, the item of inflow must not be notional but real.

The reply of the management is not tenable as

• Free recharge coupons given to distributors onwhich Service Taxwas paid by

the Company was nothing but discounts/commission paid to them. In view of

explanation given in para 3.2.1 (A), commission paid to distributors should not be

netted off from revenue for computation of GR/AGR. Free recharge coupons given

to distributors are equivalent to cash for them as these can be sold on the basis of

airtime available in the coupons.

• While noting that TDSAT judgment dated 23 April 2015 referred in reply was

challenged in Hon'ble Supreme Court by DoT in July 2015, Audit is of the view

that licensee instead of giving cash as commission had passed on benefit of use

of telecom service for which revenue was forgone and hence it was not a case of

notional revenue.

Based on the amount of service tax paid, the gross value of FOC recharge vouchers have

been worked out to ` 87.32 crore. The impact on short payment of LF and SUC on this

account was ` 5.70 crore and ` 3.00 crore respectively (Annexure - 5.10).


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Statements) though reported in the books of accounts.

5.3.1 Non consideration of forex gain in GR/AGR by RCL and RTL:

In the books of accounts of RCL/RTL, total net balances under the account codes operated

for booking transactions related to foreign exchange gain/loss were included in the Schedule

of “Financial Charges (net)” as Foreign Currency Exchange Fluctuation (gain)/loss (net).

From quarterly GL balances of all account codes operated for accounting Forex gain for

2006-07 to 2009-10, it was noticed that out of total Realized gain of ` 1934.72 crore

(` 1820.49 crore for RCL and ` 114.23 crore for RTL), only ` 600.86 crore (RCL

` 590.56 crore and RTL ` 10.30 crore) was considered by the licensee for GR/AGR in the

year 2007-08. Thus realised forex gain of ` 1333.86 crore (RCL ` 1229.94 crore and RTL

` 103.92 crore) was not considered for GR/AGR.

It is pertinent to mention here that the above realised gain calculated from the data extracted

from the reports generated from Financial System (SAP) did not represent the actual gain

of that particular item since the Company recasts the value of all the items included under

the foreign exchange gains/losses head every year, the matured items are accounted under

realised gains and the un-matured items remain under unrealised gain. Thus, the realised

gain of a particular item in that year would not be the actual gain due to accounting of the

gains /losses of that item during the intermediate period under unrealised. Audit could not

arrive at the actual value of items accounted under realised gain every year for want of

original value of each item. Further, audit has considered the quarterly net gain, head of

account-wise and LSA-wise, as it was not possible for audit to segregate/collect the figures

of gains only from the data made available. The operator should calculate the gain of each

item with reference to its initial value of accounting and include the total forex gain in GR/

AGR.

On being pointed out by Audit, it was replied by the Management that,

• AspertheTDSATjudgmentdated30August2007,thesaiditemwasnotconsidered

for the calculation of LF.

• KeralaHighCourtinitsjudgmentdated10July2012statedthattherevenueearned

from Non Telecom activities should not be included for the purpose of calculation

of LF.

• AS-9doesnotrecognizeforexgainasrevenue.AspertheTDSATjudgmentdated

23 April 2015, the aforesaid income was not liable for LF.

• TheCompany,tillQuarter3of2008-09waspayingLFonnon-Telecomrevenue

also and subsequently claimed refund from DoT of the LF paid on such non-Telecom

revenue. The unrealized gain was notional and not liable to LF.


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The reply of the management is not tenable in view of audit explanation already given

in para 3.2.5. Further, regarding specific reply of the Management, Audit views are as

follows:

• TDSATjudgmentdated30August2007wassetasidebyHon’bleSupremeCourtin

October 2011.

• KeralaHighCourt order dated 10 July 2012 is an interimorder.Audit view is

that since Licence Agreement provided “GR shall be inclusive of …… any other

miscellaneous revenue, without any set-off for related item of expense, etc,” and

forex gain was part of Miscellaneous Revenue, this should be included in GR for

computation of revenue sharing.

• TDSATjudgmentdated23April2015referredinreplywaschallengedinSupreme

Court by DoT in July 2015. While the matter was sub-judice at the Hon’ble Supreme

Court, Audit opines that non-consideration of forex gains in the GR by the Company

was a deviation from the licence conditions.

The understatement of GR by ` 1333.86 crore due to non - inclusion of forex gain

resulted in short payment of LF and SUC ` 107.63 crore and ` 26.93 crore respectively

(Annexure - 5.11).

5.3.2 Non consideration of Interest/Other income for computation of GR/AGR by

RCL/RTL

As mentioned in para 1.4 (a), the GR shall be inclusive of interest, dividend and any

other miscellaneous revenue along with other revenue stated therein without any set-off for

related item of expense. Audit scrutiny of books of accounts of RCL/RTL revealed that

Interest/other income have been partly considered for computation of GR/AGR during the

period 2006-07 to 2009-10 as discussed below-

(A) Non - inclusion of interest/dividend income in GR/AGR by RCL/RTL

In respect of RCL, total interest/dividend income booked in the accounts for the years

from 2006-07 to 2009-10 was ` 1328.40 crore, out of which ` 98.88 crore had been

considered in GR/AGR for computation of revenue share. Thus interest/dividend income of

` 1229.52 crore was not considered in GR/AGR.

Similarly, in respect of RTL, total interest income booked in the accounts for the years

2008-09 and 2009-10 and income from investment in 2009-10 of ` 139.52 crore was not

considered for GR/AGR by RTL.

The income from investment of RTL for the year 2008-09 has been commented separately

under para 5.3.4 due to netting of some income with expenses.


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(B) Non - inclusion of other income in GR/AGR by RCL/RTL

The total other income booked in the accounts of RCL for the years from 2006-07 to

2009-10 was ` 161.78 crore, out of which ` 81.73 crore had been considered in GR/AGR

for computation of revenue share. Thus other income of ` 80.05 crore was not considered

in GR/AGR.

Similarly in respect of RTL, the total other income (profit on sale of securities/bonds,

miscellaneous, etc.) booked for the years 2008-09 and 2009-10 was ` 537.40 crore. Out of

total other income, only ` 0.78 crore had been considered for GR/AGR for computation of

revenue share and ` 536.62 crore (` 537.40 crore - ` 0.78 crore) was not considered for

GR/AGR.


• AspertheTDSATjudgmentdated30August2007,Licenseesarerequiredtopay

a share out of the revenue generated from Telecom activity. This income was not

related to Telecom Activity and so not liable for LF.

• Hon’bleKeralaHighCourt in itsorderdated10July2012 restrictedDoTfrom

raising any demand for LF under which it seeks to include revenues arising from

any non licenced telegraph activities.

• TDSATinitsjudgmentdated23April2015excludedvariousnontelecomrevenue

items which have not been specifically provided in definition of GR in the Licence

agreement. Hence the said income was not liable for LF.

The reply of the Management is not tenable as

• TDSAT judgment dated 30August 2007was set aside by theHon’ble Supreme

Court in its judgment dated 11 October 2011.

• KeralaHighCourtorderdated10July2012referredinreplyisaninterimorder.

• WhilenotingthattheTDSATjudgmentdated23April2015hasbeenchallenged

in the Hon’ble Supreme Court by DoT in July 2015, Audit is of the view that

Licence agreement clearly prescribes the inclusion of interest, dividend and any

other miscellaneous revenue in GR/AGR.

In view of above, non - inclusion of interest, dividend and other miscellaneous income as

mentioned above in para 5.3.2 (A) and 5.3.2 (B) has resulted in understatement of GR/AGR

by ` 1985.72 crore. The impact on short payment of LF and SUC due to under reporting

of interest and miscellaneous income was ` 153.44 crore and ` 48.56 crore respectively

(Annexure - 5.12).


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5.3.3 Interest free loan to subsidiary by RCL resulted in avoidance of payment of

LF/SUC

Test check of Annual Accounts of RCL revealed that interest free un-secured loan was given to its subsidiary Campion Properties Limited (CPL) and Reliance Tech Services Private Limited (RTSPL). The accounts revealed that the loan amount at the end of 2006-07, 2008-09 and 2009-10 against these subsidiaries were ` 36.78 crore (CPL), ` 3.63 crore (RTSPL) and 15.27 crore (RTSPL) respectively. As these two companies were not wholly owned subsidiaries of RCL during these particular years, the grant of interest free unsecured loan was in violation of Section 372A of Companies Act, 1956 and not in line with the arm’s length relation to be maintained between the holding and subsidiary companies.

On being pointed out by audit, it was replied by the management that as per section 372A (8) (a) (i), provisions of section 372A does not apply to any loan made by a company providing infrastructural facility. RCL being telecom service provider was exempted from the provision of section 372A.These companies were promoted to support activities of RCL and therefore it was necessary for RCL to provide financial support repayable at demand, to carry out their activity smoothly in overall interest of RCL, hence it was not prejudicial to the interest of RCL. Notional income was not liable to LF.

The reply of the management is not tenable as RCL was a telecom service provider and was not established with the object of providing infrastructural facilities and hence the exemption under section 372A (8) (a) (i) was not applicable to it. Thus, GR/AGR of RCL was lower by the amount of interest receivable and thereby short payment of LF and SUC. The impact on short payment of LF and SUC could not be quantified since the date of release of loan

and period for which above interest free loan remained outstanding was not available.

5.3.4 Netting off of loss on sale of investment and non - inclusion of balance profit on

sale of investment for computation of GR/AGR by RTL

As per financial statements of RTL for the year 2008-09, income from non-trade investments was ` 108.92 crore.

However no income on this account was considered for computation of GR/AGR.

On being pointed out, it was replied by the management that-

As per TDSAT judgment dated 30 August 2007, various revenues which were not related to telecom activities should not be included in the AGR for the purpose of LF.

Only interest/dividend income with direct nexus with the provision of telecom service merits inclusion in the AGR. The profit on sale of investments was received on borrowed funds and company was paying interest on the same. Hence it was not included in the AGR.

The reply of the management is not tenable in view of audit explanation given under

para 5.3.2.


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Hence, non-inclusion of profit on sale of investments of ` 108.92 crore has resulted in

understatement of GR/AGR resulting into short payment of LF and SUC by ` 7.30 crore

and ` 3.94 crore respectively to Government of India (Annexure - 5.13).

5.3.5 Different standards for payment of dividends - RCL

As mentioned in para 1.4 (a), GR shall be inclusive of dividend along with other revenue

stated therein. This implies that licence agreement intended to include the revenue from

investment (dividend) for the purpose of revenue share. An analysis of the annual accounts

of RCL for the period from 2006-07 to 2009-10 indicated that its investments in the form

of equity shares and preference shares in its subsidiaries and associates had increased

approximately five times from ` 5434.42 crore in 2006-07 to ` 31898.30 crore in 2009-10

(Annexure - 5.14).

RCL was the majority shareholder in most of these subsidiaries and associates. However,

RCL did not receive any return on these investments during this period in form of dividend

or otherwise in spite of the fact that the total profit of these companies after tax was

` 708.61 crore, ` 668.65 crore, ` 1118.01 crore and ` 1499.98 crore during each of the

years from 2006-07 to 2009-10 respectively (Annexure - 5.14).

It was seen in audit that RCL had adopted different standards for declaration of dividend

in respect of RCL itself and for other non-licensee companies where it had investments

and majority shareholdings. While RCL had declared a dividend of 10 to 17 per cent on

face value of shares for 2006-07 and 2009-10, no dividend was declared by any of the

subsidiaries and associates where RCL had a majority shareholding. While dividend paid by

RCL was an expense for RCL and was not subject to LF and SUC, the dividends received

by it from companies/entities it had invested in would have attracted imposition of LF and

SUC as per terms of the licence agreement.

Thus non-declaration of dividend by subsidiaries and associates in which RCL had invested

was not in accordance with RCL’s own action of declaration of dividend and resulted in

reduction of revenue of RCL and consequently lower payment of LF and SUC.

5.4 Revenue considered for Licence Fee but not considered for Spectrum Usage

Charges (SUC)

5.4.1 Non consideration of revenue from sale/lease of bandwidth for computation

of SUC

UASL agreement provides that “while calculating AGR for limited purpose of levying

spectrum charges based on revenue share, revenue from wireline subscribers shall not be

taken into account”. Further, in the format of statement of revenue and licence fee (AGR Statement) prescribed for the UASL agreement-


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• Item1Ahasbeenprescribedtoreflectthe“revenuefromwirelinesubscribers”and

• Item8hasbeenprescribedtoreflect the“revenuefromsale/leaseofbandwidth,links, R&G cases, turnkey projects etc.”

In the statement of revenue and licence fee (AGR Statement) for the years 2006-07, 2007-08, 2008-09 and 2009-10, revenue from sale/lease of bandwidth links, R&G cases, turnkey projects etc. amounting to 1588.19 crore was shown under item 8 of the statements. However, this revenue was not considered for payment of SUC though considered for payment of LF which was in contravention of the provisions of the licence agreement.

The Management replied that the UASL agreement provides for the limited purpose of levying annual royalty/SUC and the revenue from wire line subscribers shall not be taken into account. Hence, the revenue from lease line and bandwidth subscribers was not required to be added in the AGR for the purpose of calculation of spectrum charges.

Audit view on above has been brought out in para 3.4.3.

As such, above revenue of ` 1588.19 crore should be considered for computation of SUC. This resulted in short payment of SUC by ` 40.66 crore to Government of India (Annexure - 5.15).

5.4.2 Non consideration of income from investment for computation of SUC

As per AGR Statements submitted by RCL, Income from investment (item 4 of the statement) for the four quarters of 2006-07 was ` 70.60 crore. However, amount of ` 17.83 crore of fourth quarter alone was considered in the AGR for computation of SUC (CDMA) and amount for the remaining three quarters of ` 52.77 crore was not considered in AGR for SUC.

However in subsequent years i.e. 2007-08, 2008-09 and 2009-10, income from investments, if considered for LF, was also considered for SUC by the company.

On being pointed out by audit, the management replied that the SUC shall be payable on revenue earned from wireless subscribers only. As investment income is not wireless revenue, the inclusion of it in the AGR for SUC does not arise. It was also stated that the SUCpaidonQ4incomefrominvestmenthadbeenclaimedasrefundfromDoT.

The reply of the management is not tenable as for the purpose of SUC, revenue from wireline subscribers only depicted in item 1A of AGR statement was to be excluded. Income from investment was to be included in item 4 of the AGR statements. In view of above, income from investment of ` 52.77 crore should have been considered for payment of SUC.

The impact on short payment of SUC is ` 0.94 crore (Annexure - 5.16)


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5.5 Transfer of infrastructure assets by RCL/RTL to its subsidiary Reliance Infratel

Ltd (RITL)

5.5.1 Transfer of Optic Fibre Undertaking (OFU) by RCL to RITL

Reliance Communications Limited (RCL) had transferred the assets and liabilities relating

to its Optic Fibre Undertaking (OFU) to its subsidiary RITL engaged in providing Telecom

Infrastructure services. This was done pursuant to the scheme of arrangement under

sections 391 to Section 394 of Companies Act for the transfer of optic fibre undertaking

approved by the Hon’ble High Court of Bombay on 18 July 2009 with the appointed date as

01 April 2008. The total value of the OFC Network of RCL as on 1 April 2008 was taken

as ` 7206.42 crore as the consideration payable on account of transfer.

Profit of ` 3063.27 crore arising from such transfer which was arrived at by deducting net

block of 4137.95 crore and capital work in progress of 5.20 crore from the consideration

amount of ` 7206.42 crore was credited to the Profit and Loss account.

It was noticed that the Company did not include the above profit in the GR/AGR.

On being pointed out by Audit about non inclusion of profit on transfer of asset in GR/

AGR, the Management replied that

• The Company was paying licence fee as per the TDSAT judgment dated

30 August 2007.

• KeralaHighCourtinitsjudgmentdated10July2012statedthatthenontelecom

revenue should not be included in the AGR for the purpose of calculation of LF.

Hence the Company excluded the profit arising as a result of transfer of OFU

undertaking which was not related to Telecom activities.

• Thetransactionwasnotasalebutatransferandnoactualgainwasreceived.Also

notional gain cannot be included.

• Thetransactionwasanincomeandnotrevenue.Itisclearthattheconnotationof

‘revenue’ as that received from ordinary activities of an enterprise is not endorsed

by AS-9.

• Thesaidincomewasnot liabletolicencefeeaspertheTDSATjudgmentdated

23 April 2015.

The reply of the Management is not tenable as-

• TDSATjudgmentdated30August2007wassetasidebytheSupremeCourtinits

judgment dated 11 October 2011.

• KeralaHighCourtorderdated10July2012wasaninterimorder.


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• RCLandRITLweretwodifferentlegalentitiesandhencetransferofassetfrom

RCL to RITL is the disposal of assets and the company itself has recognised the

profit on disposal of its assets in its profit and loss account.

• ProfitontransferofOFUbyRCLtoRITL,thoughnotendorsedasrevenueunder

AS-9, it should be included in GR/AGR for computation of LF and SUC as per

licence agreement.

• WhilenotingthattheTDSATjudgmentdated23April2015hasbeenchallengedin

Supreme Court by DoT in July 2015, Audit is of the view that gains on account of

transfer of OFC network was part of Miscellaneous Revenue and thus, was to be

included in GR in accordance with licence agreement.

Hence, in view of licence agreement, the profit of 3063.27 crore credited to the Profit and

Loss account should also have been taken to GR/AGR. The impact on short payment of LF

and SUC was ` 279.27 crore and ` 81.37 crore respectively (Annexure - 5.17).

5.5.2 Transfer of passive infrastructure by RCL/RTL to its subsidiary (RITL) at ‘nil’

value

Reliance Infratel Limited (RITL), a subsidiary of Reliance Communications Limited

(through Reliance Communications Infrastructure Limited (RCIL)), was incorporated in

2001 as a private limited company. Reliance Communications Limited (RCOM) had filed

a Scheme of Arrangement5 with the High Court of Judicature at Bombay on 5 December

2006 for the separation of its wireless towers assets owned by RCOM and its wholly owned

subsidiary Reliance Telecom Limited (RTL). The High Court’s approval was received on

16 March 2007 and the scheme became effective from 10 April 2007. Pursuant to

the scheme, the passive infrastructure assets of RCL and RTL having book value of

` 3200.74 crore and 866.80 crore respectively were transferred to RITL at ‘nil’ value. RITL

recorded6 the value of assets transferred from RCL and RTL at fair value of 3327.46 crore and


RCL, RTL and RITL, being separate entities and also RITL was not a fully held subsidiary

of RCL/RTL7, transfer of assets was not a transaction at arm’s length. As the market

value of the assets transferred from RCL and RTL were ` 3327.46 crore and ` 1188.36

crore respectively, as revalued by RITL, the difference between the book values and the

values as accounted by RITL were profits foregone on transfer of asset. Amount of profits

foregone by RCL and RTL were ` 126.72 crore and ` 321.56 crore respectively in the year

2007-08. In view of licence agreement, these profits foregone on transfer of asset should be

considered for computation of LF and SUC.

5 under sections 391 to section 394 of the Companies Act, 1956, for the transfer of passive infrastructure of RCL and RTL to RITL.

6 in its books of accounts for the year 2007-08.7 RCL was holding only 79.71 per cent of the Share in RITL as on 31 March 2008.


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On being pointed out by Audit, it was replied by the Management that

• Thesaidtransactions and fair valuations were pursuant to the scheme of arrangement

approved by the Hon’ble High Court of Bombay and no actual purchase and sale of

assets/liabilities took place.

• Further,TDSATinthejudgmentpronouncedon23 April 2015 in a separate but

related context affirmed that “in order to be counted as “gross revenue”, the item

inflow must not be notional but real”. Consequentially, it would be inappropriate

to consider such notional income in the determination of the GR under the licence

agreement.

• RITL had revalued assets in its books of accounts. Increase in value of assets

on account of any revaluation of assets cannot be considered as revenue. If this

revaluation is considered as income, the same would be accounted in RITL and not

in RTL.

The reply of the Management is not tenable as –

• RCL,RTLandRITLwereseparateentitiesandRITLwasnotafullyheldsubsidiary

of RCL/RTL. Assets transferred were written off from the books of RCL/RTL and

debited to their profit and loss accounts. Hence these transactions were similar to

sale/disposal of assets.

• Gainonrevaluationofassetstransferredwasnotnotionalasitaccruedconsequent

to disposal of assets from one entity to another entity. While noting that the TDSAT

judgment dated 23 April 2015 has been challenged by DoT in July 2015 in the

Hon’ble Supreme Court, Audit view is that transfer of assets from RCL/RTL to

RITL at value other than a 'fair value' was not a transaction at arm’s length.

• Since assetwas not disposed at fair value in linewith arm’s length transaction,

increase in value of assets on account of any revaluation of assets by transferee

Company (RITL) was the profit foregone by the transferor companies (RCL/RTL).

Thus non consideration of the amount of ` 126.72 crore in GR/AGR resulted in short

payment of LF and SUC of ` 11.56 crore and ` 3.44 crore respectively by RCL for the

year 2007-08 (Annexure - 5.18).

Similarly, non consideration of the amount of ` 321.56 crore in GR/AGR resulted in short

payment of LF and SUC of ` 17.62 crore and ` 11.72 crore respectively by RTL for the

year 2007-08 (Annexure – 5.19).

5.6 Non-consideration of Refund of Service Tax for GR during the year 2009-10

Audit observed that an amount of ` 51.45 crore being the refund of Service Tax was

accounted under Operational Income during the year 2009-10. However, the said amount

was not considered while computing GR for the purpose of LF and SUC.


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Management stated that the Company had provided certain services which were in the

category of export of services and paid service tax on same from accumulated credits, the

same was claimed as rebate from the Service Tax department which on receipt, was shown

as miscellaneous income in annual accounts, this refund was an incentive on export of

services and hence, not liable for LF. The Management also stated that Service Tax paid

was not claimed as deduction in AGR and hence, any rebate/incentive/refund cannot be

liable for LF.

The reply is not tenable since RCL is a telecommunication company and any income that

accrues to it by virtue of its business of telecom activities has to be a part of its revenue.

Audit is of the view that any monetisation of export credit or any other incentive received

by the Company constitutes part of miscellaneous income and as per the terms of Licence

Agreement, has to be included in GR for computation of LF and SUC.

Non-inclusion of the amount has resulted in short payment of LF and SUC by ` 4.69 crore

and ` 1.36 crore respectively (Annexure – 5.20). It is also pertinent to mention that the

issue was noticed in Reliance during test check and hence commented upon.

5.7 Interest on short/non - payment of LF and SUC

On issues raised above (from paras 5.2 to 5.5) short/non-payment of LF and SUC worked

out to be ` 1125.40 crore and ` 381.85 crore respectively. The interest on this short/

non-payment of LF and SUC is ` 2221.29 crore (Annexure-5.21). The calculation of

interest was based on the rate prescribed in the licence agreement i.e. 2 per cent above the

prime lending rate of State Bank of India existing as on the beginning of the financial year



licence condition.

5.8 Reply from DoT on issues raised above

Audit observations on the revenue shared by RCL/RTL were communicated to DoT in

September 2015. DoT in reply (January 2016) informed that demands for understatement

of GR as pointed out in paras pertaining to commissions/discounts paid to RCIL by RCL

(5.2.2 A), VAS/CRBT revenue not included in GR/AGR of RCL (5.2.2 B and 5.2.2 C);

non-inclusion of installation charges of FWP/T in GR/AGR of RCL (5.2.2 F); commissions/

discounts paid to distributors by RTL (5.2.5); FOC coupons given to distributors by RTL

(5.2.6); under reporting of revenue due to non-inclusion of revenue/income in GR/AGR

from forex gain (5.3.1), interest and other income (5.3.2); profit from sale of investment

(5.3.4) and gain on transfer of passive infrastructure (5.5.2) were raised on the PSP in

2012 for the years 2006-07 and 2007-08, based on the report of Special Audit conducted in

2009. But the demands were challenged by the operator in TDSAT/Hon’ble High Courts.


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The matter is still sub-judice in the court. It was also informed that action would be taken

as and when the final court judgment was pronounced.

Thus, DoT agreed to the issues raised by Audit. However, it pleaded helplessness in realising

the revenue from RCL/RTL on account of these issues being sub-judice. Considering that a

substantial amount of government revenue is blocked for many years on account of litigation,

DoT should play a proactive role in getting these legal issues settled at the earliest.

DoT in its reply also pointed out to the variation in the amounts quantified by CAG

Audit and the demands raised by DoT as a consequence of the Special Audit. These

variations could be on account of the difference in methodology adopted in quantifying the

understatement of revenue. Audit has determined the understated amounts on the basis of

actual entries identified through clear descriptions in the books of accounts of RCL/RTL

for 2006-07 to 2009-10. However, the details of working papers of the Special Auditors

were not seen by CAG Audit.

In respect of paras pertaining to non-inclusion of revenue from sale of SIM cards

(5.2.2 D); sale of handsets (5.2.2 E); understatement of GR by netting of broadband

commission from revenue (5.2.3) and non-inclusion of gain on transfer of optical fibre

(5.5.1), the DoT stated that reply received from the PSP was under examination.

In reply to para relating to booking of revenue net of FAT/commission (by eliminating it

at mediation level itself) (5.2.1), it was stated that DoT had sent a notice to the company

(June 2015) to prepare the accounts as per the norms mentioned in the licence agreements

and in respect of para relating to netting of revenue from expenses (5.2.4), it was stated that

show cause notice was issued to RCL to submit information on gross basis for items which

have been netted off as required under clause 22.3 of UASL agreement.

In respect of para pertaining to interest free loan to subsidiary (5.3.3), it was stated that

DoT had taken a decision in 2005, in consultation with Ministry of Law and learned AG,

that notional interest can neither be reckoned nor included in AGR.

Audit view is that DoT’s decision of not reckoning the due interest on interest free loan

given to subsidiaries for AGR purpose was not in line with the provisions of the Companies

Act 1956. By providing interest free loan to its not fully owned subsidiary, RCL’s revenue

was lower by the amount of interest receivable and ultimately the LF and SUC thereon was

short paid to the Government of India to that extent.

In respect of paras relating to non-consideration of revenue from sale of bandwidth for SUC

(5.4.1) and non-consideration of income from investment for SUC (5.4.2), it was stated that

reply from WPF wing of DoT was awaited.


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DoT also stated that the basic definition of GR and AGR was challenged by the PSP

in 2002-03. Since then, there has been protracted litigation and is continuing till date.

Also, some of the licensees have also filed (2012) writ petitions before various High

Courts invoking the writ jurisdiction under Article 226 of the Constitution challenging the

Section-4 of Indian Telegraph Act, 1885, as violative of the Article 14 and 19(1) (g) of the

Constitution of India. The process of deduction verification by the CCA offices and the

LF Assessment work by the DoT Headquarters was adversely impacted due to this. DoT

admitted that the numerous disputes are causing delays in assessment of the revenue share

due from the operator.

The response of DoT indicates that though the revenue share regime was introduced as

part of NTP-1999, the Department has not been able to realise its due revenue share as

envisaged in the licence agreement even after more than 16 years of its implementation.

It would be pertinent to mention here that when the government decided to reduce the

licence fee for all operators by two per cent effective from April 2004, DoT expected that

the reduction would prompt operators to withdraw the challenges against the government.

However, the reduction in licence fee did not have the expected impact and the operators

continue to institute litigations against the government challenging the definition of GR/

AGR and demand notes. Thus the PSPs got the benefit of reduction in rate of licence fee

but the government didn’t get the reciprocal benefit of reduction in litigations.


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CHAPTER – VIRevenue shared by Idea Cellular Limited (ICL) and

Aditya Birla Telecom Limited (ABTL)

6.1. Brief profile of the company

M/s Idea Cellular Limited (ICL) was a company under Aditya Birla Group. It was among

the first private sector companies that were awarded licences for providing cellular services.

Though it was an early entrant, its growth was not at par with other contemporary telecom

companies when telecom sector in India witnessed phenomenal growth. However, of late,

ICL achieved remarkable gain in telecom market share.

6.1.1 Licences granted to Idea Cellular Ltd (ICL) and Aditya Birla Telecom Ltd.

(ABTL)

M/s Idea Cellular Limited (ICL), initially incorporated as M/s Birla Communications Ltd.,

was among the first private telecom companies to be awarded licences in December 1995

for providing cellular services in Maharashtra and Gujarat LSAs. In 1996, M/s Birla

Communications changed its name to M/s Birla AT&T Communications Ltd. following a

joint venture with M/s AT&T Corporation. During the years 2000 and 2001, it got licences

in Andhra Pradesh and Madhya Pradesh by acquiring M/s Tata Cellular Limited and

M/s RPG Cellular respectively and changed its name to Birla Tata AT&T (BATATA) and

also obtained licence for Delhi LSA in 2001. In 2002, the Company changed its name to

Idea Cellular Ltd and launched “Idea” brand name. It got licences in six more LSAs1 by

acquiring M/s Escotel Communications Limited. In the year 2006, ICL obtained licence

for Mumbai LSA and licence for Bihar was obtained by one of its the promoter companies,

Aditya Birla Telecom Ltd (ABTL). ABTL became a 100 per cent subsidiary of ICL in

2007. During 2008, ICL obtained licences in seven more LSAs.2 ABTL transferred its

UAS licence of Bihar to ICL in 2009-10. Now ICL holds licences in Punjab and Karnataka

LSAs after merger of Spice Communications Limited w.e.f. 01 March 2010.

Idea Cellular Ltd. holds two licences for National Long Distance (NLD) services and one

licence for International Long Distance (ILD) services. The first NLD licence was obtained

in 2006 by ICL and second NLD as well as ILD licences were obtained through acquisition

of M/s Spice Communications Ltd which had obtained NLD and ILD licence in 2007. ICL

got registered as an Infrastructure Providers- Category I (IP-I) in 2008 and as an Internet

Services Provider (ISP) in 2010.

1 Haryana, UP (West), UP (East), Kerala, Rajasthan and Himachal Pradesh2 Tamil Nadu, Orissa, Kolkata, North East, Jammu and Kashmir, Assam and West Bengal


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6.1.2 Spectrum allotted to ICL/ABTL

ICL is a GSM operator. LSA wise GSM spectrum allotted to ICL as on 31 March 2010

was as follows:

Table 6.1

Sl No Spectrum Licenced Service Area

1 2 × 9.8 MHz Maharashtra

2 2 × 8.0 MHz Andhra Pradesh, Delhi, Kerala, Madhya Pradesh and UP (West)

3 2 × 7.8 MHz Punjab

4 2 × 6.2 MHz Gujarat, Haryana, Karnataka, Rajasthan and UP (East)

5 2 × 4.4 MHzAssam, Bihar, Himachal Pradesh, J&K, Kolkata, Mumbai, NE, Orissa, Tamil Nadu and West Bengal.

6.1.3 Subscriber base of ICL/ ABTL

During the period under audit, subscribers of ICL grew from 1.40 crore as on 31 March 2007 to 6.38 crore as on 31 March 2010 registering a phenomenal growth of 450 per cent. ICL had a market share of seven per cent during 2006-07 which increased to 10 per cent during 2009-10.

6.1.4 Gross Revenue, Deduction and Adjusted Gross Revenue reported and revenue share paid by ICL/ABTL

As brought out in Para 1.5, Telecom Service Providers are required to pay LF and SUC at a percentage of AGR on quarterly basis on self-assessment basis. GR, Deductions, AGR reported and revenue shared (LF and SUC) by ICL/ABTL during the period under audit are as follows:

Table 6.2

(` in crore)


Revenue share(LF+SUC)

2006-07 4518 851 3667 81.16 4462007-08 7150 1558 5592 78.21 6812008-09 10728 2677 8051 75.05 11072009-10 13323 2723 10600 79.56 1319Total 35719 7809 27910 78.14 3553

6.2 Under reporting of revenue by ICL/ ABTL

As mentioned in para 1.4 (a), the Gross Revenue shall be inclusive of all types of revenue stated therein without any set-off for related item of expense, etc, and as brought out in Para 1.5, service revenue (amount billable) shall be shown gross and details of discount/rebate indicated separately.

Audit examination of records/Books of accounts of ICL/ABTL revealed that these companies

had not adhered to the provisions of the Licence Agreement on the following issues:


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6.2.1 Under reporting of revenue due to netting off of revenue pertaining to Commission/offers/discounts to dealers/subscribers for prepaid services

From the examination of data/records pertaining to prepaid services furnished by ICL/ABTL for the period from FY 2006-07 to 2009-10, it was observed that -

• Themargin/commissiongiventodistributors/agentswasnettedofffromthe

revenue pertaining to prepaid services.

• Offers to the subscriberviz.FreeAirTime (FAT) tocustomers,Freeof

Cost (FOC) SIMs/Talk time/SMS facility to customers, Promotional offers

to customers, Full talk time offered to customers, Adjustments offered to

customers, PCO incentives were setoff from the revenue pertaining to prepaid

services.

Item wise details are furnished below:

A) Margin/ Commission:

The licensee company appoints distributors/franchises/dealers for selling telecom services on commission basis. The company supplies to the distributors/franchises/agents the prepaid recharge coupons/e-top up for sale to subscribers and pay commission/margin to them. During review of data/records offered by ICL/ABTL for the period from 2006-07 to 2009-10, it was observed that the Primary commission/margin paid to the distributors/franchises/dealers at the time of sale of prepaid recharge coupons/e-top up were deducted from the revenue. This resulted in revenue getting set-off of commission/margin in the books as well as in the GR and as a result, Net Revenue was considered in AGR statements submitted to DoT.

Total amount deducted from revenue on account of commission/margin to the distributor/franchisees/agents/dealers during 2006-07 to 2009-10 was ` 698.70 crore (Annexure - 6.01).

Since, the commission/margin paid to the distributors/franchises/dealers was in the nature of business expenses (marketing expenses), therefore, set-off of such expenses with revenue was against the licence condition.

On being pointed out by Audit, it was stated by Management that-

• AsperlegalopinionobtainedbyICL,therelationshipbetweentheCompanyanddistributor was on a Principal to Principal basis and accordingly the Company was required to account for the transactions with such distributors as such on the amount realized from the distributor.

• In accordance with AS-9, the price at which the Company sells the product tothe distributors was the consideration received and hence only this amount should be recognized as revenue. There was no inflow of cash, receivables or other consideration.


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• AsperTDSATjudgementdated30August2007, theLFwas tobepaidon therevenues actually realised by the licensee.

Audit view on the reply of the Management is as explained in para 3.2.1 (A).

• Further, regarding revenue recognition as perAS-9 statedbyManagement, it isstated that audit is not challenging the accounting methodology adopted by the Company but for the purpose of licence fee, the revenue is to be recognised “Gross” without set-off of related expenses as mandated under licence agreement.

• TDSATjudgmentdated30August2007referredinthereplywassetasidebytheHonourable Supreme Court vide judgement dated 11 October 2011.

Thus, the netting off of commission/margin to the distributor/franchises/agents/dealers during 2006-07 to 2009-10 to the tune of ` 698.70 crore has resulted in short payment of LF and SUC amounting to ` 59.93 crore and ` 29.74 crore respectively.

B) Free airtime/un-used airtime/ promotional offers/PCO incentives to customers

During review of data/records furnished by M/s ICL/ABTL for the period from 2006-07 to 2009-10, it was observed that in order to accommodate Offers to the subscribers viz. Free Air Time (FAT)/Unused air time (UAT) to customers, Free of Cost (FOC) SIMs/SMS/free talk time (FTT)/bonus talk time/adjustments to customers, the value of the same was deducted from revenue from prepaid services upfront and as and when the same was used by subscriber, the revenue was credited by the said amount. Resultantly, the revenue on account of these offers to subscribers was not recognised in the GR/AGR.

Since, offers to customers (FAT/UAT/FTT/FOC/Extra talk time, etc.) were part of overall commercial strategy to enhance business, the cost of such offers/discounts/rebate were in the nature of expenses. Further, as per licence agreement service revenue should be shown in gross without any set-off. Thus, the action of the Management in setting off the offers/discounts/rebate from revenue was against the licence agreement and resulted in short

payment of LF and SUC as detailed below:

Table 6.3

(` in crore)Free airtime/un-used airtime/

promotional offers/PCO incentives to customers

Under reporting of

GR

LF Impact

SUC Impact

Remark

Free Airtime (FAT)/ Un-used airtime (UAT) 202.36 15.91 8.00 Annexure – 6.02

Free of Cost (FOC) SIMs/SMS to customers 4.62 0.42 0.20 Annexure – 6.03

Free talk time (FTT) to customers 344.13 30.74 13.45 Annexure – 6.04Netting of refund of Admin fee etc. 7.09 0.47 0.31 Annexure – 6.05Public Call Office (PCO) incentives 107.93 10.08 3.86 Annexure – 6.06Total 666.13 57.62 25.82


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On being pointed out by Audit, it was stated by Management that -

• In certain prepaid tariff scheme, if free airtimewas provided to subscribers on

making recharge through specified recharge vouchers denominations, the tariff

amounts which were actually paid by the subscribers were ultimately booked as

revenue. These tariff schemes were within the TRAI guidelines.

• Itwasnotpossible to treatpromotionaloffersasanexpensesince itwasnotan

expense incurred by the company.

• TDSATorderdated23April2015holds that“inorder tobecountedas“gross

revenue”, the item of inflow must not be notional but real”.

• TheCompanyisgivingrechargecouponwithfreeairtime/promotionaloffers to

PCO operators which were normal voucher with higher denominations and tariff

scheme for the same were already approved by TRAI.

Audit views regarding the netting are brought out in para 3.2.1 B. Further, reply of the

Management is not tenable as-

• FATincludedinauditobservationsdidnotincludethosetariffschemesinwhichfree

air time is provided to subscribers on making recharge through specified recharge

voucher denominations.

• Annexure-IIIofthelicenceagreementstatesthat“Servicerevenue(amountbillable)

shall be shown gross and details of discount/rebate indicated separately”. This

indicates that service revenue should be shown gross, however the Management has

set-off the promotional offers while preparing AGR statements, which was against

the licence agreement.

• WhilenotingthattheappealhasalreadybeenfiledbyDoTbeforetheHonourable

SC against TDSAT Judgement of April 2015, Audit is of the view that offers to

customers (FAT etc.) are part of overall commercial strategy to enhance business

and the cost of such offers amount to expenses.

• Promotionaloffersfornormalconnections/PCOoperatorsweregenerallygivento

popularize new rate plans and to attract new subscribers etc. Therefore it was a part

of overall commercial strategy to enhance business. Hence, it amounts to expenses.

Thus, netting off of offers/discount/rebate amounting to ` 666.13 crore given to

pre-paid subscribers has resulted in understatement of GR/AGR, which ultimately resulted

in short payment of LF and SUC to Government of India amounting to ` 57.62 crore and



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6.2.2 Under reporting of revenue due to netting off of discounts granted to post-paid

subscribers

From the examination of data/records pertaining to post-paid services furnished by ICL

for the period from 2006-07 to 2009-10, it was observed that promotional discounts were

shown separately as debit figures under the post-paid revenue GL codes by one LSA

(UP West) and netted off from AGR instead of booking the same separately as expenditure.

Since no other LSA had shown the amount of promotional discount separately and booked

the revenue net of such discounts, audit applied the similar percentage as that of UP (West)

LSA to arrive at the total promotional discount offered to post-paid customers. The amount

worked out to ` 202.79 crore in the remaining 21 LSAs.

Promotional discounts are part of overall commercial strategy to enhance business,

therefore, such offers/discounts were in the nature of expenses and hence, in terms of

licence agreements, should not be deducted from GR.

To an audit query, it was stated by Management that-

• AsperAS-9,revenuewasdefinedastheconsiderationreceivedincashfromsaleof

goods or rendering services. There was no realization of such rebate and waiver in

the hands of the Company and thus it could not be treated as revenue.

• AsperTDSATjudgementdated30August2007,amountofwaiversanddiscounts

could not be treated as revenue forming part of GR and licensees cannot be asked to

pay licence fee thereon.

• BillableamountsformpartofAGRandLF/SUCwascomputedonthesameafter

reversal of the effects of incorrect/excess amounts billed earlier.

• It was customary in business to offer certain waivers/rebate to subscribers, the

amounts of which were credited in the bills. Such waivers/discounts/rebates were

losses to the company and could not be treated as revenue.

• Billingplanbaseddiscountswerethosewhichwereofferedtosubscribersasper

agreed terms and billing plan at the time of acquisition. Due to system constraints

the billing pattern cannot be changed and hence the customer cannot be charged zero

towards rental in subsequent months. These discounts are only adjustments entries

for amount charged extra due to system constraints.

• Subscribers are offered someminutes/ usage in every post-paid planwhichwas

known as Usage Discount Package (UDP) and was part of billing plan duly filed

with TRAI. Such UDP was applied at the time of running the bill cycle due to

system limitations and such minutes/usage offered with plan cannot be rated on real

time basis.


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• In the adjustment figures available in GL of UP (West) LSA which was taken

as base by audit for arriving at extrapolated amount for other LSAs is incorrect.

However, for internal reporting purpose UP (West) LSA passed additional entry

to the extent of minutes offered to subscribers by debiting GL code pertaining to

Post paid promotional airtime and crediting GL code pertaining to post paid airtime

revenue. Both the GL codes were under the revenue segment.

Audit view on the reply of the Management is as under-

• ConsideringthereplyoftheManagementthatboththeGLcodeswereunderthe

revenue segment and it was an additional entry passed for internal management

reporting, the amount of promotional discount which earlier worked out to ` 479.52

crore was reworked to ` 202.79 crore (Annexure - 6.07) with only those debit

figures in the revenue head which had corresponding credit entry in the Debtors GL

code.

• RegardingrevenuerecognitionasperAS-9statedbyManagement,itisstatedthat

Audit is not disputing the accounting methodology adopted by the Company but

contends that for the purpose of licence fee, the revenue is to be recognised “Gross”

without set-off of related expenses as mandated under licence agreement.

• TDSATjudgementdated30August2007mentionedinthereplyhasbeensetaside

by the Supreme Court vide its judgement dated 11 October 2011

• Incaseofbillingplanbaseddiscounts,allsuchdebitsintherevenueheadshada

corresponding credit to the Sundry debtor heads thereby reducing the revenue to

that extent. The advance rentals were accounted for through the liability heads and

the contention of the Management that due to system constraints the customer was

charged rental and the same was adjusted by promo pack is neither acceptable nor is

in compliance with the existing norms.

• TheamountworkedoutaspromotionaldiscountwastakenfromtheJournalVouchers

wherein the revenue heads were debited with corresponding credit to the debtors

thereby impacting the revenue to that extent.

Non consideration of promotional discounts, rebates and waivers offered to

post-paid customers in GR/AGR in violation of the terms of licence agreement resulted in

non-payment of LF and SUC amounting to ` 17.80 crore and ` 8.37 crore respectively.

6.2.3 Under reporting of Roaming Revenue due to set-off of Inter Operator traffic

discounts paid/credited to other Operators

ICL had arrangements with other International Operators for roaming. It was noticed that

the Inter Operator traffic (IOT) discounts paid/credited to these operators’ accounts were

debited/deducted from the revenue heads.


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Having roaming arrangement with other national/international operators was a matter of mutual agreement between two operators and giving discounts over and above the agreed charges for roaming was part of overall commercial strategy to enhance business between the two operators. As such, these discounts were in the nature of expenses and hence, in terms of licence agreements, should not be deduced from revenue.

It was observed that IOT Discounts amounting to ` 28.74 crore during 2007-08 to 2009-10 were debited from roaming revenue.

On being pointed out by Audit, it was stated by Management that-

• IOTdiscountswerevolumebasedandlinkedtothequantumofroamingdurationby their subscribers on the company’s network. Such roaming discounts were trade discounts and the company’s recognition of the roaming revenue net of trade discount is in line with prescribed accounting standards. Such trade discounts passed on to other operators on roaming cannot be added back for calculation of AGR.

• Discountswhenpassedonreducethequantumofroamingrevenue.Similarly,whenreceived, they reduce the pass through payable for out roaming leading to higher AGR. Hence, if the recipient operator is required to include gross roaming charges as revenue and the payer operator is only allowed deduction of net roaming charges, it will lead to double taxation to the extent of discount on roaming charges.

• As perAS-9, “trade discounts and volume rebates given should be deducted indetermining revenue”.

Audit view on the reply of the Management is as explained in para 3.2.3. Further view of the audit on the Management reply is as follows:

• Theargumentofdoubletaxationisnottenableastheamountoflicencefeepaidwasin effect a revenue share and not tax.

• RegardingrevenuerecognitionasperAS-9statedbyManagement,itisstatedthatAudit is not challenging the accounting methodology adopted by the Company but for the purpose of licence fee, the revenue is to be recognised “Gross” without set-off of related expenses as mandated under licence agreement.

Netting off of IOT discounts amounting to ` 28.74 crore given to international roaming operators resulted in reduction of GR/AGR which ultimately resulted in short payment

of LF and SUC amounting to ` 2.72 crore and ` 1.21 crore respectively to DoT

(Annexure – 6.08).

6.2.4 Under reporting of revenue from Infrastructure sharing revenue from other

telecom operators for GR/AGR by ICL/ABTL

Telecom infrastructure (towers, network equipment’s, etc.) owned by ICL/ABTL were

being shared with other telecom companies. ICL/ABTL entered into agreements with other

telecom companies for infrastructure sharing.


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Review of data/records pertaining to Infrastructure Sharing Charges furnished by

ICL/ABTL for the period from 2006-07 to 2009-10, revealed that Infrastructure sharing

charges recoverable/recovered on account of rent, fuel (Diesel), Electricity, Operational

and Maintenance, Insurance, Security etc. were netted off from the expense heads, hence

not included in the revenue at all.

Total amount netted off from the expenses on account of site sharing revenue (rent, Diesel,

Electricity, Operational and Maintenance, Insurance, Security etc.) during 2006-07 to

2009-10 was ` 344.72 crore. This amount should have been taken to GR/AGR.


• Some part of Operating Expenditure (OPEX) cost in the Infrastructure sharing

charges, which was in the nature of Rent, fuel, security, AMC cost and repairs

and maintenance were proportionately recovered from other operators sharing the

infrastructure on actual cost incurred. Such re-imbursement of expenses cannot

be revenue since this was covered under paras 46 and 47 of AS-29 and cannot be

disclosed as revenue in compliance with AS requirements and hence do not form part

of AGR.

While charges for Capital Expenditure (CAPEX) costs were rentals and hence treated

as revenue which was credited to the relevant income/revenue head and disclosed

under revenues in the books of accounts, recovery of combined operation costs

incurred for day to day running and maintaining such common passive infrastructure

equipment by the host operator cannot be included for the purpose of AGR.

The cost incurred on the specific heads of expenditure by the principal owner was

always more as compared to recovery of this expenditure made from the beneficiary

party. Thus, re-imbursement of operating expenditure cannot be considered for AGR.

It was not a case where any revenue item and cost items were netted off and that

revenue was recognized short or not recognized. This was the case of reimbursement

of incurred costs as operating costs were paid by one operator but have to be shared

by more than one operator and there was no way that such payment towards shared

cost by one operator to another can be treated as revenue.

• InMaharashtra LSA, rectification entries, reversal of expenses and credit notes

issued amounting to ` 17.79 crore was incorrectly considered as recovery towards

infrastructure sharing. In Haryana LSA, rectification entries and reversal of

expenses amounting to ` 1.57 crore was incorrectly considered as recovery towards

infrastructure sharing. In Mumbai LSA, recovery amounting to 1.01 crore towards

security service charges was not pertaining to Mumbai Circle.


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Audit view on the reply of the Management on infrastructure sharing revenue is explained

in detail in para 3.2.4. However, rectification/reversal/credit-note entries amounting to

` 20.37 crore which were not considered initially by audit and were brought to notice

vide Management’s reply have been considered. Accordingly, the figure of ` 344.72 crore

initially pointed out was revised to ` 324.35 crore.

Thus netting off of infrastructure sharing revenue received/receivable from other telecom

operators from the cost relating to 2006-07 to 2009-10 resulted in understatement of

GR/AGR by ` 324.35 crore and consequent non-payment of LF and SUC amounting to

` 27.69 crore and ` 13.35 crore respectively (Annexure – 6.09).

6.2.5 Non consideration of revenue from Switch sharing between Idea (NLD) and

Idea (LSAs) for GR/AGR

As mentioned in para 1.4 (a) above, the GR shall be inclusive of all types of revenue

stated therein without any set-off for related item of expense, etc and AGR is arrived at by

reducing GR by permissible deductions as stated therein.

ICL obtained licence to provide long distance services from December 2006. These services

are basically to carry a call from one licence area/circle to another licence area/circle which

requires switches.

Review of records of ICL for the period from 2006-07 to 2009-10 revealed that the Idea

NLD division did not have its own switches and therefore it used the switches of all service

areas for which NLD division paid an agreed amount of ` 0.07/0.10 per minute of call

carried. Though these amounts were paid by Idea NLD to the respective LSAs, the same

was not considered as revenue for determination of GR/AGR by the respective LSAs and

this revenue was found credited under expenditure Head of NLD switch and other expenses.

This resulted in understatement of revenue by ` 252.47 crore for the period under audit.


• NLDserviceswerebeingusedtocarrycallsfromoneserviceareatootherservice

area. For speedy roll out of services and to achieve saving in CAPEX, the company

integrated its NLD switch with CMTS/UASL switches as permitted under the NLD

licence agreement.

• NLDserviceswereusingswitchesofotherLSAsforroutingthelongdistancetraffic.

Since these switches were capitalized in respective LSA books, all maintenance,

repair and depreciation expenses were also incurred and accounted in respective

LSA itself. Hence, such LSAs were reimbursed for use of switches by NLD division

to reflect the correct profitability of each segment.


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• Thecontentionof considering such sharing of switch expense between LSAs and

NLD as revenue of LSAs was against prescribed accounting norms and such notional

transactions should not be considered as revenue for the purpose of calculation of

AGR.

The reply of the Management itself states that the LSAs were being reimbursed by NLD for

utilizing their switches and hence was in the nature of infrastructure sharing. In terms of

licence agreement, GR includes revenue from permissible sharing of infrastructure without

any set-off for related item of expense. Thus the actual amount received by LSAs from

NLD division should be reflected in their accounts as revenue and taken into consideration

of GR/AGR. Booking of revenue received from NLD division towards switch sharing as

a credit under expenditure head of account by LSAs was not permissible under UASL

agreement.

Thus non consideration of Switch sharing revenue received by the LSAs from Idea

NLD division during 2006-07 to 2009-10 has resulted in understatement of GR/AGR by

` 252.47 crore and consequent non-payment of LF and SUC amounting to ` 22.63 crore


6.2.6 Non consideration of revenue by ICL from assets given on Indefeasible Right to Use (IRU) for GR/AGR

In terms of clause 19.1 of the UASL agreement and NLD licence agreement, revenue from

permissible sharing of infrastructure and leasing of infrastructure respectively shall form

part of GR for computation of revenue share.

A sum of `1.13 crore was accounted as revenue under a separate Trial Balance maintained

for Passive Infrastructure Division of Idea Cellular Limited (ICL) for the year 2009-10 and

it was included in the Service Revenue in the Profit and Loss Account of ICL.

Review of data/records pertaining to Infrastructure sharing charges offered by ICL for the

2009-10 revealed that this was revenue accruing from the Optical Fibre Cable (OFC) given

to Tata Teleservices Limited (TTSL) on Indefeasible Right to Use (IRU) basis in the service

areas of UP (W), MP, Bihar, AP and Gujarat. However, this revenue was not considered

in GR/AGR for computation of revenue share for the year 2009-10.

To an audit query, it was stated by ICL Management that the Company was holding

Infrastructure Provider Category-I registration issued by DoT and licence fee was not

applicable on revenue arising out of provisioning of services under this registration. The

revenue highlighted by audit during 2009-10 pertains to passive Infrastructure Division

of ICL and accounted from sale of Optical Fibre Cable (OFC) to TTSL under IRU. This

revenue was shown under service revenue for preparation of Profit and Loss Account of

ICL but since licence fee was not applicable on this revenue, it was not considered in GR/

AGR for computation of revenue share (LF and SUC).


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The reply is not tenable considering the fact that revenue was from sale of OFC under IRU

and hence akin to the activity covered under NLD licence. Thus non consideration of IRU

revenue received by ICL during 2009-10 has resulted in understatement of NLD GR/AGR

by ` 1.13 crore and consequent non-payment of LF amounting to ` 0.07 crore.

6.2.7 Under reporting of revenue from forex gain (revenue) for GR/AGR by

ICL/ABTL

Review of data/records furnished by ICL/ABTL for the period from 2006-07 to 2009-10

revealed that the forex realized gain amounting to ` 53.58 crore was not considered for

GR/AGR.

Above realised gain calculated from the data extracted from the reports generated from

Oracle Financial System did not represent the actual gain of that particular item since the

Company recasts the value of all the items included under the foreign exchange gains/losses

head every year, the matured items are accounted under realised gains and the un-matured

items remain under unrealised gain. Thus, the realised gain of a particular item in that year

would not be the actual gain due to accounting of the gains/losses of that item during the

intermediate period under unrealised. Audit could not arrive at the actual value of items

accounted under realised gain every year for want of original value of each item. Further,

audit has considered the quarterly net gain, head of account-wise and LSA-wise, as it was

not possible for audit to segregate/collect the figures of gains only from the data made

available. The operator should calculate the gain of each item with reference to its initial

value of accounting and include the total forex gain in GR/AGR.

On being pointed out by Audit, it was stated by the Management that:-

• Audithasreferredclause19.1ofthelicenceconditionrelatingtoGrossRevenueand

queried on why foreign exchange fluctuations should not be added for the purpose of

AGR. The words used in clause 19.1 to define GR are those primarily from inflows

of licensee i.e. revenue relating and inclusive of those charges, fees, proceeds and

revenues which will go into invoicing of services and goods to get the consideration

which form part of service revenue of the licensee.

• Foreign exchange gains, between the rate of forex when the liability was first

recorded in the books and the rate of forex as and when such liability was finally

discharged, cannot be said to have any meaning so as to form part of Gross Revenue

mentioned under clause 19.1.

• Foreignexchangefluctuationsarisingoutofre-statementofpayablestowardscapital

equipment and foreign currency loans for mark to market or hedged closing rates

as of the end of any closing date was not revenue. Fluctuations in foreign exchange

rates have nothing to do with the revenue of the service provider. The impact of

forex fluctuations, whether upward or downward, on AGR must be ignored.


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• AsperAccountingStandard9onRevenueRecognition,ForeignExchangeGainis

not revenue.

• TDSAT in its judgementdated30August2007held thatForeignexchangegain

should not be considered for AGR purpose.

• According toTRAI, impactof foreignexchangefluctuations,whetherupwardor

downward, on AGR must be ignored.

Reply of the Management is not tenable as:-

• Auditviewregardingclause19.1ofthelicenceagreementhasbeenbroughtoutin

para 3.2.5.

• Companyhadbeenreportingexchangedifferences(onnetbasis)intheirfinancial

statement. It is not true that foreign exchange gains/losses are neither covered in the

definition of GR in the Licence Agreement nor disclosed in the Statement of AGR

as Licence Agreement provides that “Gross Revenue shall be inclusive of any other

miscellaneous revenue, without any set-off for related item of expense, etc.” and

Forex gain was part of Miscellaneous revenue.

• AS-9onlystatesthatrealisedorunrealisedgainsresultingfromchangesinforeign

exchange rates and adjustments arising on the translation of foreign currency financial

statements were not included within the definition of “revenue” for the purpose of

this Standard (AS-9). Treatment of forex gain/loss is covered under AS-11.

• TDSATjudgmentdated30August2007referredinthereplywassetasidebythe

Honourable Supreme Court judgement dated 11 October 2011.

• TRAIrecommendationreferredtointhereplyhasnotfinallybeenacceptedbyDoT.

Thus non-inclusion of foreign exchange gains pertaining to period from 2006-07 to 2009-10

has resulted in understatement of GR/AGR by ` 53.58 crore, and consequent short payment

of LF and SUC amounting to 4.45 crore and 2.00 crore respectively (Annexure - 6.11).


Statements) though reported in the books of accounts

6.3.1 Non consideration of Interest Income for GR/AGR by ICL/ ABTL

Review of data/records furnished by ICL/ABTL for the period from 2006-07 to 2009-10

revealed that interest income accounted in the books of accounts of ICL was considered

for GR/AGR in the year 2006-07 but not considered at all in the years 2007-08, 2008-09

and 2009-10. Amount of interest income accounted in the books were ` 566.87 crore out

of which ` 17.08 crore only was considered for GR/AGR during the years from 2006-07 to

2009-10 resulting in non-consideration of interest income amounting to ` 549.79 crore for

the purpose of GR/AGR (Annexure - 6.12).


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Likewise, interest income accounted in the books of accounts of ABTL amounting to

` 10.49 crore in the year 2008-09 was not included in GR/AGR.

Management in its reply stated that considering the TDSAT judgement dated 30 August 2007,

interest income accounted under Trial balances of UASL/NLD/IP1/ILD/ISP/VSAT was

not considered for AGR. Interest income accounted under corporate trial balances was

not considered as it did not relate to telecom operations. It further stated that the interest

accounted in the corporate TBs was earned from deployment of surplus funds/borrowed

funds and it being non telecom revenue needs to be excluded from AGR. It also stated that

sometimes funds borrowed for CAPEX were invested and interest earned and this interest

being always less than the interest payable/paid on borrowings, no interest income was left

for inclusion in AGR for levy of revenue share. Telecom services in Bihar LSA commenced

in October 2008, the very first year of commercial operations for which service revenue

for the year 2008-09 was ` 43.53 crore. ABTL had procured loans of over ` 300.00 crore

to roll out CAPEX out of which ` 120.00 crore was from the Holding Company i.e. ICL.

While the loan from ICL was interest free, interest was incurred on other loans. This was

a project situation where services were just launched in few districts of Bihar, a major roll

out was in progress. In such situations other than short term deployment of excess funds

before the funds are used for CAPEX, there cannot be any excess funds. Project funding in

telecom results in mismatch of loans disbursed and final use of proceeds, thereby resulting

in treasury income as also treasury expenses. Cash surpluses generated by business are used

for investing in other forms (other than in CAPEX) for business due to the loan conditions

of the lenders. If at all interest incomes are to be included, it should be done only after

taking the interest costs into consideration. Considering the above, interest income should

not be included in GR/AGR.

The Management’s contention for non-inclusion of interest income for AGR is not tenable as

TDSAT judgement dated 30 August 2007 has become null and void after Hon’ble Supreme

Court judgement dated 11 October 2011. Also definition of GR in licence agreements

expressly provides for inclusion of interest income for GR/AGR for computation of revenue

share.

Impact on short payment of LF and SUC due to non-consideration of interest income

` 560.28 crore in GR/AGR of ICL/ABTL during the years 2007-08, 2008-09 and 2009-10

is ` 44.59 crore and ` 20.47 crore respectively (Annexure - 6.12).

6.3.2 Non consideration of profit on sale of Investment for GR/AGR for payment of revenue share by ICL/ ABTL

Format of Statement of Revenue and LF (AGR Statement) prescribed as Appendix II to

Annexure II as referred in Clause 20.4 of the UASL agreement is an integral part of the

Licence Agreement. In the Statement, item 4 has been prescribed to reflect the “Income

from Investment”.


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From the data/ records of ICL, it was found that there was income on account of “Profit

on Sale of Investment” for ` 8.13 crore, ` 43.18 crore, ` 222.75 crore and ` 87.87 crore

for the year 2006-07, 2007-08, 2008-09 and 2009-10 respectively. Above income had been

accounted by ICL in the Corporate TB. Above income on “Profit on Sale of Investment”

was considered for GR/AGR for computation of revenue share in 2006-07. However an

amount of ` 353.80 crore (Annexure - 6.13) pertaining to “Profit on Sale of Investment”

was not considered in GR/AGR for computation of revenue share for the years 2007-08,

2008-09 and 2009-10. Similarly in respect of ABTL, investment income of ` 45.03 crore

for the year 2008-09 was not included in GR/AGR.

Management in reply stated that considering the TDSAT judgement dated 30 August 2007,

income from investment accounted under Corporate TB was not considered for AGR. It

further stated that this corporate income was generated from treasury function which was

a separate and distinct function from licenced activity and this income was a non-licenced

activity/non-operational income. Therefore such corporate income should not form part of

GR. It was further stated that Telecom services in Bihar LSA commenced in October 2008,

the very first year of commercial operations for which service revenue for the year 2008-09

was ` 43.53 crore. ABTL had procured loans of over ` 300.00 crore to roll out CAPEX

out of which ` 120.00 crore was from the Holding Company i.e. ICL. This was a project

situation where services were just launched in few districts of Bihar, a major roll out was in

progress. In such situations other than short term deployment (investments) of excess funds

before they are used for CAPEX, there cannot be any excess funds. Project funding in

telecom results in mismatch of loans disbursed and final use of proceeds, thereby resulting

in treasury income as also treasury expenses. Cash surpluses generated by business are used

for investing in other forms (other than in CAPEX) for business due to the loan conditions

of the lenders. Considering the above, profit on sale of investment should not be included

in GR/AGR.

The Management’s contention for non-inclusion of income from investment for GR is

not tenable as TDSAT judgement dated 30 August 2007 has become null and void after

Honourable Supreme Court judgment dated 11 October 2011. Further, licence agreements

provide for inclusion of income from investment in GR/AGR for computation of revenue

share.

Thus, non-consideration of income from investment in GR/AGR for ` 398.83 crore by

ICL/ABTL during the year 2007-08 to 2009-10 resulted in non-payment of ` 33.36 crore

as LF and ` 14.49 crore as SUC (Annexure - 6.13).


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6.3.3 Non consideration of miscellaneous income for AGR for computation of LF/

SUC by M/s ICL

In the Profit and Loss Account of ICL, revenue/income grouped under the Schedule of

“Other Income” is further sub grouped in two categories- (i) Liability/Provisions written

back and (ii) Miscellaneous receipts. From the AGR statements, it was found that amount

of other income grouped under first category was not considered for AGR in the years

2006-07 to 2009-10 whereas income grouped under second category (Miscellaneous receipt)

was considered for AGR in the years 2006-07 and 2009-10 but partly considered in the

years 2007-08 and 2008-09.

Amount of miscellaneous Income (excluding insurance claims) for the years 2007-08 and

2008-09 are ` 9.37 crore, out of which only ` 1.04 crore was considered for AGR and

balance amount of ` 8.33 crore was not considered (Annexure - 6.14).

To an audit query, the Management stated that:-

• Withregardtomiscellaneousreceipts,suchreceiptswereincidentaltobusinesssuch

as scrap sale, insurance claims etc. which do not have any connection with telecom

operations under the licence agreement.

• As per TDSAT judgement dated 7 July 2006, the principle for computation of

licence fee would be based on AGR. Licence fee would be paid only on revenue

earned from licenced activities (and not from unlicenced activities). As per TDSAT

judgement dated 30 August 2007, which was agreed with by DoT, revenue from sale

of fixed assets which was in the nature of capital receipts and insurance claims should

not be part of AGR and other items falling under the categories of miscellaneous/

other income would have to be decided for taking a view regarding its inclusion or

exclusion on a case to case basis.

ICL’s Management reply is not tenable since

• DefinitionofGRexpresslyprovidesthatmiscellaneousincomeshouldbeincluded

in GR for computation of revenue share. Management contention that these

miscellaneous income were from non-licenced activity and hence not liable to be

included in AGR is not acceptable. These miscellaneous incomes were incidental to

licenced activities only.

• The Company’s contention that DoT agreed with the TDSAT judgement dated

30 August 2007 was not correct as DoT challenged it and Hon’ble Supreme Court

set aside the TDSAT judgement vide its judgement dated 11 October 2011.

• Insuranceclaimincludedinmiscellaneousrevenuewasexcludedbyauditforarriving

at the amount of miscellaneous income not considered for GR/AGR.


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As such, items of miscellaneous income amounting to ` 8.33 crore not considered in

respective AGR should be included in AGR for computation of LF/SUC. Impact on short

payment of LF and SUC due to non-consideration of miscellaneous income in GR/AGR was

` 0.70 crore and ` 0.32 crore respectively (Annexure-6.14).

6.3.4 Non consideration of Income from profit on sale of fixed assets for AGR for

payment of revenue share by ICL/ABTL

From the examination of data/records furnished by ICL for the period from 2006-07 to

2009-10, it was noticed that gain on sale of fixed assets of ` 16.00 crore (Annexure - 6.15)

was found to be adjusted against other administrative expenditure in the Profit and Loss

account of ICL during 2007-08, 2008-09 and 2009-10 and was not included in GR/AGR

for consideration of LF/SUC.

Similarly, in case of ABTL, profit on sale of fixed assets of ` 0.12 crore was not included

in GR/AGR for consideration of LF/SUC.

To an audit query, the Management stated that –

• Thecompany’saccountingtreatmentandpresentationofaccountswasinaccordance

with Schedule VI of the Companies Act. Any loss/gain on sale was capital receipt

in nature. The investments made in assets were resulting in generation of revenue

which was subject to licence fee. Sale proceeds from disposal of such assets resulting

in either Gain/loss are nothing but the recovery of the amount higher than the

Written down Value of Assets in the books. This gain was really not a gain since

the benefit of depreciation was not availed earlier. This would also tantamount to

charging licence fee on revenue from operations as well as the capital expenditure

portion earlier put for business. This revenue was in nature of capital revenue and it

was not derived from licenced activity and hence it should not be included in AGR

for computation of LF.

• ConsideringtheTDSATjudgementdated30August2007,therevenueonaccount

of profit on sale of fixed assets was not considered for AGR.

The contention of the Management is not tenable since-

• DefinitionofGRexpresslyprovidesthatmiscellaneousincomeshouldbeincludedin

GR for computation of revenue share. Further, licence agreements did not differentiate

between licenced activity and non-licenced activity. In terms of definition of GR,

Gross Revenue shall include all revenue accruing to the Licensee without any set-off

for related item of expense and revenue earned as above was incidental to licenced

activity only. The Company had also considered it for inclusion in AGR in the year

2006-07.


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• TDSATjudgementdated30August2007hasbecomenullandvoidafterHonourable

Supreme Court judgment dated 11 October 2011.

Thus non-inclusion of income of ` 16.12 crore on account of profit on sale of fixed asset

in GR/AGR for computation of Revenue resulted in short payment of LF and SUC by

` 1.54 crore and ` 0.69 crore respectively (Annexure – 6.15).

6.4 Short/ non-payment of revenue share due to other issues

6.4.1 Irregular Deduction of Bad debts written off from GR to arrive at AGR by ICL

Review of data/records provided by ICL for the period from 2006-07 to 2009-10 revealed that for 2009-10, ` 173.31 crore was included under Administration and Other Expenses as “Bad debts Written Off”. However, in the year 2009-10, an amount of ` 172.18 crore on account of “Bad debts Written Off” was deducted from GR while arriving at AGR pertaining to eight LSAs3.

To an audit query, Management stated that considering the TDSAT judgement dated 30 August 2007, the Company claimed deduction of “Bad Debts Written Off” during the 2009-10 while preparing the Annual Audited AGR for the aforesaid eight LSAs amounting to ` 172.18 crore. However, while making licence fee and spectrum charge payment to DoT, the Company had not taken deduction of “Bad Debt Written Off” and to that extent the Licence Fee and Spectrum Usage Charges amounting to ` 25.19 crore was paid in excess. It was further stated that during 2009-10, ` 173.31 crore was written off as Bad Debts resulting in the reversal of the provision for such doubtful receivable created earlier. The entry for effecting this write off of the receivables was passed by debiting the expense GL Code for provision and crediting respective debtors and Service Tax account in the circle books of accounts which resulted in re-grouping of ` 173.31 crore from provision for Bad and Doubtful debts/Advances (Expense) to Bad debts Written Off (Expense). However, the charge to Profit and Loss Accounts during 2009-10 was only ` 47.29 crore.

The contention of the Management is not tenable since the TDSAT judgement dated 30 August 2007 has become null and void after Hon’ble Supreme Court judgment dated 11 October, 2011. Further, the licence agreement does not provide deduction of bad debt from GR to arrive at AGR and the licensee itself did not deduct the bad debts written off from GR to arrive at AGR during the year 2006-07, 2007-08 and 2008-09. Though the Company stated that it paid LF and SUC on “Bad Debt Written Off”, Audit observed that in the audited AGR statement, the same was claimed as deduction which was against the licence agreement. Further, in the absence of documentary evidence to show that amount waspaid,thereplywasnotverifiable.QuarterlypaymentmadebytheCompanyonthe

basis of unaudited AGR would be considered by DoT at the time of assessment which

would be based on audited AGR statement only.

3 AP,Delhi,Gujarat,Haryana,Kerala,Maharashtra,MPandUP(W).


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Thus deduction of bad debts from GR to arrive at AGR in audited AGR statement resulted

in understatement of GR by ` 172.18 crore having impact on LF and SUC by ` 16.89 crore


6.5 Other issues

6.5.1 Transfer of infrastructure assets by Idea Cellular Ltd to its subsidiary at NIL

consideration for ultimate transfer to a Joint Venture

ICL was initially promoted (March 1995) by Aditya Birla group of companies including

ABTL. However, ABTL ceased to be the promoter from 29 August 2006 and became a

subsidiary company of ICL from 28 February 2007. ABTL obtained UAS Licence for Bihar

LSA (December, 2006) but commenced its telecom operations only in 2009-10.

ICL established three new subsidiaries namely, Idea Cellular Services Limited (ICSL) and

Idea Cellular Infrastructure Services Limited (ICISL) (incorporated on 3 October 2007) and

Idea Cellular Tower Infrastructure Limited (ICTIL) (incorporated on 3 December 2007).

ICTIL was a wholly owned subsidiary of ICISL and hence the subsidiary of ICL.

A scheme of arrangement between ICL and ICTIL for demerger of passive infrastructure

of ICL and transfer of these infrastructures to ICTIL in 9 LSAs4 with appointed date

1 January 2009 was approved by the High Courts of Delhi and Gujarat and the scheme

became effective from 29 September 2009. Accounting entries in the books of accounts of

ICL and ICTIL were made in the year 2008-09 as per the scheme. Accordingly in the books

of ICL, book value of assets of ` 1622.78 crore was removed from books and investment

in its subsidiary, ABTL, (holding company of ICTIL) was increased by the same amount.

In the books of ICTIL, above assets were recorded at their book value with corresponding

credit to General Reserve.

Another scheme of arrangement between ABTL and ICL for transfer of UASL and related

assets and liabilities of ABTL (of Bihar LSA) with appointed date 1 April 2009 was

approved by the High Courts of Bombay & Gujarat which became effective from 1 March

2010. Accounting entries in the books of accounts of ICL and ABTL were made in the

year 2009-10 as per the scheme. Accordingly in the books of ABTL, net book value of

asset of ` 2069.45 crore was written off and same amount was withdrawn from Reserve for

Business Restructuring. In the books of ICL, assets & liabilities transferred were recorded

at their book value and ` 2069.45 crore was credited to General Reserve.

Thus, it is apparent that the assets were transferred by ICL and ABTL at NIL value since

the transferee companies (ICTIL and ICL) accounted the value of assets at book value

with corresponding credit to General Reserve. The transfer of assets at NIL value was not

a transaction at arm’s length since all the three companies were different entities. Due to

4 AP,Delhi,Gujarat,UP(E),UP(W),Haryana,Kerala,RajasthanandMumbai.


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accounting of assets at book value by the transferee companies and pending revaluation,

the profit foregone by the transferor companies and its effect on LF and SUC could not be

quantified.



worked out to be ` 289.99 crore and ` 133.27 crore respectively. The interest on this

short/non-payment of LF and SUC is ` 541.63 crore (Annexure - 6.17). The calculation of

interest was based on the rate prescribed in the Licence agreement i.e. two per cent above

the Prime Lending Rate of State Bank of India existing as on the beginning of the financial

year and the period considered for the calculation was from the end of the concerned

financial year up to March 2015. The interest has been compounded monthly as prescribed

in the licence condition.


Audit observations on the revenue shared by ICL were communicated to DoT in

November 2015. Reply of DoT is awaited (January 2016).


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CHAPTER – VIIRevenue shared by Tata Teleservices Limited and

Tata Teleservices (Maharashtra) Limited

7.1 Brief profile of the company

M/s Tata Teleservices Limited (TTSL) was incorporated in 1996 and in December 2002,

TTSL acquired 50.83 per cent of the paid up equity capital of Hughes Telecom India

Limited (HTIL) which had basic licence in Maharashtra. In February 2003, the name of

HTIL was changed to M/s Tata Teleservices (Maharashtra) Limited (TTML), and is an

associate company of TTSL. TTSL provides basic services as well as cellular services on

dual technology i.e., CDMA and GSM.

7.1.1 Licences granted to TTSL and TTML

TTSL was awarded Basic Licence in Andhra Pradesh LSA in September 1997 and in

August 2001 it was awarded Basic Licences for five more LSAs1. Subsequently, during

January-February 2004, twelve2 more UASL licences were granted to the Company. Three

new UAS Licences for Assam, Jammu and Kashmir and North East were awarded in 2008.

TTML holds UASL in Mumbai and Maharashtra. Thus, TTSL and TTML have presence

in all the 22 LSAs.

TTSL holds NLD licence also and TTML holds ISP licence.

7.1.2 Spectrum allotted to TTSL and TTML

Spectrum allotted to TTSL and TTML as on 31 March 2010 were as follows:

Table 7.1

Sl No Spectrum Licenced Service Area

CDMA

1 2 × 5 MHz Andhra Pradesh, Delhi, Maharashtra, Mumbai

2 2 × 3.75 MHz Chennai, Bihar, Gujarat, Haryana, Karnataka, Kerala, Kolkata, Punjab, Rajasthan, UP East, UP West

3 2 × 2.5 MHz Tamil Nadu, Assam, Himachal Pradesh, Jammu and Kashmir, Madhya Pradesh, North East, Odisha, West Bengal

GSM

1 2 × 4.4MHz Andhra Pradesh, Bihar, Tamil Nadu (including Chennai), Gujarat, Haryana, Karnataka, Himachal Pradesh, Kerala, Kolkata, Maharashtra, Madhya Pradesh, Mumbai, Odisha, Punjab, Rajasthan, UP East, UP West, West Bengal

1 Delhi,Gujarat,Karnataka,TamilNaduandChennai.2 WestBengal,Bihar,Haryana,HimachalPradesh,Kerala,MadhyaPradesh,Orissa,Punjab,Rajasthan,UttarPradesh–

West,UttarPradesh–EastandKolkata.


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7.1.3 Subscriber base of TTSL and TTML

The subscribers of TTSL/TTML grew from 1.66 crore as on 31 March 2007 to 6.71 crore

as on 31 March 2010 registering a growth of 305 per cent. TTSL group remained in fourth

position during the years 2006-07 to 2009-10 and its market share increased from 8 per cent

as on March 2007 to 11 per cent as on March 2010.

7.1.4 Gross Revenue, Deduction, Adjusted Gross Revenue reported and revenue

share paid by TTSL and TTML

Telecom Service Providers are required to pay LF and SUC at a percentage of AGR on

quarterly basis on self-assessment basis. GR, Deduction, AGR reported and revenue share

(LF and SUC) paid by TTSL and TTML during these years were as follows:

Table – 7.2

(` in crore)

Company YearGross

Revenue (GR)

Deductions Adjusted

Gross Revenue (AGR)

Percentage of AGR to

GR

Revenue share

TTSL

2006-07 5,015.43 1,570.06 3,445.37 68.7 318.18

2007-08 5,921.93 1,853.03 4,068.90 68.71 370.68

2008-09 6,510.74 2,222.26 4,288.48 65.87 388.91

2009-10 6,125.02 1,497.10 4,627.92 75.56 416.32

Total 23,573.12 7,142.45 16,430.67 69.7 1494.09

TTML

2006-07 1,389.45 358.60 1,030.85 74.19 103.08

2007-08 1,702.95 395.34 1,307.62 76.79 130.76

2008-09 1,912.34 427.39 1,484.94 77.65 148.49

2009-10 2,038.65 387.89 1,650.75 80.97 165.07

Total 7,043.38 1,569.22 5,474.16 77.72 547.42

7.2 Under reporting of revenue by TTSL and TTML



Further as mentioned in Annexure-III of UASL agreement, service revenue (amount billable)

shall be shown gross and details of discount/rebate indicated separately.


Profit and Loss Accounts, Balance Sheet, etc.) of TTSL and TTML revealed that these

companies had not adhered to the provisions of the licence agreement as discussed below.


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7.2.1 Commission paid to distributors/franchisees/agents/dealers, etc. debited from

the revenue in respect of TTSL

During audit scrutiny of the records of TTSL for the years from 2006-07 to 2009-10, it

was observed that the commission paid to the distributors/franchisees/agents/dealers, etc.,

was netted off from the revenue. Since the commission/margin paid to the distributors/

franchisees/dealers was in the nature of business expenses (marketing expenses), therefore,

set-off of such expenses with revenue was against the licence condition. However, in

respect of TTML, it was observed that commission paid to the distributor/franchisees/

agents/dealers, etc., was treated as expenses.

The total commission netted off from revenue in respect of all the licenced areas of TTSL

during the years 2006-07 to 2009-10 was ` 521.35 crore as confirmed by the management

(Annexure - 7.01). In response to the audit observation, the Management stated that

transactions with the wholesaler/retailer were in the nature of Principal to Principal and

also there was no sub-licence/assignment/transfer of licence as per clause 6 of the licence

agreement. Hence, trade discount or discount on bulk purchase of recharge vouchers (RCV)

and start up kits (SUK) paid to the wholesalers/dealers /retailers should not be added back

for the purpose of computing LF.

Audit view on the reply of the Management regarding Principal to Principal is as explained

in para 3.2.1 (A).

Thus, commission paid to the distributor/franchisees/agents/dealers, etc. netted off from

revenue resulted in understatement of GR/AGR by ` 521.35 crore and short payment of LF

and SUC amounting to ` 47.33 crore and ` 14.25 crore respectively.

7.2.2 Revenue understated due to netting of discounts allowed to subscribers etc. by

TTSL and TTML

Review of data/records furnished by TTSL/TTML for the period from 2006-07 to

2009-10 revealed that the Company offered various schemes/discounts to subscribers

(volume discounts, intra circle discount, content service discount, recharge card discount,

SMS discount, Tata to Tata discount, cash discount, etc.). It was also noticed that the

Company debited these discounts from revenue heads instead of expense heads as a result

of which the revenue considered for AGR was understated.

Since the commission/margin paid to the distributors/franchisees/dealers was in the nature

of business expenses (marketing expenses), therefore, set-off of such expenses from revenue

was against the licence condition.

The total amount netted off from the revenue on account of various discounts worked out

to ` 4814.16 crore and `1476.18 crore in respect of TTSL and TTML respectively for the

period from 2006-07 to 2009-10 (Annexures - 7.02 and 7.03).


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The Management stated that the discounts given by the company were discounts offered as

part of tariff plan filed with TRAI, discounts offered to employees and business associates

and internal lines discount.

Audit view on the management reply is as follows-

Management contention that above discounts were covered under tariff plan submitted to

TRAI is not acceptable since such tariff plans were neither shared with audit nor enclosed

with reply. Further, service revenue should be shown in gross and not be netted off with

any discounts/rebate while preparing the AGR statements as per Annexure-III of the licence

agreement.

Thus, total amount of ` 4814.16 crore and ` 1476.18 crore netted off from the revenue

on account of various discounts in respect of TTSL and TTML respectively resulted

in understatement of GR/AGR by same amount and in short payment of LF and SUC

amounting to ` 444.20 crore and ` 131.77 crore respectively by TTSL and ` 147.62 crore

and ` 48.42 crore respectively by TTML.

7.2.3 Netting of adjustments offered to customers from the GR in respect of TTSL

and TTML

Review of data/records furnished by TTSL/TTML for the period from 2006-07 to

2009-10 revealed that the Company was maintaining separate account heads for various

types of adjustments (billing adjustments, adjustments for collection waivers, bill back

out adjustments, round off adjustments, misc. Adjustments, etc.,) under revenue head of

accounts and all the adjustments made were debited to revenue.

It was also noticed that Companies in order to accommodate adjustments on account of

waivers given to the subscribers debited the value of these adjustments to revenue heads as

a result of which the revenue considered for AGR was understated to that extent.

Since “waivers” were a part of overall commercial strategy to enhance business, they were

in the nature of expenses and set-off such related items of expenses is not allowed as per

the licence agreement.

The total amount of adjustments for collection waivers netted off from the revenue worked

out to ` 128.00 crore and ` 147.73 crore in respect of TTSL and TTML respectively for

the period from 2006-07 to 2009-10 (Annexures - 7.04 and 7.05) leading to AGRs getting

understated by the same extent.

Company, in reply, stated that-

• Theaccountheadsincludeadjustments/waiversetc.giventothecustomers/employees/

outsourced employee etc., in the normal course of the business and revenue was

recognized net of such waivers.


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• Rectification/adjustments were made on account of dispute, wrong billing due to

configuration errors. These errors could relate to excess amount billed, erroneously

billed, payments done in time but still late payments charges levied which was

subsequently waived off. Adjustments to billings/errors in the billings were a normal

part of any business activity and does not result in gross inflow of cash, receivables

or other consideration as a result of wrong/error in billing and hence reversal needs

to be adjusted/setoff against the wrong billing.

Audit view on the Management reply is as follows -

• AspointedoutbyManagement,billingadjustmentandoperatordepositadjustments

have been considered and accordingly figures have been revised.

• Regarding other adjustment pertaining to collection waivers and miscellaneous

adjustments, etc., the contention of the Management is not tenable since they are

part of overall commercial strategy to enhance business; therefore, they were in the

nature of business expenses and set off of related items of expenses is not permitted

in terms of clause 19.1 of the licence agreement.

Thus, the total amount of adjustments for collection waivers/ miscellaneous adjustments,

etc. netted off from the revenue amounting to ` 128.00 crore and ` 147.73 crore in respect

of TTSL and TTML respectively resulted in understatement of GR/AGR and in short

payment of LF and SUC amounting to 11.20 crore and 3.48 crore respectively by TTSL

and ` 14.77 crore and ` 4.85 crore respectively by TTML.

7.2.4 Netting of the revenue from Start up Kit, recharge vouchers etc. by TTSL and TTML

Review of data/records furnished by TTSL/TTML for the period from 2006-07 to 2009-10

revealed that the Company offers various discount on bulk purchase on recharge vouchers

and start up kits to the wholesalers/dealers /retailer. It was also noticed that the Company

debited these discounts from revenue heads as a result of which the revenue considered

for AGR was understated. Since the discount on bulk purchase given to the distributors/

franchisees/dealers was in the nature of business expenses (marketing expenses) setoff of

such expenses with revenue was against the licence condition.

The total amount netted off from the Revenue by TTSL and TTML amounted to

` 104.82 crore and ` 8.50 crore respectively for the years 2008-09 to 2009-10

(Annexures 7.06 and 7.07) leading to AGR getting understated by the same extent.

Management stated that “transactions with the wholesaler/retailer were in the nature of

Principal to Principal and also there was no sub-licence/assignment/transfer of licence as

per clause 6 of the licence agreement. Hence trade discount or discount on bulk purchase

on recharge vouchers and start up kits paid to the wholesalers/dealers /retailer should not

be added back for the purpose of computing licence fee”.


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Audit view on the reply of the management regarding Principal to Principal is as explained

in para 3.2.1 (A).

Thus, the total amount of ` 104.82 crore and ` 8.50 crore netted off from the revenue by

TTSL and TTML respectively resulted in understatement of GR/AGR and in short payment

of LF and SUC of ` 8.90 crore and ` 2.82 crore by TTSL and ` 0.85 crore and ` 0.28

crore by TTML.

7.2.5 Non consideration of income received from infrastructure sharing in GR by

TTSL

During review of audited AGR statements along with notes on statements of TTSL, it was

noticed that during 2008-09 and 2009-10, income towards OPEX receipt for infrastructure

sharing received by the Company was not considered for GR as disclosed by the Statutory

Auditors.

As per terms of licence agreement, GR includes revenue from permissible sharing of

infrastructure without any set-off for related item of expense. Further, licence agreement

does not distinguish infrastructure sharing revenue between CAPEX and OPEX. Hence,

set-off of revenue from infrastructure sharing against the expenses was not allowed.

The total income received from other operators which was not considered for computation

of AGR during the years 2008-09 and 2009-10 amounted to ` 23.49 crore (Annexure - 7.08).

Management replied that :

• ReimbursementofOPEXshouldnotbepartofAGRsincecreditintheexpenses

were primarily on account of the re-classification of expenses, actualization of

accrual of expenses, reimbursement of expenses and insurance claim received which

do not form revenue to the Company in any respect/accounting practices.

• TDSATinitsjudgmentdated23April2015hadclearlylaiddownthatapayment

in the nature of reimbursement of an expense may not be taken as revenue.

While noting that DoT had filed an appeal before Hon’ble Supreme Court against the

TDSAT judgment dated 23 April 2015 as referred in the reply, Audit view on the issue is

as explained in para 3.2.4.

Thus total income received from other operators which was not considered for computation

of AGR amounting to ` 23.49 crore resulted in short payment of LF of ` 2.26 crore and

SUC of ` 0.65 crore.


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7.2.6 Non- inclusion of realized forex gain for computation of GR by TTSL and

TTML

Review of data/records furnished by TTSL/TTML for the period from 2006-07 to 2009-10 revealed that though there was a quarterly realised gain under forex account codes on account of foreign exchange fluctuations accounted in the books of the accounts, the same was not considered for GR /AGR.

Considering only the quarterly realised net gains of account heads operated for forex for the years from 2006-07 to 2009-10, it was seen that realised forex gain amounting to ` 261.75 crore and ` 59.26 crore for TTSL and TTML respectively (Annexures - 7.09 and 7.10) was not considered for AGR.

It is pertinent to mention here that the above realised gain calculated from the data extracted from the reports generated from SAP System did not represent the actual gain of that particular item since the company recasts the value of all the items included under the foreign exchange gains/losses head every year, the matured items are accounted under realised gains and the un-matured items remain under unrealised gain. Thus, the realised gain of a particular item in that year would not be the actual gain due to accounting of the gains/losses of that item during the intermediate period under unrealised. Audit could not arrive at the actual value of items accounted under realised gain every year for want of original value of each item. Further, audit has considered the quarterly net gain, head of account-wise and LSA-wise, as it was not possible for audit to segregate/collect the figures of gains only from the data made available. The operator should calculate the gain of each item with reference to its initial value of accounting and include the total forex gain in GR/AGR.

While confirming the figures pointed out by audit, it was replied by the Management that

• Foreignexchangefluctuationwasacontingencywhichhadimpactoneverybusinessand such gain had not accrued from primary or supplementary services of the Company i.e. providing telecom services to its customers/subscribers. Forex gains result when liabilities for payment in foreign exchange decrease on account of appreciation of domestic currency vis-à-vis foreign currency and such exchange differences arise when rates differ from those at which they were initially recorded in the books.

• Audithasconsideredonlygainignoringthenotionallossrecordedintheheadofaccounts. The forex gain loss, unlike telecom expenditure was not something where the notional gain was to be viewed in isolation of the loss, as these were recorded on the same principles adopted to account for the exchange rate differences at the end of each book closing period. This gets actualized only at the time of payment to the vendor.

• TDSATJudgment dated23April 2015passed inAUSPIvsUnionof India andothers held that “any gain or loss due to foreign exchange fluctuation should have no bearing on the licence fee”.


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Contention of the management was not acceptable as

• Forex gain realised by the Company was incidental to telecom activity. Audit

considered only quarterly net realized gains and unrealized account heads (notional)

were ignored. Further, as per the licence agreement “GR shall be inclusive of ……

any other miscellaneous revenue, without any set-off for related item of expense,

etc,” and forex gain was part of Miscellaneous Revenue.

• AuditnotedthatDoThadgoneonappealagainsttheTDSATjudgementofApril

2015 referred by the Company. While the matter was sub-judice at the Hon’ble

Supreme Court, Audit is of the view that non-consideration of forex gains in the GR

by the Company was a deviation from licence conditions.

Thus, realised forex gain of ` 261.75 crore and ` 59.26 crore not considered for AGR by

TTSL and TTML respectively resulted in short payment of LF of ` 23.59 crore and SUC

of ` 7.15 crore by TTSL and LF of ` 5.93 crore and SUC of ` 1.94 crore by TTML.

7.3 Under reporting of revenue in the statements of revenue and LF (AGR statements) though reported in the books of accounts.

7.3.1 Non consideration of interest income in GR/AGR by TTSL

From AGR statements and Profit and Loss account, it was noticed that interest income of

` 568.69 crore (Annexure - 7.11) accounted in the books of accounts of TTSL for the

period from 2006-07 to 2009-10 was not considered in the GR.

Management informed that entire amount of ` 568.69 crore had been considered for

GR/AGR in May 2011 and the consideration of the interest income was under protest. It

was further stated that these amounts were not to be included for calculation of revenue

share as the definition of AGR was under litigation and would be decided in due course

through judicial process.

The response of the Management was not tenable since definition of GR in licence agreement

expressly provides for inclusion of income from interest in GR/AGR for computation of

revenue share. Though the company replied (November 2015) that the same had been

considered for GR/AGR during May 2011, they failed to submit the document in support

of details of amounts considered for the earlier years and payment made thereto were

not provided to substantiate their claim of payments and in the absence of the same audit

could not verify. Further, in the audited AGR statements for the years 2006-07 to 2009-10

submitted to DoT, interest income as mentioned above were not considered for computation

of LF/SUC in the relevant years.

Thus, non consideration of interest income of ` 568.69 crore resulted in understatement of

GR/AGR for the years 2006-07 to 2009-10 and in short payment of LF and SUC by 51.22

crore and ` 15.53 crore respectively by TTSL.


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7.3.2 Profit on sale of investment not considered in GR/AGR

Format of statement of revenue and LF (AGR statement) prescribed as per Appendix-II to Annexure-II of the UASL agreement is an integral part of the licence agreement. In the statement, item 4 has been prescribed to reflect the “income from investments”. Clause 19.1 of UASL agreement defines GR which, inter alia states that, the revenue includes any other miscellaneous income and further, the revenue shall be without any set off for the related items of expenses.

Audit observed from audited AGR statements and Profit and Loss account of TTSL and TTML that profit on sale of investment (long term /current investment) was not considered for computation of GR for payment of LF/SUC during the years from 2006-07 to 2009-10. The total amount in respect TTSL worked out to ` 2082.87 crore and ` 0.63 crore in case of TTML (Annexures - 7.12 and 7.13). The Company replied that it paid licence fee in the respective financial year in the case of profit on sale of investment in Wireless TT Info Services Limited (WTTIL) (Amount pertaining to period 2008-09 and 2009-10) and licence fee on profit on sale of investment for period 2006-07 and 2007-08 was paid in May 2011.

The reply of the management is not tenable since licence agreement provides for inclusion of income from profit on sale of investment in GR/AGR for computation of revenue share. Though the company replied (November 2015) that the same had been considered for GR/AGR during May 2011, they failed to submit the document in support of details of amounts considered for the earlier years and payment made thereto to substantiate their claim of payments and in the absence of the same audit could not verify. Further, in the audited AGR statements for the years 2006-07 to 2009-10 submitted to DoT, income from profit on sale of investment as mentioned above were not considered for computation of LF/SUC in the relevant years.

Thus, non consideration of profit on sale of Investment of ` 2082.87 crore and ` 0.63 crore by TTSL and TTML respectively resulted in understatement of GR/AGR and short payment of LF of ` 187.63 crore and SUC of ` 56.93 crore by TTSL and LF of ` 0.06 crore and SUC of ` 0.02 crore by TTML.

7.3.3 Non consideration of profit on sale of assets for GR/AGR

From the data/documents (viz. trial balances, audited AGR statements, auditor’s report, notes on accounts/statements and revenue reconciliation statements etc.) provided by TTSL and TTML it was found that revenue received towards “Profit on sale of fixed assets” by both TTSL and TTML during the years 2007-08 to 2009-10 was not considered for computation of GR/AGR in the respective years.

The profit on sale of asset recorded in the books of account of TTSL and TTML for the period from 2007-08 to 2009-10 worked out to 121.25 crore and 35.49 crore respectively (Annexures - 7.14 and 7.15).


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It was replied by the Management that the Company had paid licence fee on profit on sale of assets though the Company firmly believes that this should not be part of AGR.

Reply of the Management is not tenable as Company did not provided any documentary evidence to substantiate their claim of payments and in the absence of the same, the reply could not be verified by Audit. Further, in the audited AGR statement submitted to DoT, the profit on sale of assets was not considered for computation of LF/SUC.

Thus non consideration of profit on sale of asset of ` 121.25 crore and ` 35.49 crore by TTSL and TTML respectively resulted in short payment of LF of ` 10.97 crore and SUC of ` 3.32 crore by TTSL and LF of ` 3.55 crore and SUC of ` 1.16 crore by TTML.

7.4 Short/ non-payment of revenue share due to other issues

7.4.1 Bad debts written off adjusted from the revenue by TTSL resulting in understatement of AGR

From review of data/documents furnished to audit, it was found that TTSL adjusted “Bad Debts written off” for the year ended 31 March 2010 from the respective components of revenue from services while considering the preparation of the statements for the computation of AGR of the respective circles.

The licence agreement does not provide deduction of bad debt from GR to arrive at AGR.

The total amount of “write off of subscriber bad debts” adjusted from the respective components of revenue from services was ` 272.29 crore (Annexure - 7.16).

Management accepted that an amount of ` 272.29 crore had been adjusted from the revenue as bad debts written off.

Thus, adjustment of Bad Debts written off from the respective components of revenue from services of ` 272.29 crore resulted in short payment of LF and SUC by ` 26.64 crore and ` 7.61 crore respectively.

7.4.2 Lease line and Port Charges included in deductions claimed by TTSL and TTML resulting in understatement of AGR

As per the disclosures by Statutory Auditors in the notes to the statements submitted along with the audited AGRs of TTSL for the years 2006-07 to 2009-10, “Access charges considered for computation of Adjusted Gross Revenue (AGR) include leased line charges and port charges actually paid to other carriers during the year concerned”.

Further, in respect of TTML, it was disclosed by the Statutory Auditors that during the years 2006-07 and 2007-08, the leased line and port charges were claimed along with PSTN charges and during 2008-09 and 2009-10, the expenditure towards lease line and port charges were claimed as separate deductions along with other eligible deductions.


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In terms of Clause 19.2 of the UASL agreement, the following shall be excluded from the GR to arrive at AGR.

i) PSTN related call charges (Access Charges) actually paid to other eligible/entitled telecommunication service providers within India.

ii) Roaming revenues actually passed on to other eligible/entitled telecommunication service providers and

iii) Service Tax on provision of services and Sales Tax actually paid to the Government if Gross Revenue had included as component of Service Tax and Sales Tax.

In respect of TTSL for the years 2006-07 to 2009-10, the total expenditure towards lease line and port charges included in the access charges and claimed as deduction worked out to ` 255.41 crore (Annexure - 7.17) whereas in respect of TTML, the same worked out to ` 87.26 crore (Annexure - 7.18).

Management stated that the payments on account of port charges and leased lines were for providing connectivity to the customers were a part of and similar to interconnection costs; which since included in the AGR in the hands of the receiver, would result in double taxation if the same was not allowed as deduction in the hands of the payer.

The reply of the Management is not tenable since lease line and port charges paid were actually an expense for hiring of infrastructure and not PSTN related call charges (Access charges). Therefore, it is not eligible for deduction under clause 19.2 of UASL agreement.

Thus, the total expenditure towards lease line and port charges included in the access charges and claimed as deduction for ` 255.41 crore and ` 87.26 crore respectively by TTSL and TTML resulted in short payment of LF of 22.10 crore and SUC of 6.94 crore by TTSL and LF of ` 8.73 crore and SUC of ` 2.86 crore by TTML.

7.4.3 Non consideration of revenue from sharing/leasing of infrastructure/bandwidth links for payment of SUC by TTSL

Format of statement of revenue and licence fee (AGR statement) prescribed as Appendix II to Annexure II as referred in Clause 20.4 of the UASL agreement is an integral part of the licence agreement. In the statement, item 1 A has been prescribed to reflect the “revenue from wire line subscribers”. Further, Clause 18.3.1 of UASL agreement provides that “While calculating AGR for limited purpose of levying spectrum charges based on revenue share, revenue from wire line subscribers shall not be taken into account”.

In respect of TTSL, the revenue from sharing/leasing of infrastructure/bandwidth links/R&G cases etc., which were considered in the AGR statements for computation of LF during the year 2006-07, 2007-08, 2008-09 and 2009-10 amounting to ` 1030.61 crore (Annexure - 7.19) was not considered for computation of SUC, which was in contravention of the provisions of the licence agreement. Management confirmed the facts and figures and stated that revenue from wireless services alone have been offered for CDMA SUC and the rest being income from wire line services, the same was not offered for SUC.


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Audit view on the non-inclusion of revenue from sharing/leasing of infrastructure/bandwidth links/R&G cases, etc. for payment of SUC has been explained under Para 3.4.3 of this report.

Thus, the revenue from sharing/leasing of infrastructure/bandwidth links/R&G cases, etc., which were considered in the AGR statements for computation of LF but not considered for computation of SUC amounting to ` 1030.61 crore resulted in short payment of SUC amounting to ` 28.05 crore by TTSL.

7.4.4 Non-consideration of Rental Income

Audit observed that an amount of ` 17.62 crore was credited to the expenditure head Rent. As the credits under expenditure head were in the nature of income, non-consideration of the same for computation of GR resulted in understatement of GR by ` 17.62 crore (Annexure - 7.20).

Management stated that TTSL was paying rent for office spaces. In certain places, space was taken by vendors who had to pay rent to the landlord. In such cases, TTSL was initially making the payment of rent and subsequently recovering the rent at actual from the vendors, thereby crediting the rent account. Hence, this did not constitute revenue but only reimbursement of expenditure.

The reply is not tenable because Management has not given any cogent reason as to why it should pay rent on behalf of the vendors and then subsequently get it reimbursed from them. Audit is of the view that any payment towards rent to TTSL by the vendors amounted to rental income which should be considered as part of shareable revenue in terms of the Licence Agreement.

Thus, non-consideration of rental income amounting to ` 17.62 crore for computation of GR resulted in short payment of LF and SUC ` 1.61 crore and ` 0.49 crore respectively


On issues raised above (from para 7.2 to 7.4) short/non-payment of LF and SUC worked out to be ` 1019.16 crore and ` 338.52 crore respectively. The interest on this short/ non-payment of LF and SUC by TTSL and TTML is ` 1857.71 crore (Annexure - 7.21). The calculation of interest was based on the rate prescribed in the licence agreement i.e. two per cent above the prime lending rate of State Bank of India existing as on the beginning of the financial year and the period considered for the calculation was from the end of the concerned financial year up to March 2015.


Audit observations on the revenue shared by TTSL and TTML were communicated to DoT

in November 2015. Reply of DoT is awaited (January 2016).


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CHAPTER – VIIIRevenue shared by Aircel Group (Dishnet Wireless Limited,

Aircel Limited and Aircel Cellular Limited)

8.1 Brief Profile of Aircel Group

M/s Aircel Cellular Ltd (ACL) the erstwhile M/s RPG Cellular Ltd commenced its

telecommunication services in Chennai in 1994. Subsequently, M/s Aircel Ltd (AL)

promoted by Sterling group obtained CMTS Licence in Tamil Nadu service area during 1998

(erstwhile M/s Srinivasa Cellular Ltd. Coimbatore). AL has two wholly owned subsidiaries

namely ACL and M/s Dishnet Wireless Ltd (DWL), which also provide telecommunication

services in India. In 2006, Aircel was acquired by Maxis Communications Berhad, Malaysia

(Maxis). Aircel is a joint venture with Sindya Securities and Investment Pvt Ltd and Maxis

hold majority of the stake (74 per cent) in the Company. By the year 2010, the Company

was having a pan India presence with licences in all 23 LSAs. Brief profile of the company

is as follows:

8.1.1 Licences granted to Aircel Group

ACL obtained CMTS licence in 1994 for Chennai service area. AL obtained CMTS licence in

Tamil Nadu service area during 1998. Subsequently, it also got UAS licences in seven service

areas during 20061. DWL got UAS licences in 14 service areas during 20042 and 20063.

8.1.2 Spectrum allotted to Aircel group of companies

AL, ACL and DWL are GSM operators. Initial start-up spectrum for subscriber access

(Main Radio Spectrum) to a GSM operator was 2×4.4 MHz. LSA wise spectrum allotted

to Aircel group of companies as on 31 March 2010 is detailed below:

Table No. 8.1

Sl. No. Spectrum Licenced Service Area

1 2 × 9.8 MHz Tamil Nadu

2 2 × 8.6 MHz Chennai

3 2 × 6.2 MHz Assam

4 2 × 4.4 MHz Bihar, Himachal Pradesh, Jammu and Kashmir, North East, Orissa, West Bengal, Haryana, Kerala, MP, Punjab, UP(W), UP(E), Kolkata, AP, Delhi, Gujarat, Karnataka, Maharashtra, Mumbai and Rajasthan (20 LSAs)

1 Mumbai,Delhi,AndhraPradesh,Karnataka,Maharashtra,GujaratandRajasthan.2 HimachalPradesh,Orissa,JammuandKashmir,Bihar,WestBengal,AssamandNorthEast.3 Kolkata,UttarPradesh(West),Haryana,Kerala,MadhyaPradesh,UttarPradesh(East)andPunjab.


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8.1.3 Subscriber base of AL/ACL/DWL

The cellular subscribers of Aircel Group (AL, ACL and DWL) grew from 0.55 crore as

on 31 March 2007 to 3.69 crore as on 31 March 2010 registering a growth of 569 per

cent. Its market share grew from three per cent as on 31 March 2007 to six per cent as on

31 March 2010.

8.1.4 Gross Revenue (GR), Adjusted Gross Revenue (AGR) and Revenue share paid

by the Aircel Group


at a percentage of AGR on quarterly basis on self-assessment basis. GR, deductions, AGR

reported and revenue share (LF and SUC) paid by Aircel Group during the four years

2006-07 to 2009-10 are as follows:

Table 8.2

(` in crore)


Revenue share(LF+SUC)

2006-07 1389.40 205.45 1183.95 85.21 144.33

2007-08 2332.21 364.82 1967.39 84.36 226.22

2008-09 3116.51 579.67 2536.84 81.40 315.47

2009-10 4703.64 1222.58 3481.06 74.01 409.60

Total 11541.76 2372.52 9169.24 79.44 1095.62

8.2 Under reporting of revenue by Aircel Group


without any set-off for related item of expense, etc. Further, Service Revenue (amount

billable) shall be shown gross and details of discount/rebate indicated separately.


Profit and Loss Accounts, and Balance Sheet, etc.) of Aircel Group revealed that these

companies had not adhered to the provisions of the licence agreement as brought out in the

succeeding paras:

8.2.1 Under reporting of Prepaid/Post-paid revenue due to netting off of revenue

relating to various offers given to subscribers

From the examination of data/records pertaining to prepaid services furnished by Aircel

Group for the period from 2006-07 to 2009-10, it was observed that the Company offered

various schemes/discounts viz. waiver, discount, Promo talk time, Free Air Time (FAT),


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Promotional offers, Full talk time, etc. to subscribers without any charges. It was noticed

that to accommodate such offers, the value of the same was deducted from service revenue

upfront. As and when the same was used by subscriber, the revenue was credited by

the said amount. Resultantly, the revenue on account of these offers to subscribers was

not recognised in the GR/AGR. Since, offers made to customers were part of overall

commercial strategy to enhance business, such offers/discounts amount to expenses. In

terms of licence agreement, service revenue shall be shown without any set-off for related

item of expense, so they are not allowed to be deduced from GR. This was also in violation

of the licence agreement which clearly states that service revenue (amount billable) shall be

shown gross and details of discount/rebate indicated separately.

The item wise details are furnished below-

A. Waiver, Discount and Promos to customers

Review of data/records furnished by Aircel Group for the period from 2006-07 to 2009-10

revealed that the following items of expenses were netted off from the revenue:-

i) Waiver offered to customers (` 99.09 crore)

ii) Discount offered to customers (` 46.77 crore)

iii) Promo Talk Time Transfer (` 0.96 crore)

In addition to the above, ` 24.71 crore booked as Promo talk time/usage under expenses

was netted off from revenue while arriving at GR. However, ` 30.47 crore on account of

“Promo talk time given as discount/Goodwill waiver and royalty discount” was added back

to revenue while arriving at GR.

Resultantly, total amount netted off from revenue on account of waiver, discount and

promo was ` 141.06 crore (Annexure - 8.01). Consequently, GR/AGR was understated by

` 141.06 crore and LF and SUC amounting to ` 13.13 crore and ` 5.95 crore respectively

was not paid by the Company (Annexure - 8.02).

B. Full talk time scheme offered to subscribers

The revenue from the prepaid services was netted off by ` 153.33 crore on account of Full

talk time offer to prepaid subscribers. Resultantly, LF and SUC amounting to ` 9.76 crore

and ` 4.32 crore respectively (Annexure - 8.03) was not paid on the said revenue by the

Company.

C. Free talk time offered to subscribers

The revenue from the prepaid services was netted off by ` 33.36 crore on account of

various offers (Free Air Time Bonus/Free talk value (FTV) accounted, FTV offered to

subscribers on Recharge Coupons (RC), Additional Talk time, Extra Talk time, etc.). As a


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result, the revenue was reduced by ` 33.36 crore. Consequently, LF and SUC amounting

to ` 2.95 crore and ` 1.39 crore respectively (Annexure - 8.04) were not paid on the said

revenue by the Company.

D. Discounts

During 2009-10, revenue from the prepaid services pertaining to AL was netted off by

` 2.82 crore by crediting expenditure (Discount ER). Resultantly, LF and SUC amounting

to ` 0.28 crore and ` 0.06 crore respectively (Annexure - 8.05) were not paid on the said

revenue by the company.

On being pointed out by Audit, the Management stated that-

• Waiversofferedtocustomerswhichwereinthenatureofgoodwillgesturewere

already added back for computing AGR in the respective years. Balance waivers

which were in the nature of billing errors, were corrected by giving waivers.

• Discount/PromoTalktimetransfersareinthenatureofadditionaltalktimegiven

to subscribers based on their usage pattern to enhance subscriber experience or to

retain him on Aircel network etc. For these, liabilities were booked and revenue was

accounted as per usage on decrement over a period of time and revenue was included

for AGR purpose.

• FullTalktimeschemeofferedtosubscriberswereinthenatureoftalktimegivento

subscribers for more value, to retain him on Aircel network etc. or to pull/instigate

new subscribers to join Aircel Network.

• FAT-Bonus/Free talk value/FTV offered to subscribers on RC's/additional talk

time/extra talk time offered to subscribers are in the nature of talk time given to

subscribers, to retain him on Aircel network etc. or to pull/instigate new subscribers

to join Aircel Network.

• ThecompanyaccountsfortherevenueincompliancewiththeAccountingStandard

(AS) 9 issued by the Institute of Chartered Accountants of India.

• TDSAT also upheld the above definition and passed an order to this effect on

23 April 2015 stating that “There is no conflict between the definition of “revenue’

as provided in AS-9 and clause 19.1 and 19.2 of the licence agreement defining gross

revenue and adjusted gross revenue. As is evident from section 211 (3A), (3B) and

(3C) that in case of a telecom company, the licensee is legally mandated to maintain

its profit and loss account and the balance sheet in compliance with the Accounting

Standards. Accounting Standards are given due importance by the Supreme Court

as those are the codified recommendations by the Institute of Chartered Accountants

of India which is an expert body in a specialised field”.


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Reply of the Management is not acceptable as -

• Outoftotaldebitentrynoticedintherevenueheadsonaccountof"Waiveroffered

to customers" i.e.` 99.09 crore, ` 98.62 crore (i.e. 99.53%) relates to prepaid

revenue, where no bills are raised to the customers. Further, even in case of waivers

to Prepaid subscribers, out of total debit entry of 98.62 crore on account of waivers,

` 98.43 crore was debited to GL code “Prepaid-RC Processing Income”, which if,

had it been due to wrong deduction (from the Subscriber accounts) on account of

VAS, Talk Time, rental etc, debit on account of waiver should have been on those

GL codes only. In case of billing to the post-paid customers if it is subsequently

confirmed that there was a mistake in the bill, the same is reversed/adjusted in

the respective revenue codes. It was noticed that there are several reversal and

adjustment entries in the general ledger to this effect. Analysis of the data extracted

from general ledgers pertaining to these waivers clearly indicated that these were

on account of prepaid processing income, VAS, Talk Time, rental etc. It was not

mentioned that these entries were due to wrong billing. Out of waivers of ` 99.09

crore for prepaid customers, Aircel group has itself added back ` 7.7 crore in the

name of goodwill waiver to the customer in revenue while preparing GR.

• Discount/PromoTalk time transfers andwaivers are part of overall commercial

strategy to enhance business; therefore, such offers/discounts were in the nature of

expenses and hence, in terms of licence agreements, were not allowed to be deducted

from GR.

• In case of Full Talk Time/Free Talk Time etc.Management has itself accepted

that these offers were in the nature of discounts offered to customer retention and

maintaining relationship and formed part of service revenue. Therefore, such offers/

discounts were in nature of expenses and hence, in terms of licence agreements,

were not allowed to be deducted from GR.

• IncaseofFAT-Bonus/Freetalkvalue/FTVofferedtosubscribersonRC's/additional

talk time/extra talk time offered to subscribers also, Management accepted that it is

in the nature of talk time given to subscribers to retain them on Aircel network etc.

or to pull/instigate new subscribers to join Aircel Network. Therefore, such offers/

discounts were in nature of expenses and hence, in terms of licence agreements,

were not allowed to be deducted from GR.

• AuditisnotquestioningtheaccountinginaccordancewithAS-9butcontendsthat

since these expenses were not to be set-off against as per the licence agreement,

these should be added back to GR for computation of LF and SUC.

• Whilethematterissub-judiceatHon’bleSupremeCourt,Auditviewisthatasper

licence agreement, service revenue should be shown in gross without any set-off of

related promotional expenses like discounts/waivers/offers given to the subscribers.


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8.2.2 Short accounting of revenue due to upfront debit in the revenue heads

As per the procedure followed by the Company for accounting of revenue, while the

revenue received in advance was accounted under liability, the FAT/FOC on this amount

was debited to the current revenue. Due to this, the current revenue was short accounted to

the extent of FAT/FOC resulting in deferment of LF and SUC on this amount.

On being pointed out by Audit, the Management reiterated the reply as given against our

observations at para 8.2.1 above.

Reply of the Management is not tenable since the upfront debit of FAT/FOC of revenue

received in advance to the current revenue results in short payment of LF and SUC on the

current revenue to the extent of amount debited.

8.2.3 Under reporting of prepaid revenue due to set-off of revenue pertaining to

commission/discount allowed to the distributors

From the examination of data/records furnished by Aircel group for the period from

2006-07 to 2009-10, it was observed that revenue booked in the accounts was net of

commission/discount given to the distributors at the time of sale of electronic/paper recharge

coupon. Further, the aforesaid commission/discount given to the distributors was also not

added back while arriving at GR/AGR. This was in violation of the licence agreement which

clearly stated that GR (amount billable) shall be shown gross and details of discount/rebate

indicated separately and the GR shall be without any set-off for related item of expense.

In this connection, when Audit raised the query seeking the details of amount/percentage

of commission/discount paid to the distributors at the time of sale of electronic/paper

recharge coupon, relevant information was not furnished by the Management. In such

circumstances, on the basis of average of the prevailing percentage (i.e. 4 per cent4 of the

pre-paid revenue), Audit calculated ` 272.60 crore as commission paid to the distributors

during 2006-07 to 2009-10.

On being pointed out by Audit, it was stated by the Management that:-

• It is submitted that though thepre-paid vouchers carry aMaximumRetailPrice

(MRP), these vouchers were sold to the distributors on a lower price as per agreement

between the parties. It is contended that the sale of pre-paid vouchers was a Principal

to Principal transaction.

• Further,TDSATin its judgmentdated23April2015hasheld“Inourviewthe

definition of ‘gross revenue’ cannot be construed as to bar the licensee from fixing

a wholesale price for the service which is lower than its MRP. The test is how the

actual transaction takes place. If the sale and invoicing is on MRP and any discount

4 Fourper cent(averageofthree per centtofive per cent,theprevailingpercentageofcommissionduring2006-07to 2009-10)


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is given separately, then in terms of clause 19.1 such discount is not deductible even

if the revenue booked in the profit and loss account is after netting off the discount.

On the other hand, if the sale is on a stated/agreed price, invoiced at that agreed

price and booked under the revenue in the profit and loss account accordingly,

without netting off any discount, the actual selling price would be the revenue and

the difference between the MRP and this selling price cannot be added to ‘gross

revenue”.

Audit view on the reply of the Management is as explained in para 3.2.1 (A). While the

matter is sub-judice at Hon’ble Supreme Court, Audit view is that commission/margin

paid to the distributors/franchises/dealers is in the nature of marketing expenses, therefore,

set-off of such expenses with revenue was against the licence condition.

Thus, netting off of commission amounting to ` 272.60 crore given to distributors/agents/

dealers has resulted in understatement of GR/AGR and short payment of LF and SUC by


8.2.4 Under reporting of revenue due to set-off on account of “Impact of Market

stock”

From the examination of data/records furnished by Aircel group for the period from

2006-07 to 2009-10, it was observed that during February 2009 and March 2010, the

revenue from prepaid services was netted off by ` 3.40 crore on account of “Impact of

Market stock/Impact of service tax rate change on market stock /etc.”

On being pointed out by Audit, it was stated by Management that this seems to be the

difference on account of market stock impact of increase in rate of service tax. The entries

for change in service tax rate are recorded at a later date, therefore while passing entry for

transfer of liability from market stock to customers, the liability is transferred based on the

old rate of service tax and accordingly revenue on account of such liability was recorded

in excess. Hence amount equivalent to the differential of service tax rate change have been

debited to revenue codes and credited to liability to rectify the excess revenue recorded.

Therefore, our submission is that the above should not be added back to revenue once again

in AGR for calculation of LF.

Reply of the Management is not tenable as rate of service tax was not revised during March

2010. Further, regarding cases pertaining to February 2009, it is stated that in all these

cases corresponding credit entries were made to processing fee/activation charge/other

provision, which is not related to service tax liability.

Thus netting off of revenue on account of “Impact of Market stock” has resulted in

understatement of GR/AGR by ` 3.40 crore in the year 2009-10 and short payment of LF

and SUC by ` 0.34 crore and ` 0.14 crore respectively (Annexure - 8.07).


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8.2.5 Non consideration of revenue from infrastructure sharing from other telecom

operators for GR/AGR

As mentioned in para 1.4 (a), the GR shall be inclusive of revenue from permissible sharing


of expense, etc.

Telecom infrastructure (towers, network equipments, etc.) owned by Aircel Group were

shared with other telecom companies. They have entered into agreements with other telecom

companies for infrastructure (site) sharing. In terms of the agreements entered with the

other operators, charges for sharing cell site was recovered from other operators which was

based on a percentage of CAPEX cost of the sites and OPEX cost incurred by Aircel group.

From the examination of data/records furnished by Aircel group pertaining to Infrastructure

sharing charges for the period from 2006-07 to 2009-10, it was observed that Infrastructure/

site sharing charges recoverable/recovered on account of rent, fuel (diesel), electricity,

network expenses, repairs and maintenance and security amounting to ` 67.12 crore were

netted off from their respective expense heads.

On being pointed out by Audit, it was replied that -

• Therearetwotypeofpaymentsreceivedforsharingofinfrastructurei.e.,charges

levied for the usage of the facility and reimbursement of expenditure incurred such

as that on repairs and maintenance, electricity, diesel etc. The charge for the usage

of the facility was booked as revenue whereas the reimbursement of costs was

booked as a reduction in related expenditure. It is pertinent to note here that the

Company accounts for reimbursement of expenses in compliance with the AS 29.

• TDSAT vide its judgment on 23April 2015 has held that “As is evident from

section 211 (3A), (3B) and (3C) a telecom company, the licensee is legally mandated

to maintain its profit and loss account and the balance sheet in compliance with

the Accounting Standards. Accounting Standards are given due importance by

the Supreme Court as those are the codified recommendations by the Institute of

Chartered Accountants of India which is an expert body in a specialised field”. It

is important to note that, TDSAT has also in its judgment dated 23 April 2015 has

stated that “while any payment made towards the usage of the facility has to be taken

as revenue in the hands of the recipient, a payment in the nature of reimbursement

of an expense and which is clearly indicated separately in the invoice as such, may

not be taken as revenue provided that it is not booked in the profit and loss account

as revenue.”

Audit view on the reply of the Management is as explained in para 3.2.4. While the matter

is sub-judice at Hon’ble Supreme Court, Audit view is that revenue towards diesel expenses,


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security expenses, repair and maintenance expenses and electricity charges did not constitute

reimbursement since they had to be incurred irrespective of whether the towers were shared

or not. In fact, by sharing the expenditure the Company benefited through additional

income. Thus netting of infrastructure sharing revenue received/receivable from other

telecom operators from the cost relating to 2006-07 to 2009-10 resulted in understatement

of GR/AGR by ` 67.12 crore and short payment of LF and SUC by ` 5.45 crore and


8.2.6 Short/Non-consideration of revenue from forex gain in GR/AGR

In the Profit and Loss account of Aircel Group, total net balances under the account heads

operated for booking transactions related to foreign exchange gain/loss were included in the

schedule of “Other Income” as Foreign Exchange Gain (net).

From the examination of data/records provided by Aircel group for the period from

2006-07 to 2009-10, it was observed that the total realized forex gain for the Aircel was

` 16.57 crore, out of which, forex gain amounting to ` 6.54 crore only was considered

during 2006-07 to 2008-09 in the AGRs under UASL/CMTS licences of the Aircel Ltd

and Aircel Cellular Ltd. Total realised forex gain amounting to ` 15.13 crore was not

considered for AGR.

The above realised gain did not represent the actual gain of that particular item since the

Company recasts the value of all the items included under the foreign exchange gains/losses

head every year, the matured items are accounted under realised gains and the un-matured

items remain under unrealised gain. Thus, the realised gain of a particular item in that year

would not be the actual gain due to accounting of the gains /losses of that item during the

intermediate period under unrealised. Audit could not arrive at the actual value of items

accounted under realised gain every year for want of original value of each item. Further,

Audit has considered the quarterly net gain, head of account-wise and LSA-wise, as it was

not possible for Audit to segregate/collect the figures of gains only from the data made

available. The operator should calculate the gain of each item with reference to its initial

value of accounting and include the total forex gain in GR/AGR.

On being pointed out by Audit, the Management stated that:-

• The gains are of two types. First, is the reduction of liability towards payments for

capital goods such as equipment and roaming charges for out-roamers. The other is

increase in receipts such as roaming charges for in- roamers. In the first case, the

reduction in liability on account of payment for capital goods is only a reduction of

cost. Since the cost of equipment has no impact on the LF as the same is calculated

on gross revenue, any gain arising on account of a decrease in such cost should also

not be taken into account for LF and cannot be treated as revenue for the purpose.


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As regards payment of roaming charges, since the same is allowed on actual basis and not accrual basis, the actual amount paid or set-off in case of netting, may be allowed to be deducted from gross revenue in terms of clause 19.2. On the issue of roaming revenue on account of in-roamers, since the same is to be accounted for in the revenue on accrual basis, the LF should be on the revenue that is booked in the profit and loss account as per AS-9. Subsequent changes in the book value of the receivable are only notional till the same is actually received. Further, the actual receipt may be less or more depending on the currency rate at the time of actual payment. Since no discount is given if actual receipt is less, no LF should be charged if the same is more.

• It is further submitted that the TDSAT Judgment pronounced on 23 April 2015 states that “……..any gain or loss due to foreign exchange fluctuation should have no bearing on the licence fee.”

• The Hon’ble Madras High Court by an order dated 22 June 2012 has directed as follows:

“No coercive steps shall be taken, by the respondents, to recover the LF payable by the petitioner, in respect of the non-telecom activities of the petitioner until further orders.”

Reply of the Management is not tenable as:-

• IntermsofthelicenceagreementGRshallbeinclusiveofanyothermiscellaneousrevenue.

• Whilethematterissub-judiceatHon’bleMadrasHighCourtandHon’bleSupremeCourt, Audit view is that any gain incidental to PSPs should be considered for GR.

Thus non-inclusion of realised foreign exchange gains pertaining to period from 2006-07 to 2009-10 resulted in understatement of GR/AGR by ` 15.13 crore and short payment of

LF and SUC amounting to ` 1.23 crore and ` 0.31 crore respectively (Annexure - 8.09).

8.2.7 Non/Short consideration of Interest Income for GR/AGR

From the examination of data/records provided by Aircel group for the period from 2006-07

to 2009-10, it was observed that out of total Income on account of interest on bank deposits

and fixed deposits of ` 200.20 crore, ` 98.89 crore was not considered as revenue during

2006-07 to 2009-10 in the GR/AGR (Annexure - 8.10), which was in violation of licence

agreement as definition of GR in licence agreements expressly provides for inclusion of

income from interest in GR/AGR.

On being pointed out by Audit, it was stated by the Management that-

• Theinterestearnedoninvestmentofsavingsmadebyalicenseeaftermeetingliability

on account of share of the government in the gross revenue is ought to be excluded

from AGR. Investment of saving from the income which has severed all its links


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with the licenced telecom activity was again an application of income, the revenue

where from did not come within the purview of AGR. Similarly, revenue derived

from any temporary surplus funds through use for any business other than telecom

service or for maximizing the value of money through fixed deposits, securities or

mutual funds cannot be termed as an income from telecom activity and hence cannot

be included in AGR for the purposes of computation of LF. Such interest, therefore,

cannot be treated as revenue generated from service or licensee’s business under the

licence or not even distantly related to the business being carried out to provide the

service under the licence.

• TheHon’bleMadrasHighCourtbyanorderdated22June2012hasdirectedas

follows:

“No coercive steps shall be taken, by the respondents, to recover the LF payable by

the petitioner, in respect of the non-telecom activities of the petitioner, until further

orders.”

Reply of the Management is not acceptable as -

• Whilethematterissub-judiceatHon’bleMadrasHighCourt,Auditviewisthat

definition of GR in licence agreements expressly provides for inclusion of interest

income for GR/AGR for computation of revenue share.

Thus non-inclusion of interest income pertaining to period from 2006-07 to 2009-10 has

resulted in understatement of GR/AGR by ` 98.89 crore and short payment of LF and SUC

amounting to ` 6.74 crore and ` 2.66 crore respectively (Annexure - 8.10).

8.2.8 Non consideration of income from investment for GR/AGR for payment of

revenue share


2006-07 to 2009-10 it was observed that income from investments amounting to ` 9.01

crore was not considered as revenue during 2006-07 to 2009-10 for GR/AGR.

To an Audit query, the Management stated that -

• The nature of the income, being dividend, was not attributable to any licenced

activity. Hence, any dividend earned on account of investments of any nature

whatsoever, was not part of income accrued from the licenced activity.


follows:



orders.”


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Reply of the Management is not tenable as while the matter was sub-judice at Hon’ble

Madras High Court, Audit view is that definition of GR in licence agreements expressly

provides for inclusion of income from dividend in GR/AGR for computation of revenue

share.

Thus non-inclusion of Income on investment pertaining to period from 2008-09 to 2009-10

has resulted in understatement of GR/AGR by ` 9.01 crore and short payment of LF and

SUC amounting to ` 0.90 crore and ` 0.37 crore respectively (Annexure - 8.11).

8.2.9 Non consideration of miscellaneous income for GR/AGR


2006-07 to 2009-10, it was observed that certain items of miscellaneous income like income

from composite contract, income from software services, income from project Management,

notice pay (barring a few cases in some LSAs), income on account of sale of scraps,

reimbursement of cost etc. were not considered while computing AGR for the purpose of

revenue share:

(i) Corporate Income amounting to ` 93.63 crore was not considered for AGR in DWL

during 2006-07 and 2008-09. The short payment of LF and SUC on this amount

worked out to ` 5.70 crore and ` 2.16 crore respectively (Annexure - 8.12).

(ii) Recovery of Notice pay from the employees was not treated as revenue for the

purpose of GR/AGR (except for a few cases in DWL in 2009-10). During 2009-10

in some LSAs of DWL (viz. UP (West), Bihar and Jharkhand, Assam, North East

and NLD) notice pay was included in AGR and LF paid on it. The total amount of

recovery of notice pay was ` 5.56 crore, out of which ` 0.58 crore was considered

for AGR during 2009-10 and the total amount on which LF/SUC remains to be paid

was ` 4.98 crore. LF and SUC short paid works out to ` 0.40 crore and ` 0.13 crore

respectively (Annexure - 8.13).

(iii) Miscellaneous income/other income on account of sale of scraps, reimbursement

of cost etc. (excluding insurance claims) amounting to ` 1.59 crore had not been

considered as revenue while computing GR/AGR for the purpose of LF/SUC.

LF and SUC short paid works out to ` 0.11 crore and ` 0.03 crore respectively

(Annexure - 8.14).

To an Audit query, the Management stated that-

• Corporate incomesdonotarise fromthe licencedactivityandfordoing this,no

licence was required. Further, separate divisional books of account were maintained

for the non-telecom businesses which had no nexus with the licenced activities of any

telecom circles.


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“Notice Pay Recovery” consists of income received from employees on termination of

services which do not accrue either from subscribers or from other telecom service providers

for provisioning of telecom service, and therefore, should not be part of AGR.

“Miscellaneous income/other income” includes income from sale of scraps, insurance

claim, reimbursement of cost etc. which do not accrue either from subscribers or from

other telecom service providers for provision of telecom service, and therefore, should not

be part of AGR.

Furthermore, these incomes do not require even a telecom licence.


follows:



orders.”

Reply of the Management is not tenable as -

• Definition of GR in licence agreement expressly provides for inclusion of

miscellaneous income in GR/AGR for computation of revenue share. As mentioned

earlier, the insurance claims have been excluded from AGR.

• Whilethematterissub-judice at Hon’ble Madras High Court, Audit view is that

miscellaneous income should be included in GR/AGR for computation of revenue

share, as per licence conditions.

8.2.10 Non consideration of income from profit on sale of fixed assets for payment of

revenue share


2006-07 to 2009-10, it was observed that income from profit on sale of fixed assets was not

included in GR/AGR for computation of revenue share, as detailed below:

Table 8.3

Name of the company YearAmount not considered for GR/

AGR (` in crore)Annexure reference

Dishnet Wireless Ltd 2007-08 10.04 8.15

Aircel Ltd 2009-10 23.88 8.16

Aircel Cellular Ltd2007-08 0.01

8.172009-10 7.24

Total 41.17


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To an Audit query, the Management stated that -

• Saleoffixedassetsonwhichcapitalgainsweremadecannotbesaidtobepartof

licenced activity. The stage at which the funds were utilized for purchase of fixed

assets was after they had severed their connection with AGR. Hence, capital gains

made on account of sale of fixed assets etc. should not form part of AGR. The

capital gain made out of sale of asset was well within the purview of income tax and

are charged separately from the operator during its assessment by the tax authorities

and it was a common principle of law that the same cannot be charged twice by the

State. If the licensor also extends its right to claim a part of this capital gain as a

percentage of AGR from the licensee, then the State is indulging in double taxation,

which was legally impermissible.


follows:



orders.”

• Further,TDSATinitsrecentjudgmentdated23April2015hasheldthat“Inlight

of the discussions made above and especially in view of the recognition of revenue

as per AS-9 “gain on sale of capital assets and receipt from sale of scrap” cannot be

included in “gross revenue” for computation of LF. As seen above, clause 19.1 of

the licence agreement mentions specific inflows as forming part of “gross revenue”.

The item under consideration evidently does not come under any of the inflows

enumerated in clause 19.1. Capital receipts are different from revenue receipts;

hence, receipts of capital nature cannot be added to the “gross revenue” (para 19.2).

Reply of the Management is not tenable as:

• Definition of GR in licence agreements expressly provides for inclusion of

miscellaneous income in GR/AGR for computation of revenue share.

• Whilethematterissub-judice at Hon’ble Madras High Court and Hon’ble Supreme

Court, Audit view is that any gain incidental to PSPs should be considered for GR.

Thus, income of ` 41.17 crore on account of profit on sale of fixed asset accounted in

the books of accounts of the company should be included in GR/AGR for computation of

revenue share payable by the company to DoT. Resultantly, LF and SUC amounting to

` 3.72 crore and ` 1.34 crore respectively (Annexure - 8.18) were not paid on the said

revenue by the Company.


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8.2.11 Non Inclusion of profit on revaluation of assets in GR

As per the Scheme of Arrangements (SoA) approved by the Hon’ble Madras High Court

in June 2010, the passive infrastructure assets of the three companies in the Aircel

group-Aircel Ltd (AL), Aircel Cellular Ltd (ACL) and Dishnet Wireless Ltd ( DWL)

were to be transferred to Chennai Network Infrastructure Limited (CNIL) for a lump

sum consideration. The appointed date of the Scheme was 1 January 2010. Accordingly,

the assets of all three companies were revalued as on 1 January 2010 and the profit on

revaluation of ` 3612.04 crore was accounted in 2009-10 under General Reserve which has

been treated as a free reserve for all purposes as per the SoA. The above profit included

profit from revaluation of the Company’s passive infrastructure assets and other assets. As

per the directions of the Hon’ble High Court, the SoA was to be effective from the date of

filing of the order with the Registrar of Companies. Accordingly the transfer of assets as

per the SoA became effective in July 2010.

Audit observed that the profit of ` 3390 crore earned on revaluation of the passive

infrastructure assets, transferred to CNIL was not considered for revenue share in the year

2009-10. The Management informed that recording of the transaction of sale/transfer of

asset prior to July 2010 i.e. before filing the order with the Registrar of Companies would

have amounted to contempt of court.

As the effective date of SoA was beyond the period covered in the present Audit, it could not

be ascertained whether the profit earned from the passive infrastructure assets transferred to

CNIL was offered for payment of LF and SUC in subsequent years.

8.3 Short/non-payment of revenue share due to irregular/excess deductions claimed

in the AGR statements

8.3.1 Irregular deduction of bad debts written off from GR to arrive at AGR

In terms of clause 19.2 of the licence agreement, only following three items are allowed to

be excluded from the GR for arriving at AGR-

• PSTNrelatedcallcharges(AccessCharges)actuallypaidtoothereligible/

entitled telecommunication service providers within India:

• Roaming revenues actually passed on to other eligible/entitled

telecommunication service providers and;

• Servicetaxonprovisionofserviceandsalestaxactuallypaidtothegovernment

if gross revenue had included as component of sales tax and service tax.

Review of data/records furnished by Aircel Group for the period from 2006-07 to 2009-10

revealed that during 2009-10, while arriving at GR for Aircel Cellular Ltd, Bad debt written

off amounting to 24.70 crore in Tamil Nadu LSA was deducted from the revenue resulting

in reduction of GR/AGR for 2009-10 by ` 24.70 crore.


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To an Audit query, the Management stated that-

• Thebaddebtswritten-offintheyear2009-10werereducedfromtheAGRpursuant

to the TDSAT judgment dated 30 August 2007 which stated that “Bad debts are actual

monies lost by the service provider. Therefore, such losses have to be excluded from

AGR. Allowing amounts on account of such losses to be included in AGR would

mean that while the party incurs loss it has to pay LF on the loss also”. The above

judgment still holds good since the new judgment of TDSAT dated 23 April 2015

has yet not attained the finality as the same is challenged by DoT before Supreme

Court.

• In our view, bad debts represent failure of the service provider to realize the

amounts. To impose LF on these items would mean subjecting the operators to

double jeopardy – by failing to realize the amounts they lose the revenue.

The contention of the Management is not tenable, as:

• TDSATjudgmentdated30August2007referredinthereplywassetasidebythe

Hon'ble Supreme Court vide judgement dated 11 October 2011.


AGR.

• Whilethematterissub-judiceatHon’bleSupremeCourt,Auditviewisthatbad

debt should not be deducted from GR, as per licence conditions.

This has resulted in understatement of AGR by ` 24.70 crore and short payment of LF and

SUC by ` 2.47 crore and ` 1.05 crore respectively.

8.3.2. Excess Deductions claimed in ISP (IT) AGR

In terms of the amendment to “Terms and conditions of licence agreement for provision

of internet services (including Internet Telephony)” issued by DoT vide its letter dated

3 March 2006, “For the purpose of arriving at the AGR, the following shall be excluded

from the GR:

• Chargesfrominternetaccess,internetcontentandinternetaccessrelatedinstallation

charges.

• Servicetaxonprovisionofserviceandsalestaxactuallypaidtothegovernmentif

gross revenue had included as component of sales tax and service tax.”

During review of Audited AGR in respect of ISP (IT) Licence of DWL for the year

from 2006-07 to 2009-10, it was noticed that the total deduction claimed by DWL was

` 96.52 crore out of which, deduction amounting to ` 7.50 crore pertains to customer

premises equipment rental, mailbox solution to corporate, server co-location charges, etc.


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which do not fall under any of the category of deductions allowed in the licence agreement

for ISP(IT), consequently the AGR was understated by the same amount.

On being pointed out by Audit it was replied that-

Table-8.4

GL Description Remarks

Income from

Inter divisional

Services

The company is charging for the lease line (E1s) used by the clients. The

invoices raised by the Company and charges recovered are in the nature of lease

line though the same are billed as Port charges on account of lease lines. These

lease line charges are against the internet access charges and is grouped under

the same. Port is a technical arrangement of the company for the provision of

connectivity of the services for which the customers are not billed by any of

the private operators. Charges billed to customers are in the nature of lease line

only though billed with the nomenclature of port charges. Even the invoices

raised in the current periods also have the same nomenclature.

Income from

CPE rental -

Inter Company

The Company is installing equipment at the customer premises to provide the

internet services, for which the Company recovers installation charges from

the group company. The Company is charging installation charges which are

described as CPE rental charges in the invoices. The invoice does not contain

installation charges separately in the invoices, since it is charged under this

head. The same practice of invoicing is followed by the company during the

current years too.

Income from

CPE Rental

Therefore, from the above, it is evident that deductions claimed are as per the licensing

agreement and eligible for deduction from the calculation of AGR.

Audit view on the Management reply is as follows:

• ManagementcontentionthatincomefromInterdivisionalservicesincludesincome

from port charges, which was of the nature of internet lease line, was considered.

During 2006-07 to 2009-10 total income from such port charges was ` 2.37 crore.

Hence the amount of excess deduction claimed during 2006-07 to 2009-10 was

revised from ` 7.50 crore to ` 5.13 crore.

• RegardingIncomefromInterdivisionalServices,therevenuesrelatingtoMailbox

solution to corporate, server co-location charges, etc. amounting to ` 0.83 crore

was not at all eligible for deduction, as it did not fall under any of the category of

deductions allowed in the licence agreement for ISP (IT).

• Further,asperinvoiceshowntoAudit,installationchargesandCPErentalcharges

were separately shown in the invoice and also they do not fall under any of the


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category of deductions allowed in the licence agreement for ISP (IT) and hence did

not qualify for deduction.

In view of above, deduction amounting to ` 5.13 crore was claimed in excess by DWL and

consequently the AGR was understated by the same amount. Resultantly, LF amounting to

` 0.31 crore (Annexure - 8.19) was not paid by the Company.


On issues raised above (para 8.2 to 8.3) short/non-payment of LF and SUC worked out to

be ` 75.80 crore and ` 31.81 crore respectively. The interest on this short/non-payment of

LF and SUC is ` 155.22 crore (Annexure - 8.20). The calculation of interest was based

on the rate prescribed in the Licence agreement i.e. two per cent above the Prime Lending

Rate of State Bank of India existing as on the beginning of the financial year and the period

considered for the calculation was from the end of the concerned financial year up to March

2015. The interest has been compounded monthly as prescribed in the licence agreement.

8.5 DoT’s response to the Audit observations

Audit observations on the revenue shared by Aircel Group were communicated to DoT in

October 2015. Reply of DoT is awaited (January 2016).


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CHAPTER – IXVerification of deduction claims in the Offices of the Controllers

of Communications Accounts

9.1 Introduction

Offices of the Controllers of Communications Accounts (CsCA) are the interface between

DoT and the PSPs licensed to provide service in a Licensed Service Area (LSA). Besides

the Statutory1 and Administrative2 functions, CsCA revenue functions included collection

of LF and SUC from all licensees of various telecom services which is being paid by the

PSPs on their self - assessed revenue, scrutiny and verification of documents submitted by

the licensees in support of their claims for deduction.

Verification of deductions claimed by PSPs was delegated to CsCA from 2006-07 and on

completion of the verification exercise, the CsCA convey their findings through ‘verification

reports’ to the LF Wing of DoT.

Verification of proof of payment with respect to the deduction claims and determination

of actual AGR is an important pre-requisite for the accurate computation/assessment of

revenue share due from a PSP. Timely completion of the process of verification was to be

ensured to facilitate final assessment in DoT.

Records maintained by 21 CsCA out of 25 CsCA were test checked by audit to ensure that

LF and SUC due was collected from PSPs and the verification of their claims for deduction

from AGR was supported by due documents. The test check was conducted for the period

2006-07 to 2009-10 in respect of six operators viz BAL, Vodafone, RCL/RTL, ICL, Aircel

and TTSL/TTML. Audit observations emanating from the scrutiny of records and the

process of verification are as under:

9.2 Audit Observations

9.2.1 Deductions allowed in absence of required proof

From time to time, DoT issued clarifications regarding verification procedure for deductions

claimed by Telecom Service Providers. As per the issue no.7 of the clarification issued by

DoT on 05 July 2007, proof of payment included vouchers/bank statements/receipts etc.

Subsequently, DoT in November 2011, emphasized that submission of details including

payable invoices along with proof of payment/receipt was a pre-requisite for claiming

deductions by the licensees.

Test check of records in CsCA office revealed that CsCA had allowed claims for deduction

in respect of PSTN/roaming charges paid to other operators without proof of document as

1 Statutoryfunctionincludesbudgetingofpensionexpenditure,authorizationofretirementbenefitsonCDAandIDApayscale,maintenanceofGPF,recovercontributionforNPSandremittotrusteebank,PAOandotherDDOfunctions.

2 OtheradministrativefunctionsasHeadoftheDepartmentincludinghandlingofcourtcases


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prescribed by DoT. To an audit observation in this regard while 11 CsCA3 accepted the

lapse and replied that operators are being addressed to submit the required documents, other

CsCA replied that the deductions were allowed based on the instructions of DoT prevailing

during the relevant year.

DoT, in June 2013 and November 2014, provided detailed clarification on deduction

verification based on queries raised by CsCA. Prior to those clarifications from DoT, there

was no uniformity among CsCA as well as operators with regards to nature of documents

to be submitted as proof for deduction. This resulted in different CsCA adopting different

standards regarding documents to be submitted in support of deduction claims.

9.2.2 Ineligible deductions allowed from GR

As per the conditions of UASL agreement, for the purpose of arriving at the AGR of the licensee, the following three items of charges paid by the PSP were only permitted to be excluded from the GR.:-

i) PSTN related call charges (Access Charges) actually paid to eligible/entitled Telecom Service Providers within India.

ii) Roaming revenues actually passed on to other eligible/entitled telecom service providers.

iii) Service Tax/Sales Tax paid to Government, if the same had been included in the Gross Revenue.

Scrutiny of documents submitted as proof against claims for deduction and verification reports issued by CsCA for the period 2006-07 to 2009-10 revealed that, PSPs had claimed deductions for expenses incurred under Interest on delayed payment and leased line charges. CsCAs erroneously allowed these deductions from GR resulting in understating AGR in four LSAs as detailed below:

Table 9.1

(` in lakh)

Sl No. PSP LSA Year Amount Payment type

1 Vodafone Gujarat 2006-07 to 2009-10

10.58 Fixed Charges, Interest on delayed payments

Rajasthan 2006-07 to 2009-10

13.69

Maharashtra 2007-08 958.93 Deduction allowed including ST

Andhra Pradesh 2007-08 300.64 Excess deduction on account of typographical error

2 TTSL Karnataka andOdisha

2007-08 to2008-09

2.65 Interest for delayed payment of Interconnect Usage Charges (IUC)

3 Jharkhand,Karnataka,Odisha,Punjab,Rajasthan,Kerala,Kolkata,Delhi,Bhopal,HaryanaandMumbai


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On this being pointed out, CCA Karnataka replied that there was no clear cut indication on

non-admissibility of interest towards delayed payment, while CCA Odisha and CCA Gujarat

replied that the matter was being rechecked. Response from CCA Rajasthan is awaited.

This lacuna in the verification process adopted by the CsCA and non-adherence to the

conditions in the licence agreement and instructions issued by DoT resulted in allowing

ineligible deductions from the GR of the PSPs. As the DoT does the assessment based on

the verification reports sent by the CsCA, the impact of discrepancies, if any, in allowing

deduction would result in short realization of revenue share.

9.2.3 Inadmissible deduction on account of Service Tax

In terms of provisions in UASL agreement and as per clarifications issued in July 2007 by

DoT, if the GR includes Service Tax/ Sales Tax, then actual payments made by the licensee

to the Government during the Financial Year qualifies for deduction for that year.

It was observed that as per notes to audited AGR statements of BAL, Vodafone and ICL,

GR shown in the audited AGR does not include Service Tax component. However, on a

test check of records it was noticed that BAL, Vodafone and ICL had claimed deduction

including service tax component in four LSAs which was allowed by the respective CsCA

as below:

Table 9.2

(` in crore)

Name of the PSP LSA Year Gross Invoice ST component

Bharti Airtel Ltd Odisha 2007-08 21.32 2.35

Idea Cellular Ltd Andhra Pradesh 2007-08 16.42 1.81

Idea Cellular (Spice Communications Ltd)

Karnataka 2008-09 55.48 6.08

Vodafone Karnataka2006-07 to2009-10

41.17 4.52

Vodafone Maharashtra2007-08 to 2009-10

87.40 9.59

TOTAL 24.35

On this being pointed out by Audit, while CCA Bhubaneswar accepted the audit comments

and the Pr. CCA, Andhra Pradesh replied that claim of ICL would be reviewed. CCA

Karnataka has stated that the claim on inclusion of Service Tax in roaming related

deductions have been checked randomly and agreed with Audit. However, confirmation

of the observation raised by Audit on all the items is required to be done after thorough

verification.


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Thus allowing deduction including service tax component in violation of DoT’s instruction

led to excessive deduction of ` 24.35 crore resulting in short payment of revenue share.

9.2.4 Allowing deduction twice on same claim

As per conditions of licence agreement, operators shall submit claims for deduction towards

PSTN charges along with required proof as communicated by DoT from time to time. Test

check of records of CsCA revealed that in six LSAs, CsCA had allowed deduction twice

for invoice/voucher amounting to ` 11 crore in respect of three PSPs as detailed below.

Table 9.3

Name of the Pr. CCA/

CCA

Operator (Service Area)

Year of claim

Deduction Claim on First occasion

Year of claim

Claim on Second occasion

Amount claimed

Amount allowed by CCA

Amount claimed

Amount allowed by CCA

` in crore ` in crore

RaipurBAL (MP)

2007-08 (Q-4)

2.28 2.212008-09(Q-1)

2.28 2.21

LucknowBAL(UP(E))

2007-08(Q-4)

1.71 1.712008-09(Q-1)

1.71 1.71

MumbaiBAL (Mumbai)

2006-07 (Q-1)

2.09 2.092006-07(Q-2)

2.09 2.09

RajasthanBAL (Rajasthan)

2008-09 (Q-2)

0.94 0.942008-09(Q-3)

0.92 0.92

GuwahatiVodafone (Assam)

2008-09(Q-3)

2.35 2.652008-09(Q-4)

2.35 2.35

LucknowVodafone (UP(E))

2007-08 1.61 1.61 2007-08 1.61 1.61

BangaloreAircel (Karnataka)

2009-10 (Q-1)

0.10 0.102009-10(Q-2)

0.10 0.10

BangaloreAircel (Karnataka)

2009-10 (Q-2)

0.01 0.012009-10(Q-3)

0.01 0.01

TOTAL 11.00

On this being pointed out by Audit, three CsCA (Raipur, Lucknow and Bangalore) accepted

the audit observation and stated that the revision of verification would be carried out in

consultation with DoT as the assessment for the above period has already been completed.

Replies from remaining three CsCA (Mumbai, Assam and Rajasthan) are awaited.


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9.2.5 Excess deduction allowed by Pr.CCA Andhra Pradesh while restricting deduction

claims not supported by proof documents for TDS

In case of IUC payable to other operators, service tax is levied and TDS is also deducted

from the amount payable. However, only the IUC actually paid is eligible for deduction

from GR to arrive at AGR. In case of IUC deductions claimed by the PSP, proof documents

for amount paid (net of TDS) as well as proof for TDS deposited are required to be

submitted by the PSP at the office of the CsCA as per DoT’s instructions (July 2007 and

January 2012).

Audit scrutiny of records of Pr. CCA Andhra Pradesh revealed that BAL, RCL and TTSL

had not submitted the proof documents for TDS amount and hence the Pr. CCA office

disallowed TDS amount after recalculating the amount to be disallowed. While recalculating

the TDS related deduction, Pr. CCA allowed the deductible TDS amount including service

tax component, instead of limiting it to IUC alone. This resulted in allowing of excess

deductions amounting to ` 75.41 crore by the Pr. CCA Andhra Pradesh thereby reducing

AGR to that extent as detailed below:

Table 9.4

(` in crore)

YearExcess deduction allowed

TotalBAL RCL TTSL

2008-09

5.22 5.32 7.60 18.14

11.12 9.34 10.67 31.13

10.71 6.37 9.06 26.14

Total 27.05 21.03 27.33 75.41

On this being pointed out by Audit, Pr. CCA, Andhra Pradesh replied that TDS amount

would be disallowed during revision of deduction verification.

Further, response from the DoT was received (January 2016) wherein it was stated that in

respect of Reliance, revised report was received by DoT from Pr. CCA Andhra Pradesh.

However, in respect of Airtel, it was stated that reply from Pr. CCA Andhra Pradesh was

awaited. No reply has since been furnished by DoT regarding TTSL.

9.2.6 Allowance of deduction on account of TDS despite non-submission of TDS

certificate

As per the clarification for issue No.8 in their DoT letter No.1-28/2006/LF dated 5 July

2007, in case of adjustment of PSTN/Roaming charges between two PSPs the payment of

only net amount due is effected. However, the respective licensee can claim the deduction


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of the full amount. The licensee should however support this through proof of payment and

adjustment. The nature of proof of payment includes vouchers/bank statement/receipts.

While allowing the deduction claims submitted by the operators, for the portion of TDS

amount paid, CCA shall allow such portion of claim on the basis of submission of document

by the operator such as Form 16A duly attested/certified by the statutory auditor or TDS

certificate issued by tax deducting authority. If any of the said documents were not submitted

by the operator, the amount of TDS should be disallowed on the ground of non-submission

of proof documents for TDS amount.

Scrutiny of deduction claims of PSPs for the years 2006-07 to 2009-10, revealed that in

many CsCA, the deduction claims were allowed without production of proof documents for

TDS payments. DoT issued clarifications regarding the proof of documents to be accepted

for the TDS deductions and their admissibility during November 2014 wherein it was stated

that cases where deduction verification has been finalised may not be reopened by the

CsCA.

As most of the CsCA have completed the verification of deduction for the years

2006-07 to 2011-12, the short payment of licence fee on inadmissible deduction on account

of nonsubmission of proof for the TDS would not be recovered resulting in loss of LF to

the DoT to the extent of allowance of such claim.

On above issue, response from the DoT was received (January 2016) wherein it was stated

that in respect of CCA Chattisgarh, RCL/RTL had submitted the additional documents to

substantiate the TDS amount and the documents submitted were verified and revised report

sent to DoT. However CsCA Kolkata, Chennai, Bihar and Karnataka stated that verification

ofdeductionclaimedwascompletedonthebasisofguidelinesissuedbyDoTHQapplicable

at that time and there was no provision/instruction to separately confirm payment of TDS

when verification was conducted. In respect of Vodafone, too, it was stated by the CsCA

that the verification was carried out as per the DoT’s instruction prevailing at that time and

there was no provision/instruction to separately confirm payment of TDS when verification

was conducted. In respect of Airtel, it was stated that reply from CsCA was awaited.

Audit is of the view that there was lack of uniformity amongst CsCA in allowing deductions

on non-submission of proof documents for TDS.

9.2.7 Claims disallowed despite submission of proof documents

DoT clarified in July 2007 (Issue No.7) that proof of payment includes vouchers/bank

statements/receipts etc. and reiterated in November 2011 that submission of details including

payable invoices along with proof of payment/receipt is a pre-requisite for claiming

deductions by the licensees.


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On verification of deduction claimed by the licensee, it was noticed that in respect of five

PSPs (BAL, Vodafone, RCL, Idea and TTSL/TTML) in several LSAs despite availability

of proof of payment, various deduction claim of the PSPs like deduction on PSTN charges

and IUC were disallowed by CCA (Annexure - 9.01).

On this being pointed out by Audit, CCA Kolkata replied that regarding RCL the amount

was inadvertently disallowed by arithmetical mistake. The other CsCA also accepted the

audit observation and replied that the matter would be considered on request of the licensee

and the facts shall be intimated to DoT for further instructions. Further in its reply, DoT

stated that the claims were not rejected merely on technical grounds and it is also clear that

the verifications in most cases have been done as per DoT instructions.

9.2.8 CsCA permitted irregular deductions on inter-divisional adjustments of

` 432.64 crore.

DoT in July 2007 while clarifying admissibility of inter-divisional adjustments of PSTN

charges, specified that audited proof of adjustments certified by the statutory auditor was

required. In June 2013, DoT further clarified that proof of adjustment could be the extract

of ledger statement of adjustment on quarterly basis duly signed by the authorized signatory

of the licensee and at the end of the year account statement duly certified by the Statutory

Auditor of the licensee.

Audit scrutiny of records of ICL in five CsCA (Bhubaneswar, Lucknow, Meerut, Ahmedabad

and Ambala) revealed that CsCA allowed inter-divisional adjustments amounting to 432.64

crore for year 2007-08 to 2009-10 without obtaining prescribed proof of adjustments from

the licensee as detailed below:

Table 9.5

(` in crore)

Sl. No. Name of CCA Name of LSA Year Amount

1 Ahmedabad Gujarat2008-09 25.43

2009-10 128.76

2 Bhubaneswar Odisha 2009-10 5.97

3 Lucknow UP (East) 2007-08 13.67

4 Meerut UP (West) 2007-08 to 2009-10 188.92

5 Ambala Haryana 2006-07 to 2008-09 69.89

Total 432.64

On this being pointed out by Audit, CCA Bhubaneswar stated that the operator would be

directed to submit detailed operator-wise statement before re-verification is carried out,

while other CsCA replied that verification of deduction was done on the basis of DoT’s

clarification issued in July 2007.


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The reply is not tenable as DoT vide its letters dated 5 July 2007 and 10 January 2012 had

clarified that the licensed company was to furnish documents duly certified by the Statutory

Auditor at the end of the year to avail benefit of deduction on account of inter-division

payments/adjustments.

9.2.9 Miscellaneous Observations

9.2.9 (a) Excess allowance of deduction claim ` 3.87 crore to Dishnet Wireless Ltd.

(Aircel Group of companies) of Assam LSA.

Scrutiny of the statement of revenue and licence fee for the year 2009-10 in respect of DWL

(Aircel) in Assam LSA revealed that CCA had erroneously allowed ` 3.91 crore being the

payment made to BSNL against the invoice amount of ` 0.04 crore which had resulted in

excess allowance of deduction to the tune of ` 3.87 crore.

CCA replied that factual position would be furnished after verification of the records.

9.2.9 (b) Verification on the basis of Unaudited AGR and Estimated AGR

DoT instructed that verification of deduction based on quarterly documents submitted

by the PSPs shall be done after submission of annual audited accounts. Scrutiny of the

verification reports of Vodafone and TTSL alongwith audited and estimated AGRs revealed

that verification of deduction claimed for the period from 2006-07 to 2008-09 in Rajasthan,

Kerala and Madhya Pradesh service areas was conducted on the basis of unaudited AGR

while verification of deduction claimed for the year 2006-07 in Odisha service area was

conducted on the basis of estimated AGR.

On this being pointed out by Audit, CCA, Madhya Pradesh replied that facts and figures

would be confirmed; whereas CCA Odisha replied that verification was now being done on

the basis of Audited AGR.

In the absence of verification of deduction based on audited AGR, the authenticity of

deductions claimed by PSPs could not be verified.

9.2.9 (c) Improper permitting of claim of deduction

Test check of records of two CsCA (Andhra Pradesh and Bhubaneswar) revealed that

(i) In respect of claim for deduction for the year 2008-09 submitted by BAL, Pr. CCA

Andhra Pradesh allowed an amount of ` 0.18 crore without any adjustment details

by the operator.

(ii) CCA Bhubaneswar allowed claim of ` 4.86 crore of deduction for the year 2008-09

out of which an amount of ` 3.94 crore was passed without any claim of the same

by the operator and an amount of ` 0.92 crore already disallowed by the CCA was

wrongfully included as allowed amount in the verification report submitted to DoT.


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On being pointed out, Pr. CCA Andhra Pradesh accepted the audit observation and informed

that the same will be addressed in the verification report. CCA Bhubaneswar accepted the

audit observation relating to ` 0.92 crore of wrongly allowed claim and reply was still

awaited in respect of the balance ` 3.94 crore.

9.2.9 (d) Deductions claimed in advance

As per conditions of licence, claims on deduction of PSTN charges should be allowed on

actual basis. On a test check of the PSTN charges claimed as deduction by Vodafone and

Tata Group of Companies for the period from 2006-07 to 2009-10 along with the respective

verification reports of the CsCA, it was noticed that four4 CsCA had allowed deduction of

PSTN charges in advance of the year in which the payment was actually made.

On being pointed out,

• CCAChennairepliedthatasperissueno.5ofclarificationdated5July2007

of DoT, date of receipt of cheques by receiving licensee, was to be taken as

date of payment and accordingly the claims were allowed.

• CCAMadhyaPradeshcarriedoutre-verificationofdeductionsclaimedby

thePSPandrepliedthatadetailedreportthereonwassubmittedtoDoTHQ

• CCAOdisha replied that in view of audit observation and issue of new

instructions, re-verification of the claim was under process.

• CCAKolkatarepliedthatthelicenseeshallbeaddressedinthisregardand

outcome shall be intimated

The reply furnished by CsCA Chennai was not acceptable as the cheques were issued in

the year 2006-07 whereas the date of actual payment was in the next financial year i.e. in

2007-08. This could result in double deduction as there was possibility of deduction claims

being allowed again in the following year. With disclosure to this effect not being made by

statutory auditors, the eventuality needs further verification.

9.2.9 (e) Non-submission of operator-wise details of revenue receivable and actual

payments made.

As per condition 20.4 of the licence agreement, the licensees were required to furnish to

the licensor in their statement of revenue and licence fee (Appendix-II to Annexure-II of

License Agreement), operator-wise details of pass through revenue receivable in their GR

and operator-wise details of actual payments made against deductions claimed, for arriving

at the AGR. This information from the operators is an important input for final assessment

by DoT, since it facilitates cross examination of the claims made by PSPs.

4 Chennai,MP,Odisha,Kolkata


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Review of financial statements submitted by Vodafone for the period 2006-07 to

2009-10 revealed that operator-wise details of revenue receivable were not disclosed by the

company. Operator-wise pass through charges payable were also not furnished by Vodafone

from 2008-09 onwards. In absence of this information, which serves to cross check claims of

operator-wise revenue receivables/ payables, the possibility of PSPs erroneously including

revenue in GR after set-off (netting off receivable-payable) and then claiming deductions in

full with proof of actual payment cannot be ruled out.

Thus, the operator failed to submit correct and authentic documents containing prescribed

details relating to pass through revenue to the CsCA/DoT and as a result the pass through

revenue receivable and deductions based on actual payment of pass through charges paid to

other operators cannot be verified by the CsCA/DoT.

9.2.9 (f) Delay in submission of proof documents by service providers and delay in

process of verification/re-verification

The licence conditions stipulate time frame for payment of LF and submission of proof

documents by licensee. Reiterating Clause 22.3 (a) of UASL agreement which confers

right on licensor or TRAI to call for any book of accounts which the licensee maintains,

DoT directed (August 2010) all PSPs to submit details of payments made to other service

providers and service/sales tax paid along with necessary documents in support of deductions

in AGR statement.

In the light of verdict of Hon’ble Supreme Court of India (October 2011) setting aside

TDSAT order on claiming deductions on accrual basis, DoT granted extension of time upto

December 2011 to the operators to submit all requisite documents to support deductions

claimed from 2007-08 onwards. However, scrutiny of data (test checked for Vodafone)

available in CsCA revealed inordinate delays in submission of required proof documents

in various LSAs during 2007-08 to 2009-10. Documents were also submitted in staggered

manner affecting the timely completion of verification process.

Further CsCA also failed to adhere to the time frame stipulated by DoT for completion of

verification of deductions and submission of report on verification to LF Branch. Test check

in case of Vodafone revealed that none of the CsCA submitted verification reports within

time frame and delay in completion of verification of deductions claimed by Vodafone

ranged from 3 to 68 months (Annexure - 9.02).

Audit also observed delay in completion of re-verification based on SC judgment dated

11 October 2011 (Annexure - 9.02). Thus, delays in submission of required proof documents

by the operator and the inability of DoT to force the issue with the operator has led to a

situation where the Government could not correctly assess the actual revenue share.


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9.3 DoT’s response

DoT’s response in relation to verification process of deductions claimed by the three

operators (BAL, Vodafone and Reliance) at the offices of CsCA was received in January

2016. Reply specific to excess deduction allowed by Pr. CCA Andhra Pradesh and allowance

of deductions on account of TDS has been included in para 9.2.5 and 9.2.6 respectively.

In general, DoT stated that the verification work decentralized to CsCA’s had initial teething

troubles. One issue which directly impacted the process of deduction verification was the

disagreement between DoT and PSPs on whether deductions will be allowed on paid basis

or accrual basis. The licence agreement provides for deduction on paid basis while the PSPs

insisted on submitting documents to CsCA on accrual basis. The PSPs often taking the

shelter of litigation either did not provide the documents or provided them in un-acceptable

formats. The Department got judgment from Hon’ble Supreme Court in 2011 and only after

this did the PSPs started submitting documents which were also not complete. The PSPs

had to be provided with extra time in respect of production of documents which had to be

obtained from other parties like bank (for payment proof)/Government Departments (TDS

proof etc.).

Further, DoT stated that after the deduction verification work was decentralized to the

CsCA offices, there were several operational issues including interpretation of DoT

instructions on deduction verifications. Clarifications were sought from DoT by the CsCA

offices regarding various issues related to deductions claimed like international roaming

charges, lease line charges, Access charges etc and the documents mandatorily required for

submission. However, the process of submission of documents and verification in the recent

years has become relatively more timely and regular.

Audit is of the view that the issues highlighted by DoT are in its administrative domain and

DoT should take proactive action to streamline the process of verification of deductions

claimed by the operators. The licence agreement include penal provisions for violation of

licence terms and conditions. However, these provisions have not been used by DoT to

enforce the agreements.

As brought out in the earlier paragraphs, verification of deduction claims at CsCA level

was not done uniformly and CsCA have taken different approach in allowing/disallowing

deduction claims submitted by the PSPs. During the course of audit of records maintained

by CsCA for verification of deduction claims, discrepancies on various issues were noticed

among different CsCA. Also within the same CsCA, different yard sticks were adopted for

different operators due to lack of co-ordination within the CsCA. The main reason for these

discrepancies was the lack of proper monitoring of CsCA by DoT.


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CHAPTER – XAssessment of Licence Fee and Spectrum Usage Charges

10.1 Introduction

The Licence Finance (LF) wing in DoT is responsible for the assessment of GR and final

computation of the revenue share payable by the Licensees. Assessment of GR is done

taking into account the Audited AGR and reports/reconciliation statements received from

the PSPs. Final revenue share is to be calculated considering the collection details and

verification reports received from the Offices of the CsCA. Additional demands, if any,

based on the GR assessment and LF paid by PSPs are then to be raised by the LF Wing.

Penalty for delayed/short/non-payment of LFs is also to be levied by the LF wing. For

spectrum charges, the Wireless Planning Finance (WPF) Division of DoT was responsible.

Other duties in connection with revenue share realization for DoT included –

• CalculationandcollectionofpenaltyfordelayedpaymentofLF

• Computationofinterest/penaltyforshort/non-paymentofLF

• Maintenance/forfeitureoffinancial/performancebankguarantees

• Suspension,terminationoflicenses

• Levyofliquidateddamagesincaseoffailureonthepartofthelicenseein

meeting roll out obligation and target/commitment etc.

The process of assessment of LF and SUC undertaken by DoT in respect of the PSPs was

test checked and the findings are as given below:

10.2 Audit Findings

10.2.1 Under assessment of GR due to omission of revenues disclosed in reconciliation

statements

The UASL agreement conditions stipulated that every licensee should submit reconciliation

between the figures appearing in the quarterly statements of revenue and LF payable with

those appearing in annual accounts along with their audited annual accounts. Since the

final adjustment of LF payable was based on the GR figures certified by the auditors of

the licensee, the information presented in the reconciliation statement was an important

document which explained the variations between the GR computed for payment of LF with

the revenue appearing in the profit and loss account of the licensee company. The notes to

the accounts/disclosures of the Auditors and schedules in the annual accounts were other

documents which facilitated DoT in identifying those items of revenue which were not taken

into account for arriving at the GR as envisaged in the Licence agreements.


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A test check of the demands raised by DoT after assessment of the accounts of various

LSAs of Vodafone Group for the years 2006-07 to 2009-10 revealed that various items

of revenue which were disclosed by Auditors through reconciliation statements annexed

to AGR statements as well as schedules annexed to Profit and Loss Account etc., were

overlooked by DoT while assessing the GR of the company (Annexure - 10.01). Failure

of DoT to add back such revenue items, disclosed by the Statutory Auditors, to GR/AGR

resulted in short payment of LF/SUC.

DoT in reply (January 2016) agreed with the audit contention and informed that necessary

demands would be raised after verification.

10.2.2 Lack of coordination between LF and WPF Wing

As per licence conditions for using radio frequency spectrum allotted by DoT, PSPs in

addition to LF, shall also pay spectrum charges on revenue share basis. However, while

calculating ‘AGR’ for limited purpose of levying spectrum charges based on revenue share,

revenue from wire line subscribers shall not be taken into account.

It was seen from the assessments finalized by WPF wing of DoT towards SUC for the years

2006-07 to 2009-10, that they were carried out taking into account the AGR stated by the

operator in the audited AGR statements.

However, consequent to the assessments carried out by the LF wing of DoT, taking into

account the verification reports of CsCA and disclosures in the audited financial statements

of the PSPs there were certain revenue items added back to the AGR. These additions to

the AGR were not being considered by the WPF division for working out SUC as detailed

below:

i) Vodafone being a cellular mobile service provider, the revenue assessed for LF

should be the revenue for assessing the spectrum charges also. Short assessment of

SUC, on account of the failure to consider the revised assessment done by LF wing

for raising additional SUC worked out to ` 267 crore for the period 2006-07 to

2009-10.

ii) In respect of Aircel Group of companies for the years 2006-07 to 2009-10, while

for assessment of LF, AGR was revised by adding PSTN disallowed, un-reconciled

differences, rebates & discounts, dividend income, other income, foreign exchange

gains, profit on sale of fixed assets, Interest income etc., AGR submitted by the


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company was taken up by DoT for assessment of SUC. Thus the difference in AGRs

for the years 2006-07 to 2009-10, considered for LF and SUC was ` 973.59 crore

resulting in short recovery of SUC by DoT. To an audit query in this regard, it was

replied by DoT (January 2016) that SUC is being revised as per AGR intimated by

LF wing of DoT.

iii) DWL (Aircel) submitted ‘Nil’ AGR for Haryana and Punjab service area for the year

2009-10 since their services did not commence. While DoT raised the demand of

LF for Haryana and Punjab service area for the period by adding foreign exchange

gains, SUC was not revised. On being pointed out by Audit (September 2015), it

was replied by DoT (January 2016) that SUC is being revised as per AGR intimated

by LF wing of DoT.

iv) In respect TTSL and TTML, while the assessments carried out by the LF wing

of DoT for the years 2006-07 to 2009-10, had taken into account the verification

reports of CsCA and disclosures in the audited financial statements of the PSP the

WPF division did not consider the above information for working out the SUC.

v) Out of the total deductions of ` 228.62 crore claimed by RCL (Gujarat Circle),

` 167.46 crore was disallowed by CCA. While DoT had taken into account the

inadmissible deductions disallowed by CCA Ahmedabad and added back to AGR for

arriving at the short paid LF, assessment of SUC (CDMA and GSM) was finalized

by accepting the total deductions claimed by RCL (` 133.48 crore for CDMA and

` 82.21 crore for GSM) as admissible deduction without considering inadmissible

deductions disallowed by CCA (` 97.77 crore for CDMA and ` 60.22 crore for

GSM). The finalisation of assessment of SUC without considering inadmissible

deductions disallowed by CCA and considering total deductions claimed by RCL,

resulted in short payment of Spectrum Usage charges. (Annexure - 10.02)

Response to audit query seeking the reasons for not considering the assessment done by

LF wing for computing SUC was awaited from DOT, except for para (ii) and (iii) above.

10.2.3 Issue of demand notes based on special audit and provisional assessment without

proper due diligence.

Based on special audit/provisional assessment for the years 2006-07 and 2007-08, DoT

issued demand notes after adding back the respective amounts to AGR for computation of

LF. Discrepancies noticed in the demand notes are detailed in Table 10.1 below:


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Table 10.1

Year Name of the TSP Audit Observations2006-07 BAL In the demand note issued for the year 2006-07 based on special

audit, interest income of ` 20.23 crore was included twice in the demand and supplementary show cause notice. Further, instead of apportioning the corporate income amongst all the licences held by the TSP, it was included only under Delhi LSA.

` 87.38 Crore was added to AGR of Delhi LSA as income from IP1 services accounted in IP1 TBs. Inclusion of entire revenue of IP1 under Delhi LSA was not proper.

Vodafone As per the audited accounts of company the deduction claim was inclusive of ` 23.17 crore in respect of “Amounts paid/adjusted during the year ended 31 March 2007, against amounts claimed as deduction from GR for the financial year 2005-06 or earlier” which indicated that deduction on this account has already been claimed from GR through the respective CsCA. But, this disclosure was not considered in the final assessment which allowed the operator the benefit of claiming double deductions. DoT informed (January 2016) that service area wise demands were being issued on the above issue.

2007-08 BAL In the demand note issued for the year 2007-08, based on special audit, interest income of ` 65.01 crore, was included twice in the demand notes issued on provisional assessment and Special audit including supplementary demands. Further, instead of apportioning the corporate income amongst the licences held by the PSP its inclusion in Delhi LSA only was not proper.

` 38.75 crore being income from trading in VSAT equipment accounted in TB maintained for erstwhile Satcom Broadband Equipment Limited, a subsidiary of BAL was added to AGR of Delhi LSA. Inclusion of entire revenue under Delhi LSA was not proper as this should have been included in VSAT AGR.

` 100.92 crore added to AGR of Delhi LSA as income from IP1 services and inclusion of entire revenue of IP1 under Delhi was not proper.

In respect of audit observations relating to BAL, the DoT replied (January 2016) that the

audit observation was noted and the para was communicated to BAL for their comment. It also stated that items pointed out by Audit are pending in Kerala High Court and action would be taken after the judgement.

Thus, DoT did not exercise due diligence while issuing demand notes that may lead to

further litigation.

10.2.4 Delay in submission of documents by service providers and absence of proper

policy on time schedule leading to delay in verification of deductions by CsCA

DoT delegated (September 2006) verification of deductions to CsCA on quarterly basis. The above verification for each quarter was to be completed by the CCA within a stipulated


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time frame, i.e. by 15 October, 15 January, 15 April and 30 June for quarters I, II, III and IV respectively of the financial year. Also DoT (April 2007) specified the documents to be submitted and the consequences of not submitting the documents within the specified time schedule.

On test check of the records at the offices of CsCA relating to verification of deductions, it was noticed that in seven1 CCA offices, there was considerable delay in submission of

documents by RCL and in verification of deductions claimed due to non-submission of

documents by the operator. This delayed the verification of deductions by the CCA office

by a period of one month to 59 months (Annexure – 10.03).

DoT issued (July 2008) instructions stating that operators should be given opportunity to

submit the missing documents and instructed the CsCA to furnish the details of inadmissible

deductions to the operator. Accordingly, RCL got extension for furnishing of the documents

ranging from 15 days to five months. Further, it was also observed that RCL after the

provisional assessment of LF again got extension of time for submission of documents

which ranged from 15 days to 6 months.

Thus due to the inconsistent policies of the DoT, the Telecom operator submitted the

documents on piece meal basis on various occasions resulting in delay in the process of

verification which needs a further review and proper instructions from DoT. Reply is

awaited from DoT on this observation.

10.2.5 Non assessment of LF of NLD, ILD and ISP for the year 2006-07 to 2009-10

DoT has not carried out assessment of licence fee for NLD, ILD and ISP for the year

2006-07 to 2009-10 in respect of DWL and Delhi Service area in respect of Aircel Ltd. for

the year 2009-10 despite lapse of more than five years.

DoT replied that assessment could not be done due to non-receipt of verification reports

from CCA as of September 2015.

Reply of the DoT is not acceptable as the CsCA are under administrative control of DoT

and DoT should have obtained the verification reports.

10.2.6 Non recovery of LF and SUC on international roaming claimed by the Telecom

Service Providers

Clause 2.2 (a) of the UASL agreement provides for the licensee to enter into an agreement

with other service provider(s) in India or abroad for providing roaming facility to its

subscriber under full mobility service unless advised/directed by licensor otherwise. As per

Clause 19.2 of the UASL/CMTS agreement, following shall be excluded from the GR to

arrive at AGR-

1 Odisha,Delhi,Patna,Bangalore,UP(West),UP(East)andKerala


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• PSTNrelatedcallcharges(AccessCharges)actuallypaidtoothereligible/

entitled telecommunication service providers within India;

• Roaming revenues actually passed on to other eligible/entitled

telecommunication service providers and;

• Service tax on provision of service and sales tax actually paid to the

Government if GR had included as component of sales tax and service tax.

DoT issued (20 September 2006) instructions to all Telecom Service Providers intimating them about the decentralization of verification of deductions to office(s) of CsCA. They were directed to submit the proof of payment to CsCA on demand. In terms of the letter, deduction on account of “roaming revenues actually passed on to other eligible/entitled Telecommunication Service Providers (TSPs) within India” was permissible for the purpose of arriving at AGR. Therefore, roaming revenues actually passed on to Foreign Service Providers (International Roaming) was not eligible for deduction for the purpose of arriving at AGR.

DoT issued an internal letter to all CsCA on 21 September 2006 detailing the verification of deduction from the GR by the PSPs alongwith which letter dated 20 September 2006 addressed to all Telecom Service Providers was also enclosed.

It was seen that only in November 2014, DoT issued a specific clarification that the entire deduction claims on account of International Roaming to be inadmissible. The justification offered was that foreign operators were not eligible/entitled operators as licence to them was not issued by DoT. It was also mentioned that cases where deduction verification has been finalised/closed may not be opened by CsCA for the time being till further orders.

Audit observed during test check that international roaming charges actually passed on to the international operators were allowed as deduction by some CsCA2 whereas it was disallowed by some other CsCA3. Inconsistencies in the clarifications issued by DoT regarding deduction claims on account of international roaming charges has resulted in non-uniformity among CsCA regarding allowance/disallowance of deduction claims on account of International Roaming charges and possible loss of revenue to the exchequer in terms of revenue share.

In reply to above audit observation issued to DoT (April 2015), it stated (January 2016) that the verification of deduction on account of International Roaming claimed by Telecom Service Providers was carried as per order dated 5 July 2007 up to 6 November 2014. These were superseded by order dated 7 November 2014. It further stated that the issue was presently under review.

The above reply of the DOT confirms that the issue is still under review and has not reached its finality which may lead to continuance of non-uniformity among CsCA regarding

allowance/disallowance of deduction claims on account of International Roaming charges.

2 Karnataka,MadhyaPradeshandKerala3 Delhi,WestBengal


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10.2.7 Lack of appellate mechanism resulting in high number of litigations

DoT has been contributing 13.76 to 20.17 per cent of total non-tax revenue in the form of

LF and SUC for Government of India during the period from 2012-13 to 2014-15 as detailed

in Table 10.2 below:

Table-10.2

(` in crore)

RevenueActual 2012-13

Actual 2013-14

Revised 2014-15

Budget 2015-16

Total Non-Tax revenue of Govt. of India 137354 198869 217831 221732

Non Tax Revenue from Communication service under head “Other Communication Services”

18902 40113 43161 42865

Percentage of Non-Tax Revenue contributed by Communication

13.76 20.17 19.81 19.33

(Source: Budget document)

As detailed in the earlier chapter, DoT, as the licensor, is required to assess the correctness of

revenue share due from the PSPs as per provisions in the licence agreements. This assessment

process includes verification of deductions claimed by the telecom service providers to arrive

at AGR and assessment of GR to ensure the correct reporting of all revenues as per relevant

licence agreements.

It has been observed that within few years of introduction of revenue share regime, service

providers challenged the definition of AGR in different courts of law. The service providers,

individually and through their associations, filed petitions during 2003 to 2005 before the

TDSAT questioning the validity of the AGR defined in the licence agreement. One of

the contentions of the service providers’ was that the definition of the AGR and certain

components included in the AGR is contrary to the Indian Telegraph Act, 1885, National

Telecom Policy of 1999, the recommendations made by the TRAI and the Migration Package

offered to the licensees.

TDSAT in August 2007 concluded that AGR shall be the revenue earned through

licensed activity and decided the items of revenue that would form part of AGR thereby

curtailing the scope of GR as defined in the license agreement. The pronouncement of

TDSAT was challenged by DoT in the Hon’ble Supreme Court of India which pronounced

(October 2011) in its judgment that “TDSAT had no jurisdiction to decide on the validity of

the definition of AGR in the licence agreement and to exclude certain items of revenue which

otherwise formed part of AGR as defined in the licence agreement”. However, Hon’ble

Supreme Court was of the opinion that in case of any disputes regarding demands raised by

DoT, PSPs shall approach TDSAT and TDSAT shall also give opinion as to whether the

demands are in line with agreement conditions.


- 152 -

During the course of audit at DoT, it was noticed that DoT raised demands on operators based

on its annual assessments and on the findings of the special audit which were challenged

in the TDSAT. While Vodafone, BAL/BHL and ICL have challenged/represented against

all the demands raised, M/s Aircel Ltd. had represented against three out of five demands

raised on them. The details of demands raised by DoT and paid by the PSPs are as under:

Table 10.3

(` in crore)

Name of the PSPTotal Demand raised by DoT (LF + SUC)

Amount paid Balance due

BAL/BHL 2294.33 0.00 2294.33

Vodafone 1320.00 0.72 1319.28

RCL/RTL 2394.89 0.00 2394.89

Idea 1047.24 0.00 1047.24

TTSL/TTML 1066.33 0.00 1066.33

Aircel 195.45 0.03 195.42

Besides, the operators filed another petition again challenging the validity of definition of

AGR in Kerala High Court and other High courts. In April 2015, TDSAT adjudicating on

the demands raised by DoT gave its ruling which exempted certain items of revenue from

the purview of AGR and set aside the demands raised by DoT. DoT has filed appeals in the

Supreme Court against the TDSAT’s order of April 2015 (July 2015).

Thus, even though the revenue share regime has been in force since 1999, even after lapse

of sixteen years the basic question of the definition of AGR on which revenue share is

computed has not reached finality with the result that Government of India has been left

with no option but to accept only what the PSPs pay as LF and spectrum charges.

By challenging all demands raised by DoT, even on disallowances on account of clear

deviations from the provisions of licence agreement, the efforts of the Government in

securing its dues as revenue share have been effectively hindered by the operators. The

increasing number of pending court cases indicate that the directions/procedures framed

by DoT for verification of AGR, imposition of interest/penalty etc., were susceptible to

different interpretations leaving room for numerous disputes.

Though DoT had revised the rates of LF and SUC from time to time, the definition of

GR/AGR was not reviewed despite the increasing numbers of disputes/litigation. Thus,

it is recommended that there is a need for clear, cogent and specific description of

the scope of GR/AGR. This is essential as even after 16 years since the introduction of

the revenue share regime, the correctness and completeness of revenue flowing into the

Consolidated Fund of India could not be ensured by DoT.


- 153 -

The absence of an appellate/redressal mechanism within DoT to address disputes with

operators contributes to the increasing number of litigations. To minimize the litigations on

the demands raised by DoT, it is recommended that an appellate mechanism within the

department should be established to address the disputes between DoT and the PSPs

on demands raised by DoT.

In reply to above audit observation issued to DoT (April 2015), it stated (January 2016)

that presently the appeals were dealt with through the administrative hierarchy of the

Department and the process of setting up a formal appellate structure was in process.

New DelhiDated : 8 February 2016

(Meera Swarup)Director General of Audit

(Post and Telecommunications)

Countersigned

New DelhiDated : 9 February 2016

(Shashi Kant Sharma)Comptroller and Auditor General of India


- 155 -

Airtel

Annexures


- 157 -

Airtel

ANNEXURE-1.01 [Para 1.2]List of Companies which migrated to Revenue Share Regime

Sl. No.

Name of Licensee Company Service Areas

1 Aircel Ltd. Tamil Nadu (excluding Chennai Service Area)

2 Aircel Cellular Limited Chennai

3 Bharti Airtel LimitedDelhi, Kolkata, Mumbai, Andhra Pradesh, Himachal Pradesh, Punjab, Karnataka, Gujarat, Haryana, Kerala, Madhya Pradesh, Maharashtra

4 Bharti Hexacom Ltd. Rajasthan, North East

5 HFCL Infotel Ltd. Punjab

6 Idea Cellular Ltd. AP, Delhi, Gujarat, Haryana, Kerala, MP, Maharashtra, UP-W, Punjab, HP, Rajasthan, UP (E)

7 Loop Mobile (India) Ltd. Mumbai

8 Reliance Telecom Ltd. Assam, Bihar, HP, MP, North East, Odisha, West Bengal, Kolkata

9 Reliance Communications Ltd.

Gujarat, AP, Delhi, Bihar, HP, Haryana, Karnataka, Kerala, Kolkata, MP, Maharashtra, Mumbai, Odisha, Punjab, Rajasthan, UP (E),UP (W), West Bengal, Tamil Nadu (including Chennai)

10 Spice Communications Ltd. Karnataka, Punjab

11 Sistema Shyam Teleservices Ltd. Rajasthan

12 Vodafone Essar Ltd. Mumbai

13 Vodafone Essar East Ltd. Kolkata

14 Vodafone Essar Mobile Services Ltd. Delhi

15 Vodafone Essar Digilink Ltd. Haryana

16 Vodafone Essar Gujarat Ltd. Gujarat

17 Vodafone Essar Cellular Kerala, Maharashtra, Tamil Nadu

18 Vodafone Essar South Ltd. Chennai, Karnataka, AP, Punjab

19 Tata Teleservices (Maharashtra) Ltd. Maharashtra, Mumbai

20 Tata Teleservices Ltd AP, Delhi, Gujarat, Karnataka, Tamil Nadu (including Chennai)

21 Mahanagar Telephone Nigam Ltd. Delhi, Mumbai

Note: Licences of Vodafone Group were originally with Essar/Hutch etc. Name Vodafone is used for easy identification


- 158 -

Airtel

AN

NE

XU

RE

3.0

1 [P

ara

3.2.

1 (A

)]Im

pact

on

paym

ent o

f LF

and

SUC

due

to n

on c

onsi

dera

tion

of r

even

ue fr

om C

omm

issi

on a

nd M

argi

n(A

mou

nt in

`)

Serv

ices

/LSA

2006

-07

2007

-08

2008

-09

2009

-10

Am

ount

of

GR

/AG

RL

F Im

-pa

ctSU

C Im

pact

Am

ount

of

GR

/AG

RL

F Im

pact

SUC

Impa

ctA

mou

nt o

f G

R/A

GR

LF

Impa

ctSU

C Im

pact

Am

ount

of

GR

/AG

RL

F Im

pact

SUC

Impa

ct

AP

1207

8741

9662

9954

7167

1058

0444

184

6435

548

1410

290

6602

090

6602

4125

0425

6768

072

2567

6807

1168

2947

Ass

am

2613

6355

1568

181

7448

8690

9110

9854

5466

631

3643

311

5677

660

6940

660

3990

879

1352

6026

081

1561

646

6647

9B

ihar

20

9688

384

1258

1303

9079

507

3064

3728

818

3862

3713

9428

9753

7206

188

3223

2371

2444

2882

5244

3101

531

4658

6123

8616

11C

henn

ai

--

--

--

--

-11

6340

271

1163

4027

5642

503

Del

hi15

2358

530

1523

5853

6627

596

--

-46

4925

846

4926

2022

4330

6971

929

3069

7193

1335

3279

Guj

arat

-

--

--

--

--

2366

3372

623

6633

7386

3713

1H

arya

na

3324

7429

2659

794

1157

011

1990

666

1592

5368

678

1633

876

1307

1056

369

9930

9183

7944

735

3426

167

HP

1054

516

5272

636

381

7462

189

3731

0925

7446

2347

359

1408

4280

984

9749

3766

5849

626

3363

535

J& K

-

--

--

--

--

1048

2798

562

8967

936

1656

5K

arna

taka

-

--

4772

7771

938

1822

1822

1934

1498

8115

138

9881

1514

4594

7354

1007

9484

2310

0794

842

4686

9602

Ker

ala

-

--

4048

432

3238

7514

3719

5330

111

4264

0918

9219

2467

9152

219

7433

2287

6109

9K

olka

ta

4953

622

4953

6221

3006

1041

912

1041

9144

802

--

-11

2724

049

1127

2405

4847

134

Mah

aras

htra

74

2603

874

2604

2710

5026

9489

732

2694

8973

9836

375

1604

6002

116

0460

0264

9863

144

6703

043

4467

0304

2077

1692

MP

6907

6411

5526

113

2521

289

3175

5495

025

4043

9611

5907

5632

1367

123

2570

9370

1172

9900

1417

8739

111

3429

9151

7524

0M

umba

i 12

3075

296

1230

7530

5599

926

1773

1885

517

7318

8580

6800

892

1486

4192

1486

441

9276

325

3485

417

2534

8542

1153

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Odi

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-

--

2678

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1606

8312

0512

1043

2679

6259

6146

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1546

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7971

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-

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8913

2497

0830

9785

347

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2828

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TN23

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223

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9009

2-

--

1127

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121

5466

5426

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978

2682

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1301

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UPE

4563

0435

3650

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257

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2664

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6301

112

2796

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WB

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145

5292

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0349

287

1362

7943

5962

225

TOTA

L B

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6870

9660

056

0232

8428

4849

7617

6208

1478

1416

9913

474

2189

2822

7251

7625

1938

0233

899

2759

9351

6466

0528

4529

5656

322

3014

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NE

1125

6790

6754

0726

4535

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8753

2728

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1068

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9543

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904

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1113

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ajas

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-

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--

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--

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8970

337

6231

7621

3981

81TO

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L11

2567

9067

5407

2645

3545

4687

5327

2812

510

6851

695

4317

2557

2590

425

2894

158

1628

893

4430

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2512

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6983

5339

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6986

9228

7495

1018

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0231

1444

2725

975

2874

4323

6794

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2824

210

1804

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5746

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2249

7260

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2481

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4

(` in

cro

re)

Serv

ices

/Com

pany

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l am

ount

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pact

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45.

40


- 159 -

Airtel

AN

NE

XU

RE

3.0

2 [P

ara

3.2.

1 (B

)]Im

pact

on

paym

ent o

f LF

and

SUC

due

to n

on c

onsi

dera

tion

of r

even

ue fr

om F

ree A

ir T

ime

(FAT

)(A

mou

nt in

`)

Serv

ices

/LSA

2006

-07

2007

-08

2008

-09

2009

-10

Am

ount

of

GR

/AG

RL

F Im

pact

SUC

Im

pact

Am

ount

of

GR

/AG

RL

F Im

pact

SUC

Im-

pact

Am

ount

of

GR

/AG

RL

F Im

pact

SUC

Im-

pact

Am

ount

of

GR

/AG

RL

F Im

pact

SUC

Impa

ct

AP

--

--

--

5470

9206

954

7092

0724

8926

8919

4072

0419

4072

088

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Ass

am

3767

350

2260

4110

7369

--

--

--

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0365

1254

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7214

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6219

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213

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1030

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--

--

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4407

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4722

2090

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--

--

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5280

3036

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525

5425

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-

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-39

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9934

1379

6219

8022

2311

8813

368

3177

Kar

nata

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8915

3807

7132

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4145

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1166

6963

0193

3357

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2513

7813

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1375

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363

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ala

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0

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4431

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797

7854

2434

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kata

-

--

2233

750

2233

7596

051

--

-10

2135

0210

2135

043

9181

Mah

aras

htra

-

--

--

--

--

4277

4589

4277

459

1989

018

MP

6947

7825

5558

226

2535

941

3869

4734

3095

579

1412

358

1971

6409

915

7731

2871

9649

010

1998

4181

5987

3722

94M

umba

i 23

4223

439

2342

2344

1065

7166

1981

1582

1981

158

9014

27-

--

1861

1751

1861

175

8468

35O

dish

a

4849

2315

2909

539

1939

693

2120

2747

1272

165

9541

2423

1001

9413

8601

210

3950

922

9907

3513

7944

410

3458

3Pu

njab

-

--

--

--

--

1440

9601

1152

768

6412

27TN

--

--

--

--

-48

1127

648

1128

2333

47U

PE-

--

--

--

--

9495

664

7596

5342

7305

UPW

--

-30

632

2451

1087

--

-30

4972

324

3978

1082

65W

B-

--

3259

500

2607

6088

007

--

-10

1525

4681

2204

3553

39TO

TAL

BA

L65

1986

569

5864

4957

2837

5620

1520

0247

3312

5331

313

6941

7400

2534

4348

6424

4376

799

1142

7889

412

5209

8924

1169

1256

156

6045

53N

E60

7707

3646

214

281

--

--

--

1424

5367

8547

2247

7220

Raj

asth

an

--

--

--

--

-12

2715

5398

1724

5583

56TO

TAL

BH

L60

7707

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214

281

--

--

--

2651

6920

1836

446

1035

575

TOTA

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ASL

6525

9427

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6814

1928

3899

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2002

4733

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3131

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7679

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4278

894

1278

6158

4411

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cro

re)

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ices

/Com

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l am

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/AG

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pact

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Impa

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54

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2.7

1

0

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0.1

0

Tota

l UA

SL

5

98.5

7

54

.71

26.9

7


- 160 -

Airtel

AN

NE

XU

RE

3.0

3 [P

ara

3.2.

1 (B

)]Im

pact

on

paym

ent o

f LF

and

SUC

due

to n

on c

onsi

dera

tion

of r

even

ue fr

om F

ree

of C

ost C

ards

/Cou

pons

/SIM

s (FO

C)

(Am

ount

in `

)

Serv

ices

/LSA

2006

-07

2007

-08

2008

-09

2009

-10

Am

ount

of

GR

/AG

RL

F Im

pact

SUC

Impa

ctA

mou

nt o

f G

R/A

GR

LF

Impa

ctSU

C Im

-pa

ctA

mou

nt o

f G

R/A

GR

LF

Impa

ctSU

C

Impa

ctA

mou

nt o

f GR

/A

GR

LF

Impa

ctSU

C Im

-pa

ct

Ass

am

--

-11

2842

6771

3893

--

-34

3945

2063

711

866

Bih

ar

--

-85

2454

5114

738

787

--

--

--

Del

hi52

0967

6452

0967

622

6620

924

2686

5224

2686

510

5325

9-

--

8133

9081

339

3538

2

Guj

arat

56

1180

9056

1180

920

4831

0-

--

--

--

--

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1005

8789

5029

3934

7028

2102

539

1051

2772

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--

--

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J& K

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1239

987

7439

942

904

1542

0192

5253

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8475

2023

878

1176

379

--

--

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9026

3690

264

4197

3

Ker

ala

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5858

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8687

1192

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5290

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725

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8090

1455

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Kol

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21

1107

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1107

9077

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--

4212

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1158

4145

5841

425

118

Mah

aras

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59

2668

6959

2668

721

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6585

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6586

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UPW

2230

9918

1784

793

7920

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--

--

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WB

5727

723

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--

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6361

330

9089

1352

2622

2669

217

8135

7793

4

TOTA

L B

AL

2965

5445

926

6920

6211

3952

4048

8929

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0290

219

4828

015

1567

9213

6761

963

8552

2214

2879

1983

443

9667

79

NE

--

--

--

--

-20

595

1236

690

Raj

asth

an

2010

9729

1206

584

7098

73-

--

--

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9240

126

3392

1498

04

TOTA

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2010

9729

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584

7098

73-

--

--

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1299

626

4628

1504

94

TOTA

L U

ASL

3166

6418

827

8986

4612

1051

1348

8929

8346

0290

219

4828

015

1567

9213

6761

963

8552

2545

5875

2248

070

1117

273

(` in

cro

re)

Serv

ices

/Com

pany

Tota

l am

ount

of G

R/

AG

RL

F Im

pact

SUC

Impa

ct

BA

L

38.

28

3

.46

1

.49

BH

L

2

.34

0.1

5

0.0

9

Tota

l UA

SL

40.

62

3.6

1

1.5

8


- 161 -

Airtel

AN

NE

XU

RE

3.0

4 [P

ara

3.2.

1 (B

)]Im

pact

on

paym

ent o

f LF

and

SUC

due

to n

on c

onsi

dera

tion

of r

even

ue fr

om P

rom

otio

nal o

ffer

s to

cust

omer

s(A

mou

nt in

`)

Serv

ices

/LSA

2006

-07

2007

-08

2008

-09

2009

-10

Am

ount

of

GR

/AG

RL

F Im

pact

SUC

Impa

ctA

mou

nt o

f G

R/A

GR

LF

Im-

pact

SUC

Im

pact

Am

ount

of

GR

/AG

RL

F Im

pact

SUC

Im-

pact

Am

ount

of

GR

/AG

RL

F Im

pact

SUC

Impa

ct

AP

--

--

--

--

-23

5107

1323

5107

110

6973

7A

ssam

-

--

--

--

--

4345

139

2607

0814

9907

Bih

ar

--

--

--

--

-27

7015

616

6209

1260

42C

henn

ai

--

--

--

--

-18

4116

818

4117

8929

7D

elhi

--

--

--

--

-20

4821

4320

4821

489

0973

Guj

arat

-

--

--

--

--

4059

124

4059

1214

8158

Har

yana

-

--

--

--

--

1482

5211

860

5115

HP

1123

500

5617

538

761

--

-32

2821

4719

3692

911

1373

411

0161

7066

0970

3800

58J&

K

--

--

--

2711

6416

270

9355

8743

352

4630

16K

arna

taka

-

--

--

--

--

1389

1402

1389

140

6459

50K

eral

a

--

--

--

--

-63

6113

5088

922

582

Kol

kata

-

--

--

--

--

2973

665

2973

6712

7868

Mah

aras

htra

-

--

--

--

--

1157

1810

1157

181

5380

89M

P-

--

--

--

--

7571

981

6057

5827

6377

Mum

bai

2814

0028

140

1280

423

2929

923

2930

1059

83-

--

1752

150

1752

1579

723

Odi

sha

-

--

--

--

--

1673

9398

1004

364

7532

73Pu

njab

-

--

--

--

--

5181

9541

456

2306

0TN

--

--

--

--

-38

1679

5038

1679

518

5114

6U

PE11

0568

9888

4552

3869

91-

--

1679

2117

113

4336

9462

1308

319

2368

5915

3894

986

5659

UPW

1182

1608

394

5728

741

9667

139

8183

231

8547

1413

5533

1797

0326

5437

611

7787

945

8422

236

6738

1627

40W

B-

--

--

--

--

8875

771

7100

6231

0652

TOTA

L B

AL

1306

7788

110

4261

5346

3522

763

1113

155

1476

2473

3823

3654

185

1804

1269

8514

052

1947

7981

317

2482

2285

1942

1N

E-

--

--

--

--

2108

586

1265

1570

638

Raj

asth

an

2951

7926

1771

076

1041

983

6810

9104

4086

546

2417

873

6158

9237

4927

139

2371

186

2083

5907

1666

873

9480

34TO

TAL

BH

L29

5179

2617

7107

610

4198

368

1091

0440

8654

624

1787

361

5892

3749

2713

923

7118

622

9444

9317

9338

810

1867

1TO

TAL

UA

SL16

0195

807

1219

7229

5677

210

7442

0235

4638

023

2665

211

2952

4342

222

9684

0810

8852

3821

7724

306

1904

1609

9538

093

(` in

cro

re)

Serv

ices

/Com

-pa

nyTo

tal a

mou

nt o

f G

R/A

GR

LF

Impa

ctSU

C Im

pact

BA

L

5

6.54

4.6

3

2.1

9

BH

L

1

8.22

1.2

5

0.6

9

Tota

l UA

SL

7

4.76

5.8

8

2.8

8


- 162 -

Airtel

AN

NE

XU

RE

3.0

5 [P

ara

3.2.

1 (B

)]Im

pact

on

paym

ent o

f LF

and

SUC

due

to n

on c

onsi

dera

tion

of r

even

ue fr

om F

ull T

alk

Tim

e (F

TT

)(A

mou

nt in

`)

Serv

ices

/LSA

2006

-07

2007

-08

2008

-09

2009

-10

Am

ount

of G

R/

AG

RL

F Im

pact

SUC

Impa

ctA

mou

nt o

f G

R/A

GR

LF

Im-

pact

SUC

Im

pact

Am

ount

of

GR

/AG

RL

F Im

pact

SUC

Im

pact

Am

ount

of

GR

/AG

RL

F Im

-pa

ctSU

C Im

pact

Del

hi-

--

--

--

--

3790

0537

901

1648

7

J& K

-

--

--

-12

0079

6372

0478

4142

7528

3629

317

0178

9785

2

Mah

aras

htra

-

--

--

--

--

1932

1901

1932

190

8984

68

Mum

bai

6521

510

6521

5129

6729

(661

9204

9)-

--

--

--

-

UP

(E)

2152

4873

1721

990

7533

7154

2496

9043

3997

518

9873

9-

--

--

-

UP

(W)

5437

102

4349

6819

3017

2442

8699

1954

296

8672

19-

--

--

-

TOTA

L B

AL

3348

3485

2809

109

1243

116

1248

6340

6294

271

2765

958

1200

7963

7204

7841

4275

2253

7199

2140

268

1012

807

Raj

asth

an

2577

3263

1546

396

9097

96-

--

--

--

--

TOTA

L B

HL

2577

3263

1546

396

9097

96-

--

--

--

--

TOTA

L U

ASL

5925

6748

4355

505

2152

913

1248

6340

6294

271

2765

958

1200

7963

7204

7841

4275

2253

7199

2140

268

1012

807

(` in

cro

re)

Serv

ices

/Com

pany

Tota

l am

ount

of

GR

/AG

RL

F Im

pact

SUC

Im-

pact

BA

L

8.0

5

1.2

0

0.5

4

BH

L

2.5

8

0.1

5

0.0

9

Tota

l UA

SL

1

0.63

1.3

5

0.6

3


- 163 -

Airtel

AN

NE

XU

RE

3.0

6 [P

ara

3.2.

1 (B

)]Im

pact

on

paym

ent o

f LF

and

SUC

due

to n

on c

onsi

dera

tion

of r

even

ue fr

om A

djus

tmen

ts(A

mou

nt in

`)

Serv

ices

/LSA

2006

-07

2007

-08

2008

-09

2009

-10

Am

ount

of

GR

/AG

RL

F Im

pact

SUC

Impa

ctA

mou

nt o

f G

R/A

GR

LF

Impa

ctSU

C Im

-pa

ctA

mou

nt o

f G

R/A

GR

LF

Impa

ctSU

C Im

-pa

ctA

mou

nt o

f GR

/A

GR

LF

Impa

ctSU

C Im

-pa

ctA

P-

--

--

--

--

2461

3011

224

6130

1111

1989

20A

ssam

-

--

--

-99

9070

3859

9442

234

4679

327

3511

9316

4107

294

3616

Bih

ar

1735

2703

110

4116

2275

1372

016

0309

662

9618

580

7294

090

--

-56

0311

633

6187

2549

42C

henn

ai

1778

0547

1778

055

7823

4484

2598

7884

2598

841

7086

411

5643

271

1156

4327

5608

699

3265

3669

3265

367

1583

703

Del

hi-

--

--

--

--

4601

549

4601

5520

0167

Guj

arat

-

--

--

--

--

4337

464

4337

4615

8317

Har

yana

-

--

--

-79

4656

6357

327

416

8329

9066

639

2873

8H

P-

--

--

-27

5036

316

5022

9488

823

0761

1384

679

61J&

K

--

--

--

1224

1009

7344

6142

2315

3590

2621

542

1238

6K

arna

taka

-

--

--

-57

6318

5763

226

799

2674

131

2674

1312

4347

Ker

ala

40

3525

3232

2820

314

3251

5-

--

3325

0679

526

6005

4411

8039

9117

1456

2213

7165

060

8670

Kol

kata

-

--

--

--

--

2857

426

2857

4312

2869

Mah

aras

htra

-

--

--

--

--

8183

7601

8183

760

3805

448

MP

--

--

--

--

-97

3877

777

9102

3554

65M

umba

i -

--

--

--

--

8608

271

8608

2739

1676

Odi

sha

-

--

--

-75

7433

545

4460

3408

4553

6802

132

2081

2415

61Pu

njab

-

--

--

--

--

2478

791

1983

0311

0306

TN10

6201

044

1062

0104

4035

640

3426

9591

534

2695

9116

9634

4844

9751

402

4497

5140

2181

2943

1354

2975

713

5429

7665

6834

3U

PE86

8724

9369

4979

930

4053

7-

--

7585

6506

6068

520

2806

691

3825

7230

606

1721

6U

PW-

--

--

-37

6066

1330

0852

913

3503

511

1659

8933

3964

WB

7881

3863

051

1970

3-

--

--

-38

6570

930

9257

1353

00TO

TAL

BA

L42

5521

785

3305

0834

1682

4460

5872

6545

552

3141

5928

4284

0111

3520

8307

9968

6629

4772

6413

5925

9821

657

0122

1526

8739

18N

E-

--

--

-62

8094

9237

6857

016

6445

221

9847

8313

1908

773

6490

Raj

asth

an

--

--

--

--

-11

1354

889

084

5066

6TO

TAL

BH

L-

--

--

-62

8094

9237

6857

016

6445

223

0983

3214

0817

178

7157

TOTA

L U

ASL

4255

2178

533

0508

3416

8244

6058

7265

455

5231

4159

2842

8401

1198

0177

9910

3455

199

4939

0865

6156

9654

858

4203

8527

6610

74

(` in

cro

re)

Serv

ices

/Com

pany

Tota

l am

ount

of

GR

/AG

RL

F Im

pact

SUC

Impa

ct

BA

L

274

.06

24

.20

11

.99

BH

L

8.59

0.5

2

0.2

4

Tota

l

282

.65

24

.72

12

.23


- 164 -

Airtel

AN

NE

XU

RE

3.0

7 [P

ara

3.2.

2]Im

pact

on

paym

ent o

f LF

and

SUC

due

to n

on c

onsi

dera

tion

of r

even

ue fr

om D

isco

unts

(Am

ount

in `

)

Serv

ices

/LSA

2006

-07

2007

-08

2008

-09

2009

-10

Am

ount

of G

R/

AG

RL

F Im

pact

SUC

Impa

ctA

mou

nt o

f G

R/A

GR

LF

Im-

pact

SUC

Im

pact

Am

ount

of

GR

/AG

RL

F Im

-pa

ctSU

C

Impa

ctA

mou

nt o

f G

R/A

GR

LF

Im-

pact

SUC

Im

pact

AP

5055

7315

4044

585

2290

246

2461

0145

1968

812

1119

762

3224

9923

3224

992

1467

372

6403

5941

464

0359

4129

1363

53

Bih

ar

5438

3632

630

2354

8-

--

--

--

--

Che

nnai

25

2104

509

2521

0451

1109

2598

--

--

--

--

-

Del

hi25

9175

0825

9175

111

2741

2-

--

--

-26

9889

126

9889

1174

02

Har

yana

-

--

--

--

--

4212

533

7014

53

HP

--

--

--

--

-11

9492

7170

4122

Kar

nata

ka

5328

912

4263

1324

7794

4948

611

3958

8923

0110

5035

572

5035

5723

4154

--

-

Kol

kata

56

9855

5698

624

504

--

--

--

--

-

MP

--

--

--

7715

3461

723

2816

1-

--

Odi

sha

10

788

647

432

--

-

-

-

- -

--

Punj

ab

--

--

--

2054

3516

435

9142

--

-

TN22

9026

742

2290

2674

8703

016

4087

7181

740

8771

8220

2342

0592

5868

5992

5868

644

9046

3-

--

UPW

2984

7592

2387

807

1059

590

1066

490

8531

937

860

--

--

--

TOTA

L U

ASL

(B

AL

)59

3907

057

5765

3844

2456

9140

4393

9706

343

3272

0121

6219

3713

0849

323

1306

5393

6229

291

6432

1992

364

3163

7029

2593

31

(` in

cro

re)

Serv

ices

/Com

pany

Tota

l am

ount

of

GR

/AG

RL

F Im

pact

SUC

Impa

ct

Tot

al U

ASL

(BA

L)

180

.74

17.

84

8.

17


- 165 -

Airtel

AN

NE

XU

RE

3.0

8 [P

ara

3.2.

2]Im

pact

on

paym

ent o

f LF

and

SUC

due

to n

on c

onsi

dera

tion

of r

even

ue fr

om W

aive

rs (R

even

ue)

(Am

ount

in `

)

Serv

ices

/LSA

2006

-07

2007

-08

2008

-09

2009

-10

Am

ount

of

GR

/AG

RL

F Im

pact

SUC

Impa

ctA

mou

nt o

f GR

/A

GR

LF

Impa

ctSU

C Im

-pa

ctA

mou

nt o

f G

R/A

GR

LF

Im-

pact

SUC

Im

pact

Am

ount

of G

R/

AG

RL

F Im

pact

SUC

Im

pact

AP

4200

559

3360

4519

0285

2121

2099

1696

968

9651

51-

--

3528

5948

435

2859

4816

0551

07A

ssam

34

6607

0020

7964

298

7830

4772

5904

2863

554

1646

544

2892

3067

1735

384

9978

4649

7776

8529

8666

117

1733

0B

ihar

34

8506

720

9104

1509

0350

4862

3029

222

971

2998

562

1799

1413

6435

3123

0957

1873

857

1421

009

Che

nnai

31

200

3120

1373

--

--

--

1041

6568

0110

4165

680

5052

0355

Del

hi-

--

--

-24

9966

888

2499

6689

1087

3560

1772

4306

2017

7243

062

7710

0732

Guj

arat

45

5045

516

6-

--

--

-27

1132

115

2711

3212

9896

322

Har

yana

17

0702

6213

6562

159

4045

6144

388

4915

5121

1981

9290

390

7432

3132

0518

1284

3729

910

2749

8444

3108

7H

P14

6776

2173

3881

5063

7810

1298

2050

6491

3494

7940

9888

124

5933

1414

1139

2027

7823

5216

713

5249

6J&

K

2222

8966

1333

738

7335

5610

5108

9363

0654

3636

7710

6665

0863

9990

3679

9553

9805

0232

3883

018

6232

7K

arna

taka

21

0944

863

1687

5589

9808

936

1735

4453

313

8835

6380

6982

112

1831

447

1218

3145

5665

162

9340

6530

593

4065

3143

4340

37K

eral

a

--

--

--

--

-16

0584

865

1284

6789

5700

763

Kol

kata

-

--

--

-12

6676

712

6677

5447

119

2895

303

1928

9530

8294

498

Mah

aras

htra

32

7848

3278

511

966

--

-17

3481

1734

870

2624

3202

520

2432

0252

1130

8917

MP

3793

303

138

1396

6578

1117

326

5097

8014

9588

9911

9671

254

6000

1034

2820

782

7425

737

7513

0M

umba

i -

--

--

-20

5132

2051

393

3432

0184

617

3201

8462

1456

8400

Odi

sha

42

9145

7725

7487

517

1658

361

0356

9536

6214

227

4660

670

5097

9542

3058

831

7294

167

5694

6140

5416

830

4062

6Pu

njab

11

7600

062

7056

004

5233

203

7729

4267

4637

656

3439

595

2593

7779

2075

022

1154

231

4792

7921

738

3423

3721

3279

25U

PE-

--

--

-63

9968

151

1974

2367

8815

3849

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2831

6549

2831

655

1076

029

4870

2732

4870

273

2410

785

1900

7108

719

0071

0992

1844

814

7925

592

1479

2559

7174

391

UPE

8515

608

6812

4929

8046

1905

6008

1524

481

6669

6091

6913

1273

3530

533

9257

978

8685

5063

0948

435

4908

5U

PW61

5940

449

2752

2186

5911

0613

3788

4907

3926

7743

3767

6634

7014

115

3987

536

2504

7729

0003

812

8689

2W

B37

3515

429

8812

9337

910

2228

2181

7826

2760

1646

3972

3737

1177

916

2390

339

6467

3231

7173

913

8763

6TO

TAL

UA

SL (B

AL

)27

2179

173

2326

8683

1122

2927

4739

5334

140

1867

2520

0971

6718

8191

1193

1693

2517

780

2658

2814

5014

2568

1296

8688

162

9085

10N

LD

(i/c

IP1)

3823

3480

2294

009

-56

7316

8234

0390

1-

3015

0190

118

0901

14-

2598

8951

115

5933

71-

ILD

(i/c

BIL

GO

)30

0022

2318

0013

3-

4442

4800

2665

488

-15

9961

306

9597

678

-11

9644

673

7178

680

-IS

P12

8628

7718

-15

3451

792

071

-84

3199

750

5920

-63

4281

638

0569

-V

SAT

(i/c

Satc

om)

8671

0352

026

-86

0710

5164

3-

3033

682

1820

21-

2151

064

1290

64-

GR

AN

D T

OTA

L34

1410

607

2742

2569

1122

2927

5775

0505

046

3998

2820

0971

6723

5484

0079

1977

0091

080

2658

2818

3817

0632

1529

6856

562

9085

10

(` in

cro

re)

Serv

ices

/Com

pany

Tota

l am

ount

of G

R/A

GR

LF

Impa

ctSU

C Im

pact

Tota

l UA

SL

407

.82

36.2

5

17.4

5 N

LD

(i/c

IP1)

65.

64

3.9

4

-

ILD

(i/c

BIL

GO

)

3

5.40

2

.12

-

IS

P (i/

c B

BL

)

1.64

0

.10

-

V

SAT

(i/c

Satc

om)

0.

69

0.0

4

-

GR

AN

D T

OTA

L

511

.19

42.4

5

17.4

5


- 172 -

Airtel

AN

NE

XU

RE

3.1

5[Pa

ra3.

3.4]

Bha

rti A

irte

l Ltd

, its

subs

idia

ries

and

shar

e ho

ldin

g pa

tter

n(`

in c

rore

)

Sl. N

o.N

ame

of th

e co

mpa

nyC

ount

ry o

f in

corp

.Pr

inci

pal s

ervi

ceR

elat

ion

ship

Sh

are

hold

ing

Profi

t aft

er ta

xPr

opos

ed

divi

dend

1B

harti

Hex

acom

Lim

ited

Indi

aC

ellu

lar M

obile

& B

B a

nd T

elep

hone

Ser

vice

sSu

bsid

iary

2006

-07

68.8

9%

1

53.1

0 N

il

2007

-08

68.8

9%

3

30.6

7 N

il

2008

-09

70%

545

.51

Nil

2009

-10

70%

624

.34

Nil

Tota

l pro

fit

1

,653

.62

2B

harti

Acq

ua n

et L

td (

Mer

ged

with

B

AL

w.e.

f. 01

.1.0

9)In

dia

Subm

arin

e ca

ble

land

ing

stat

ion

Subs

idia

ry

2006

-07

51%

1.20

N

il

2007

-08

100%

3.00

N

il

2008

-09

100%

-

Nil

2009

-10

-

- N

il

Tota

l pro

fit

4.20

3Sa

tcom

Bro

adba

nd E

qpt.

Ltd

Indi

aEn

terp

rise

Serv

ice

Cor

pora

te a

nd V

SAT

eqp

t tra

ding

Subs

idia

ry

2006

-07

100%

2.74

N

il

2007

-08

-

- N

il

2008

-09

-

- N

il

2009

-10

-

- N

il

Tota

l pro

fit

2.74

4B

harti

Com

tel

Ltd/

Bha

rti A

irtel

Ser

-vi

ces L

tdIn

dia

Adm

inis

trativ

e su

ppor

t to

Bha

rti A

irtel

and

VSA

T

eqpt

trad

ing

Subs

idia

ry

2006

-07

100%

(11

.86)

Nil

2007

-08

100%

-

Nil

2008

-09

100%

-

Nil

2009

-10

100%

-

Nil

Tota

l pro

fit

(11

.86)

5B

harti

Bro

adba

nd L

tdIn

dia

Ente

rpris

e Se

rvic

es C

orpo

rate

Subs

idia

ry

2006

-07

100%

(2

.88)

Nil

2007

-08

-

- N

il

2008

-09

-

- N

il

2009

-10

-

- N

il

Tota

l pro

fit

(2

.88)

6B

harti

Inf

rate

l Lt

dIn

dia

Pass

ive

infr

astru

ctur

e fo

r mob

ile se

rvic

esSu

bsid

iary

2006

-07

100%

(0

.01)

Nil

2007

-08

92.8

9%

41.

86

Nil

2008

-09

92.5

1%

2

96.3

4 N

il

2009

-10

86.0

9%

2

05.5

0 N

il


- 173 -

Airtel

Sl. N

o.N

ame

of th

e co

mpa

nyC

ount

ry o

f in

corp

.Pr

inci

pal s

ervi

ceR

elat

ion

ship

Sh

are

hold

ing

Profi

t aft

er ta

xPr

opos

ed

divi

dend

Tota

l pro

fit

543

.69

7B

harti

Tel

emed

ia L

tdIn

dia

DTH

Ser

vice

sSu

bsid

iary

2006

-07

100%

(0

.10)

Nil

2007

-08

40%

(23

.81)

Nil

2008

-09

40%

(223

.70)

Nil

2009

-10

95%

(467

.24)

Nil

Tota

l pro

fit

(714

.84)

8B

harti

Airt

el (U

K) L

tdU

KIn

tern

atio

nal c

allin

g se

rvic

es a

nd w

hole

sale

switc

hing

da

ta p

rodu

cts

Subs

idia

ry

2006

-07

100%

(1

.65)

Nil

2007

-08

100%

(1

.91)

Nil

2008

-09

100%

(1

.72)

Nil

2009

-10

100%

5.88

N

il

Tota

l pro

fit

0.60

9B

harti

Airt

el (C

anad

a) L

tdC

anad

aIn

tern

atio

nal c

allin

g se

rvic

es a

nd w

hole

sale

sw

itchi

ng

data

pro

duct

sSu

bsid

iary

2006

-07

100%

(0

.19)

Nil

2007

-08

100

(0

.12)

Nil

2008

-09

100

(2

.19)

Nil

2009

-10

100

(1

.28)

Nil

Tota

l pro

fit

(3

.78)

10B

harti

Airt

el (U

SA) L

tdU

SAIn

tern

atio

nal c

allin

g se

rvic

es a

nd w

hole

sale

sw

itchi

ng

data

pro

duct

sSu

bsid

iary

2006

-07

100%

(22

.70)

Nil

2007

-08

100

(31

.96)

Nil

2008

-09

100

(22

.80)

Nil

2009

-10

100

0.78

N

il

Tota

l pro

fit

(76

.67)

11B

harti

Airt

el (H

ongk

ong)

Ltd

Hon

g K

ong

Inte

rnat

iona

l cal

ling

serv

ices

and

who

lesa

le s

witc

hing

da

ta p

rodu

cts

Subs

idia

ry

2006

-07

100%

(0

.73)

Nil

2007

-08

100

(0

.80)

Nil

2008

-09

100

(1

.38)

Nil

2009

-10

100

(1

.01)

Nil

Tota

l pro

fit

(3

.91)

12N

etw

ork

I2i L

td (F

rom

200

7-08

)M

aurit

ius

Subm

arin

e ca

ble

syst

emSu

bsid

iary

2006

-07

- N

il

2007

-08

100

2

9.09

N

il

2008

-09

100

(58

.54)

Nil

2009

-10

100

3

2.37

N

il

Tota

l pro

fit

2.92


- 174 -

Airtel

Sl. N

o.N

ame

of th

e co

mpa

nyC

ount

ry o

f in

corp

.Pr

inci

pal s

ervi

ceR

elat

ion

ship

Sh

are

hold

ing

Profi

t aft

er ta

xPr

opos

ed

divi

dend

13B

harti

Airt

el S

ervi

ces L

td (F

rom

200

7-08

)In

dia

Man

pow

er su

ppor

t to

Bha

rti A

irtel

and

VSA

T eq

pt

tradi

ngSu

bsid

iary

2006

-07

- N

il

2007

-08

100

1

1.02

N

il

2008

-09

100

(3

.61)

Nil

2009

-10

100

1

5.17

N

il

Tota

l pro

fit

2

2.59

14B

harti

Airt

el (S

inga

pore

) Pte

Ltd

(Fro

m

2007

-08)

Sing

apor

eIn

tern

atio

nal c

allin

g se

rvic

es a

nd w

hole

sale

sw

itchi

ng

data

pro

duct

sSu

bsid

iary

2006

-07

- N

il

2007

-08

100

(1

.17)

Nil

2008

-09

100

(0

.25)

Nil

2009

-10

-

9.

64

Nil

Tota

l pro

fit

8.22

15B

harti

Airt

el L

anka

(Pvt

) Ltd

(Fro

m

2007

-08)

Sri L

anka

Mob

ile

Subs

idia

ry

2006

-07

-

- N

il

serv

ices

2007

-08

100

(10

.37)

Nil

20

08-0

910

0

(1

61.0

6)N

il

20

09-1

010

0

(3

08.5

7)N

il

Tota

l pro

fit

(480

.00)

16B

harti

Airt

el H

oldi

ngs (

Sing

apor

e) P

vt

Ltd

(Fro

m 2

007-

08)

Sing

apor

eIn

vest

men

tsSu

bsid

iary

2006

-07

-

- N

il

2007

-08

100

(0

.03)

Nil

2008

-09

100

5.06

N

il

2009

-10

100

(56

.99)

Nil

Tota

l pro

fit

(51

.96)

17B

harti

Inf

rate

l Ven

ture

Ltd

(Fro

m 2

007-

08)

Indi

aPa

ssiv

e in

fras

truct

ure

serv

ices

Subs

idia

ry

2006

-07

-

- N

il

2007

-08

100%

(0

.03)

Nil

2008

-09

100%

(0

.03)

Nil

2009

-10

100%

(0

.03)

Nil

Tota

l pro

fit

(0

.10)

18B

harti

Inf

rate

l (La

nka)

Pvt

. Ltd

(Fro

m

2007

-08)

Sri L

anka

Mob

ile se

rvic

esSu

bsid

iary

2006

-07

-

- N

il

2007

-08

100

-

Nil

2008

-09

100

-

Nil

2009

-10

100%

(308

.57)

Nil

Tota

l pro

fit

(308

.57)


- 175 -

Airtel

Sl. N

o.N

ame

of th

e co

mpa

nyC

ount

ry o

f in

corp

.Pr

inci

pal s

ervi

ceR

elat

ion

ship

Sh

are

hold

ing

Profi

t aft

er ta

xPr

opos

ed

divi

dend

19W

arad

Tel

ecom

Inte

rnat

iona

l Ltd

(Fro

m

2009

-10)

Ban

glad

esh

Mob

ile se

rvic

esSu

bsid

iary

2006

-07

-

- N

il

2007

-08

-

- N

il

2008

-09

-

- N

il

2009

-10

70%

(23

.14)

Nil

Tota

l pro

fit

(23

.14)

20B

harti

Inte

rnat

iona

l (Si

ngap

ore)

Pvt

Ltd

(F

rom

200

9-10

)Si

ngap

ore

Inve

stm

ents

Subs

idia

ry

2006

-07

-

- N

il

2007

-08

-

- N

il

2008

-09

-

- N

il

2009

-10

100

(51

.10)

Nil

Tota

l pro

fit

(51

.10)

21B

harti

Airt

el In

tern

atio

nal (

Net

herla

nds)

B

.V. (

From

200

9-10

)N

ethe

rland

Su

bsid

iary

2006

-07

-

- N

il

2007

-08

-

- N

il

2008

-09

-

- N

il

2009

-10

100

-

Nil

Tota

l pro

fit

-

22In

dus T

ower

s (Fr

om 2

007-

08)

Join

t ven

ture

2006

-07

0

- N

il

2007

-08

42%

-

Nil

2008

-09

42%

-

Nil

2009

-10

42%

-

Nil

Tota

l pro

fit

-


- 176 -

Airtel

ANNEXURE 3.16 [Para 3.3.4]Particulars of investment of BAL in its subsidiary/JV/Associates

(` in crore)

Investments by BAL 2006-07 2007-08 2008-09 2009-10

In subsidiaries 572.87 9365.20 9706.94 11137.80

In Joint Venture and others 7.37 14.23 15.70 15.71

Total investments 580.24 9379.43 9722.64 11153.51

Source: - Annual Reports of BAL for the respective years

ANNEXURE 3.17 [Para 3.3.4]Summary of Bharti Airtel Ltd’s statements under Section 212(8) of the Companies Act, 1956 relating to

Subsidiary companies contained in the respective Annual Reports

(` in crores)

YearTotal No. of subsidiaries

No. of profit making

subsidiaries

Capital invested in profit making subsidiaries

Profit after Tax / (Loss)

Proposed Dividend

2006-07 11 3 269.06 157.04 Nil

2007-08 14 5 280.32 415.64 Nil

2008-09 14 4 962.10 905.44 Nil

2009-10 17 7 943.75 893.68 Nil

Total 2455.23 2371.80

Source: - Annual Reports of BAL for the respective years


- 177 -

AirtelA

NN

EX

UR

E 3

.18

[Par

a 3.

3.8)

}Im

pact

on

paym

ent o

f Rev

enue

Sha

re (L

F an

d SU

C) o

n M

isce

llane

ous i

ncom

e no

t con

side

red

by B

AL

(Am

ount

in `

)

Serv

ices

/LSA

FY 2

006-

07FY

200

7-08

FY 2

008-

09FY

200

9-10

Am

ount

of

GR

/AG

RL

F Im

pact

SUC

Im

pact

Am

ount

of

GR

/AG

RL

F Im

pact

SUC

Im-

pact

Am

ount

of

GR

/AG

RL

F Im

pact

SUC

Im-

pact

Am

ount

of

GR

/AG

RL

F Im

-pa

ctSU

C Im

pact

AP

--

-23

2520

1818

6016

110

5796

727

0399

527

0400

1230

3247

6878

947

6879

2169

80A

ssam

--

-17

6762

210

6057

6098

394

7440

5684

632

687

1009

577

6057

534

830

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8231

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4939

1737

4554

1594

184

9565

172

535

2736

516

1641

9112

4511

Del

hi-

--

2465

8217

2465

822

1070

167

3256

270

3256

2714

1648

9521

673

9521

6741

4193

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--

-84

3377

384

3377

3078

3319

7432

8819

7432

972

0630

4890

924

4890

9217

8519

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yana

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2684

617

8148

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617

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6108

411

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992

030

3968

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--

2930

562

1465

2810

1104

2639

7715

839

9107

5970

9735

826

2060

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3622

896

2173

7412

5352

7066

0142

396

2437

882

9807

4978

828

628

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2894

3196

2315

456

1345

859

8601

707

8601

7139

9979

8797

072

8797

0740

9064

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5928

2811

6742

651

8045

6214

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231

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225

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8473

254

8473

2536

4350

6758

6067

586

2906

224

5353

324

5353

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1307

7708

1307

771

4773

3611

4899

2711

4899

346

5342

5593

362

5593

3626

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--

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4407

156

3526

2571

0919

5853

315

6683

7148

644

6090

435

6872

1628

23M

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--

1410

8689

1410

869

6419

4519

7359

4319

7359

489

7985

1175

0285

1175

029

5346

38O

dish

a-

--

3552

460

2131

4815

9861

1046

535

6279

247

094

1876

146

1125

6984

427

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7616

4770

5699

5233

9311

6587

9969

9528

5188

1721

2493

916

9995

9456

040

1819

532

1456

1788

10TN

--

-36

3995

5936

3995

618

0177

827

9147

927

9148

1353

8782

2369

082

2369

3988

49U

PE-

--

8053

917

6443

1328

1887

2584

388

2067

5195

622

4477

859

3582

2920

1504

UPW

--

-52

5342

842

0274

1864

9779

6488

6371

928

275

6093

7748

750

2163

3W

B-

--

2664

547

2131

6471

943

8106

8464

855

2837

424

0390

019

2312

8413

6TO

TAL

UA

SL (B

AL

)11

7616

4770

5699

5233

9322

8946

343

1975

4140

9800

213

8422

4263

8026

737

3500

329

8332

2317

7644

789

3611

366

NL

D (i

/c IP

1)-

--

4139

0695

2483

442

-32

0881

719

2529

-34

2050

420

5230

-IL

D (i

/c B

ILG

O)

--

-42

5134

2425

5080

5-

2495

8196

814

9749

18-

1733

1596

210

3989

58-

ISP

(i/c

BB

L)

1340

7568

8044

54-

6081

986

3649

19-

4837

5929

026

-27

2318

1633

9-

VSA

T (i/

c Sa

tcom

)10

3063

8961

8383

-95

4889

157

2933

-80

6848

4-

1090

6165

44-

GR

AN

D T

OTA

L35

4756

0421

2853

652

3393

3284

8133

825

7262

3998

0021

333

7506

875

2322

3694

3500

329

2604

4016

218

2718

6036

1136

6

(` in

cro

re)

Serv

ices

/Com

pany

Tota

l am

ount

of G

R/A

GR

LF

Impa

ctSU

C Im

pact

Tota

l UA

SL

40.8

3

3.

62

1.

74

NL

D (i

/c IP

1)

4.8

0

0.

29

-

IL

D (i

/c B

ILG

O)

46

.54

2.79

-

ISP

(i/c

BB

L)

2

.02

0.12

-

VSA

T (i/

c Sa

tcom

)

2.0

0

0.

12

-

G

RA

ND

TO

TAL

96

.19

6.94

1.

74


- 178 -

Airtel

AN

NE

XU

RE

3.1

9 [P

ara

3.3.

9]Im

pact

on

paym

ent o

f Rev

enue

Sha

re (L

F an

d SU

C) o

n pr

ofit o

n Sa

le o

f Ass

ets n

ot c

onsi

dere

d by

BA

L(A

mou

nt in

`)

Serv

ices

/LSA

FY 2

007-

08FY

200

8-09

FY 2

009-

10A

mou

nt o

f GR

/A

GR

LF

Impa

ctSU

C Im

pact

Am

ount

of G

R/

AG

RL

F Im

pact

SUC

Impa

ctA

mou

nt o

f GR

/A

GR

LF

Impa

ctSU

C Im

pact

AP

3778

2130

226

1719

198

390

9839

4477

1761

2417

612

8014

Ass

am10

905

654

376

1380

882

847

669

3519

4161

123

926

Bih

ar54

506

3270

2480

5502

433

0125

0411

1813

6709

5087

Del

hi38

6366

3863

716

768

1074

769

1074

7746

752

1743

6717

437

7585

Guj

arat

2620

626

2195

735

370

3537

1291

7795

077

9528

45H

arya

na11

442

915

395

1427

111

4249

221

699

1736

749

HP

9581

479

331

1025

061

535

417

960

1078

620

J & K

1533

192

053

039

994

2400

1380

2723

516

3494

0K

arna

taka

5422

750

4338

2025

2158

2230

8556

2230

856

1037

348

9381

363

9381

3643

6233

Ker

ala

2288

618

3181

228

718

2297

1019

4883

939

0717

34K

olka

ta52

6888

4252

6888

422

6562

016

3034

5516

3034

670

1049

6068

170

6068

1726

0931

Mah

aras

htra

4485

044

8516

3754

893

5489

2223

9030

790

3141

99M

P27

7207

9122

1766

310

1180

996

9911

477

5929

3540

1824

9261

1994

190

98M

umba

i48

855

4886

2223

5208

052

0823

7030

1912

3019

113

737

Odi

sha

2131

518

1278

9195

918

2466

114

8011

1044

946

2697

2023

Punj

ab46

263

2776

2059

5346

642

7723

7983

654

6692

3723

TN16

2353

1623

580

3693

430

9343

4531

1652

8316

528

8016

UPE

3197

125

5811

1945

165

3613

1671

8812

370

5039

66U

PW17

944

1436

637

2132

217

0675

740

504

3240

1438

WB

3111

2703

2489

016

8400

4322

2686

0717

8148

977

9401

7547

2760

378

2641

5TO

TAL

UA

SL (B

AL

)12

0343

883

1064

9202

4521

099

7229

5341

6581

171

2945

602

1861

7756

1800

221

8212

79N

LD

(i/c

IP1)

(162

3135

)-

-(9

9347

9)-

-40

6045

2436

3-

ILD

(i/c

BIL

GO

)72

066

4324

-78

630

4718

-13

3684

8021

-IS

P (i/

c B

BL

)24

8914

9-

4145

249

-70

8742

5-

VSA

T (i/

c Sa

tcom

)13

9684

-14

9189

-24

0314

4-

GR

AN

D T

OTA

L12

0419

834

1065

3759

4521

099

7237

9607

6586

227

2945

602

1916

6975

1833

174

8212

79

Not

e: N

egat

ive

figur

es n

ot c

onsi

dere

d fo

r cal

cula

tion

of G

R/A

GR

.(`

in c

rore

)

Serv

ices

/Com

pany

Tota

l am

ount

of G

R/A

GR

LF

Impa

ctSU

C Im

pact

Tota

l UA

SL

21

.13

1.

90

0.83

NL

D (i

/c IP

1)0.

04

0.00

-

ILD

(i/c

BIL

GO

)

0.0

3

0.01

-

ISP

(i/c

BB

L)

0

.00

0.

00

-

VSA

T (i/

c Sa

tcom

)

0.0

0

0.00

-

GR

AN

D T

OTA

L

21.2

0

1.91

0.

83


- 179 -

AirtelA

NN

EX

UR

E 3

.20

[(Pa

ra 3

.4.1

]Im

pact

on

paym

ent o

f LF

and

SUC

due

to d

educ

tion

of B

ad D

ebts

Wri

tten

Off

from

GR

to a

rriv

e at

AG

R fo

r co

mpu

tatio

n of

rev

enue

shar

e(A

mou

nt in

`)

Serv

ices

/LSA

FY 2

007-

08FY

200

8-09

FY 2

009-

10

Am

ount

of G

R/

AG

RL

F Im

pact

SUC

Impa

ctA

mou

nt o

f GR

/A

GR

LF

Impa

ctSU

C Im

pact

Am

ount

of G

R/

AG

RL

F Im

pact

SUC

Impa

ct

AP

3480

7986

2784

639

1583

763

2703

776

2703

7812

3022

6810

762

6810

7630

9890

Ass

am27

1126

8216

2676

193

5388

9385

793

5631

4832

3810

9354

651

5612

7932

2735

Bih

ar39

6598

923

7959

1804

5252

8029

031

6817

2402

5397

6755

358

6053

4444

24D

elhi

7583

5032

7583

503

3291

240

1270

3579

1270

358

5526

0615

6704

2315

6704

268

1663

Guj

arat

1638

9698

416

3896

9859

8224

0-

--

8722

8130

8722

813

3183

827

Har

yana

1059

8051

984

7844

236

5632

869

2166

3255

3733

123

8797

411

9137

9995

3104

4110

26H

P18

0240

590

120

6218

317

6547

0510

5928

260

9087

3568

1721

409

1231

0J &

K43

6165

6926

1699

415

0913

366

6144

039

9686

2298

2016

2438

9746

5604

Kar

nata

ka29

9439

4823

9551

613

9239

4-

--

2428

345

2428

3511

2918

Ker

ala

8160

5075

6528

406

2896

980

2845

1963

2276

157

1010

045

5228

0599

4182

448

1855

961

Kol

kata

2340

3819

2340

382

1006

364

7476

783

7476

7832

1502

1152

075

1152

0849

539

Mah

aras

htra

3195

7646

831

9576

4711

6645

4192

5100

6892

5100

737

4665

873

3366

773

3367

3410

16M

P24

3960

087

1951

6807

8904

543

8851

4264

7081

141

3230

771

7944

4482

6355

559

2899

724

Mum

bai

2871

5483

128

7154

8313

0655

4518

6185

6618

6185

784

7145

2226

3821

2226

382

1013

004

Odi

sha

1471

4819

8828

8966

2167

8107

132

4864

2836

4821

1249

0824

7494

4956

2087

Punj

ab36

5974

0421

9584

416

2858

422

6062

2618

0849

810

0597

795

5470

076

4376

4251

84TN

1897

5261

718

9752

6293

9275

512

0058

480

1200

5848

5822

836

3753

2877

3753

288

1820

345

UPE

7027

914

5622

3324

5977

7989

7328

6391

786

2956

201

1612

4781

1289

982

7256

15U

PW11

2079

233

8966

339

3978

813

3448

4924

2758

794

1224

215

2212

9171

1770

334

7855

86W

B84

6006

167

6805

2284

2274

2747

659

4198

2599

6273

4842

158

7874

2571

95TO

TAL

BA

L18

1129

4443

1635

2172

972

2678

1263

1759

425

5468

0392

2525

6705

4113

4833

635

8736

2416

2196

53N

E-

--

2235

4432

1341

266

5923

92-

--

Raj

asth

an-

--

1724

7813

798

6640

3383

4527

068

1539

5TO

TAL

BH

L-

--

2252

6910

1355

064

5990

3233

8345

2706

815

395

TOTA

L U

ASL

1811

2944

4316

3521

729

7226

7812

6542

8633

556

0354

5625

8557

3741

1686

681

3590

0692

1623

5048

(` in

cro

re)

Serv

ices

/Com

pany

Tota

l am

ount

of G

R/A

GR

LF

Impa

ctSU

C Im

pact

BA

L

28

5.44

25.

41

11.3

8

BH

L

2.2

8

0.

14

0.0

6

Tota

l UA

SL

28

7.72

25.

55

11.4

4


- 180 -

Airtel

ANNEXURE 3.21 [Para 3.4.2]Impact on payment of LF & SUC due to deduction of lease line charges (2006-07)

(Amount in `)

Services/LSA Amount of GR/AGR LF Impact SUC Impact

AP 5681254 454500 257361

Assam - - -

Bihar 134698433 8081906 5832442

Delhi 91775162 9177516 3992220

Gujarat 139189284 13918928 5080409

Haryana 119834958 9586797 4170257

HP 13121316 656066 452685

J&K 12644856 758691 417280

Karnataka 432674658 34613973 20119372

Kerala 127128652 10170292 4513067

Kolkata 63469174 6346917 2729174

Maharashtra 499135568 49913557 18218448

MP 313098261 25047861 11428087

Mumbai 85615307 8561531 3895496

Odisha - - -

Punjab 57064747 3423885 2539381

TN (including Chennai) 533323080 53332308 20266277

UPE 238080782 19046463 8332827

UPW 121832683 9746615 4325060

WB 22902939 1832235 572573

TOTAL BAL 3011271114 264670041 117142416

NE - - -

Rajasthan 259605842 15576351 9164086

TOTAL BHL 259605842 15576351 9164086

TOTAL UASL 3270876956 280246392 126306502

(` in crore)

Services/Company Total amount of GR/AGR LF Impact SUC Impact

BAL 301.13 26.47 11.71

BHL 25.96 1.56 0.92

Total UASL 327.09 28.03 12.63


- 181 -

AirtelA

NN

EX

UR

E 3

.22

[Par

a 3.

4.3]

Impa

ct o

n pa

ymen

t of S

UC

due

to n

on c

onsi

dera

tion

of r

even

ue fr

om sa

le/le

ase

of b

andw

idth

(Am

ount

in `

)

Serv

ices

/LSA

2006

-07

2007

-08

2008

-09

2009

-10

Am

ount

of G

R/

AG

RSU

C Im

pact

Am

ount

of G

R/

AG

RSU

C Im

pact

Am

ount

of G

R/

AG

RSU

C Im

pact

Am

ount

of G

R/

AG

RSU

C Im

pact

AP

2992

3939

1355

554

2912

0400

1324

978

7698

0625

3502

618

4795

1780

2181

806

Del

hi11

3660

298

4944

223

1989

6606

486

3512

746

2475

179

2011

7670

2140

8548

793

1271

9

Guj

arat

--

1979

589

7225

578

0004

928

4702

3242

0174

1183

336

Har

yana

1110

8038

6610

4717

3613

2683

8592

5967

5424

523

3021

Kar

nata

ka20

7065

450

9628

543

3496

4845

916

2586

5350

7045

098

2357

7597

1351

5017

362

8448

3

Ker

ala

1190

6375

4226

7613

1881

1546

8178

1814

7125

6442

2320

2028

8571

7202

Kol

kata

8140

710

3500

5119

6431

6584

4656

4789

5614

2059

511

2003

8780

8616

68

MP

1734

2484

863

3000

782

1415

9929

9816

819

4190

153

7087

941

4467

9689

1630

809

Mah

aras

htra

4822

117

1760

0732

3673

4811

8140

868

5975

1327

7819

965

4378

4730

4286

0

Mum

bai

--

8252

1377

3754

723

1676

9282

676

3002

412

2221

994

5561

101

Punj

ab21

9127

9751

6653

288

2960

7113

7101

5861

0102

1473

9745

6559

19

TN38

3228

561

1456

2685

1690

6583

683

6875

930

9726

174

1502

1719

1437

7231

669

7295

7

UPE

--

2077

2372

7024

1380

889

311

2172

3467

9775

56

UPW

--

--

1312

695

4660

118

0491

1164

0743

TOTA

L B

AL

9325

0250

537

7833

6398

5607

680

4421

3859

1878

2554

0283

4594

7790

7227

693

4025

6180

Raj

asth

an42

8891

1514

011

0603

639

264

7377

623

2840

3820

8805

3495

0064

TOTA

L B

HL

4288

9115

140

1106

036

3926

473

7762

328

4038

2088

0534

9500

64

TOTA

L U

ASL

9329

3139

637

7985

0398

6713

716

4425

3123

1885

6330

2583

7435

1592

8108

227

4120

6244

(` in

cro

re)

Serv

ices

/Com

pany

Tota

l am

ount

of G

R/A

GR

SUC

Impa

ct

BA

L

47

0.36

20.5

7

BH

L

2.9

8

0.1

3

Tota

l UA

SL

47

3.34

20.7

0


- 182 -

Airtel

ANNEXURE 3.23 [Para 3.5]Impact on payment of LF and SUC on gain from transfer of assets by BAL during 2007-08

(Amount in `)

Services/LSA Amount of GR/AGR LF Impact SUC Impact

AP 2450296243 245029624 111488479

Assam 354079600 21244776 12215746

Bihar 1248925110 74935507 56826093

Delhi 3317758185 331775819 144322481

Gujarat 850880422 85088042 31057135

Haryana 371500711 29720057 12816775

HP 311076018 18664561 10732123

J&K 497794076 29867645 17173896

Karnataka 3320068629 332006863 154383191

Kerala 743080768 59446461 26379367

Kolkata 772734448 77273445 33227581

Maharashtra 1456239694 145623969 67715146

MP 990684944 79254796 36160000

Mumbai 1586268306 158626831 72175208

Odisha 562117623 33727057 25295293

Punjab 1440197276 115215782 64088779

TN 2565232252 256523225 124413764

UPE 1003703147 80296252 45166642

UPW 582614107 46609129 20682801

WB 538448440 43075875 18845695

TOTAL UASL 24963699999 2264005716 1085166195

(` in crore)


UASL 2,496.37 226.40 108.52


- 183 -

Airtel

AN

NE

XU

RE

3.2

4 [P

ara

3.6]

Stat

emen

t sho

win

g in

tere

st o

n L

F an

d SU

C u

pto

Mar

ch 2

015

(Am

ount

in `

)

Sl N

o.

Para

N

o.

No.

of M

onth

s(up

to M

arch

15)

9684

7260

TOTA

LR

ate@

(PL

R+2

)%14

.25

14.2

514

.25

13.7

5

Issu

es20

06-0

720

07-0

820

08-0

920

09-1

0In

tere

st o

n L

FIn

tere

st o

n SU

CIn

tere

st o

n L

FIn

tere

st o

n SU

CIn

tere

st o

n L

FIn

tere

st o

n SU

CIn

tere

st o

n L

FIn

tere

st o

n SU

C

13.

2.1

Com

mis

sion

/Mar

gin

1193

9840

060

5418

8324

4892

030

1276

5799

826

7280

236

1363

7391

248

7801

571

2434

2229

316

8736

8322

2

3.2.

1B

FAT

1235

7370

859

7846

0221

2512

790

1177

0470

532

7357

610

1530

8354

111

6490

250

5654

3739

1167

0509

453

Free

of C

ost

5875

0098

2549

1437

7804

718

3303

519

1832

009

8553

8022

0530

910

9602

110

1338

491

4Pr

omo

2568

5419

1195

5298

7864

269

4519

154

3076

7581

1458

1439

1867

9414

9356

666

1234

0923

95

Ful

l Tal

k Ti

me

9171

998

4533

690

1067

2617

4689

981

9651

2455

4946

2099

558

9935

4233

6814

576

Adj

ustm

ents

offe

red

6959

9784

3542

9628

8870

4312

4820

3428

1385

8454

266

1620

7257

3091

5527

1349

2553

1127

846

73.

2.2

Dis

coun

ts

1214

0979

951

7386

8973

4659

5436

6623

3217

5018

9083

4451

563

0929

9128

7027

8140

0918

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1519

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1991

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1368

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1446

7311

4533

5121

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1978

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960

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2007

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2008

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2009

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ct o

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pact

on

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--

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Gra

nd T

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nd T

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8.72


- 192 -

Vodafone

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NE

XU

RE

4.0

9 [P

ara

No.

4.4]

Im

pact

on

LF

and

SUC

due

to d

educ

tion

of B

ad d

ebts

from

GR

(A

mou

nt in

`)

Serv

ices

/ LSA

2007

-08

2008

-09

2009

-10

Am

ount

of L

F/SU

CL

F Im

pact

SUC

Impa

ct

Am

ount

of L

F/SU

CL

F Im

pact

SUC

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ct

Am

ount

of L

F/SU

CL

F Im

pact

SUC

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ct

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5852

3756

5852

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2077

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4236

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2829

3144

2829

315

7204

4

Che

nnai

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1549

5349

155

2273

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2767

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277

1947

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996

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0400

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176

3742

1257

137

4212

5716

4653

5316

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1622

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Guj

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8431

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9811

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1340

5633

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in c

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ount

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UR

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me

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re


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RCL/RTL

AN

NE

XU

RE

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1 [P

ara

No.

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)]Im

pact

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tion

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on/d

isco

unt

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ount

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)

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ices

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2006

-07

2007

-08

2008

-09

2009

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Am

ount

of

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RL

F Im

pact

SUC

Im

pact

(C

DM

A)

Am

ount

of

GR

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pact

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(C

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Am

ount

of

GR

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RL

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MA

)

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pact

(G

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ount

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F Im

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MA

)

SUC

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pact

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AP

1767

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760

5157

-

J&K

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519

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1328

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810

6319

0735

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315

2089

589

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7167

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4304

013

598

2444

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319

5587

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717

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889

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6200

2730

9208

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0441

624

1900

332

383

2071

2017

616

5696

1443

4268

717

3739

6

TN10

7831

631

1078

3163

3119

648

1341

5788

913

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1892

319

2658

716

1926

5872

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682

1969

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0020

109

3800

2011

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1121

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4828

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6240

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180

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8


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NE

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RE

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2 [P

ara

No.

5.2.

2 (B

)Im

pact

on

paym

ent o

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and

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due

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of S

MS

cont

ent a

nd R

wor

ld(A

mou

nt in

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ices

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2006

-07

2007

-08

2008

-09

2009

-10

Am

ount

of

GR

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RL

F Im

pact

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MA

)A

mou

nt o

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ctSU

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ount

of

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9840

9848

9840

985

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1982

8412

219

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1254

7512

335

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1748

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130

2153

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3269

9427

3269

943

6973

9064

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9964

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8114

--

--

--

--

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6541

442

1165

4144

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120

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1473

059

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3041

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5633

3533

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599

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1180

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848

1941

5177

188

1261

3101

7567

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2000

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1160

9488

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6932

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J&K

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1123

455

2360

4950

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2970

1211

9099

1235

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7413

831

764

1335

9679

970

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515

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278

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957

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184

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112

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319

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4747

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2019

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743

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-

TOTA

L U

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5217

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ara

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Serv

ices

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2006

-07

2007

-08

2008

-09

2009

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Am

ount

of

GR

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RL

F Im

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ct

SUC

Im

pact

(C

DM

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Am

ount

of

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pact

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Am

ount

of

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ount

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Che

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94-

--

--

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711

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-

TOTA

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CL

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6211

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110

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2008

-09

2009

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Am

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pact

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315

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2

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Serv

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2006

-07

2007

-08

2008

-09

2009

-10

Am

ount

of

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RL

F Im

pact

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pact

(C

DM

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Am

ount

of

GR

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of

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Am

ount

of

GR

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pact

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pact

(C

DM

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AP

1660

3126

6316

6031

266

4312

4863

5238

0943

052

3809

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9434

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7847

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2272

284

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2425

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114

5536

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2756

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3361

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9191

310

1691

9131

1130

954

--

--

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Del

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2008

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2009

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Bih

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2008

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2009

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5429

0756

3257

445

1248

687

1273

6475

276

4188

529

2938

9-

1658

8303

199

5298

243

5294

4-

Che

nnai

1952

0687

1952

069

4470

2437

8688

5937

8688

688

9918

--

--

--

--

Del

hi69

5721

3569

5721

315

9320

212

3005

144

1230

0514

2890

621

2791

0989

727

9109

9065

1513

747

686

4316

7113

843

1671

1483

7206

719

2303

0

Guj

arat

4212

1549

4212

155

1069

887

7858

1592

7858

159

2192

426

1629

6861

416

2968

6143

7067

227

297

2103

9359

521

0393

6046

8822

291

8894

Har

yana

1099

2211

8793

7726

4912

2465

1235

1972

099

6409

3255

2376

6244

1901

314

8142

492

5275

2885

8260

2308

716

7766

332

8823

HP

1931

715

1159

0348

100

7457

812

4474

6920

1361

1481

9654

8891

7940

0131

-15

7995

8694

7975

4867

02-

J&K

2333

6314

002

5064

2926

930

1756

1665

271

9152

9154

917

2272

915

313

1736

6779

0420

2718

0657

536

Kar

nata

ka42

0928

2042

0928

210

4811

189

2646

4489

2646

424

1014

520

2807

872

2028

0787

5439

125

3397

025

7220

059

2572

2006

5731

660

1123

409

Ker

ala

4416

0783

3532

863

1126

100

9084

3910

7267

513

2716

233

1883

5014

415

0680

1254

2555

832

811

1767

8902

214

1431

2242

3121

583

3896

Kol

kata

2719

0245

2719

024

6226

5755

9645

5855

9645

613

1516

712

3811

691

1238

1169

2909

575

-12

2262

220

1222

6222

3278

034

-

Mah

aras

htra

5348

3564

5348

356

1379

876

1002

2730

010

0227

3030

4691

020

2501

650

2025

0165

5833

202

3391

928

2047

261

2820

4726

6750

435

1231

841

MP

2631

9303

2105

544

6553

5160

2995

2748

2396

216

2808

713

9043

876

1112

3510

3754

185

-16

6568

271

1332

5462

5131

086

-

Mum

bai

7674

8887

7674

889

1818

949

1490

4353

414

9043

5338

0061

033

5143

904

3351

4390

8488

910

5995

445

7928

129

4579

2813

9637

166

2240

001

Oris

sa81

5468

148

9281

2030

5218

4691

6011

0815

049

8667

3698

8795

2219

328

9986

97-

4259

7745

2555

865

1312

211

-

Punj

ab18

8515

6515

0812

546

9404

3330

9369

2664

749

8993

5367

1937

3153

7549

918

0207

511

255

9373

0235

7498

419

2088

600

4093

67

Raj

asth

an27

4988

7621

9991

068

4722

5076

7795

4061

424

1370

730

1075

9328

686

0746

328

8555

518

743

1497

7095

111

9816

7633

3736

170

6455

TN35

8312

3335

8312

399

2525

8013

3211

8013

321

2444

063

2473

4485

024

7344

8566

3356

643

087

2747

9685

727

4796

8661

2332

612

9618

9

UPE

3625

7134

2900

571

1004

323

7397

0313

5917

625

2256

095

1819

0827

114

5526

6248

7861

631

688

2638

1127

421

1049

0258

7853

312

4437

1

UPW

2789

3728

2231

498

7391

8457

4795

5945

9836

518

1060

613

2894

218

1063

1537

3828

111

2315

019

5324

957

1562

5997

4674

849

9213

28

WB

1052

1585

8417

2726

1987

2603

4247

2082

740

7029

2561

1615

3948

9292

317

7368

5-

7044

0261

5635

221

2169

891

-

TOTA

L U

ASL

(R

CL

)65

8773

084

6058

8656

1640

7750

1331

8299

0212

1510

085

3619

4300

2928

5076

5926

6979

572

7737

9458

4167

4237

6873

3169

3435

4068

586

9508

1614

5595

26

NL

D11

6745

735

7004

744

-25

9264

025

1555

5842

-71

8644

776

4311

8687

--

1282

2285

2376

9337

11-

-

ILD

1438

0076

586

2804

6-

2196

2750

813

1776

50-

4487

4337

926

9246

03-

-42

2457

709

2534

7463

--

GR

AN

D

TOTA

L91

9319

584

7622

1446

1640

7750

1810

7214

3615

0243

577

3619

4300

4095

8958

1433

7022

861

7737

9458

4167

4254

7341

9401

4458

2185

986

9508

1614

5595

26

Con

td…

….


- 205 -

RCL/RTLR

TL

(Am

ount

in `

)

Serv

ices

/LSA

2006

-07

2007

-08

2008

-09

2009

-10

Am

ount

of

GR

/AG

RL

F Im

pact

SUC

Impa

ctA

mou

nt o

f G

R/A

GR

LF

Impa

ctSU

C Im

pact

Am

ount

of

GR

/AG

RL

F Im

pact

SUC

Impa

ctA

mou

nt o

f G

R/A

GR

LF

Impa

ctSU

C Im

pact

Ass

am22

0140

1100

775

7364

3952

7232

1976

422

2163

713

2370

0879

4220

4566

7789

9848

5153

9909

131

0447

7

Bih

ar42

2006

2110

016

247

9770

1897

4885

095

4298

883

2002

4881

1201

493

8710

8212

0666

858

7240

011

5249

008

HP

5062

125

3116

8620

0357

2810

0178

667

1197

4991

863

2995

1216

7227

3074

0898

1844

454

1029

820

Kol

katta

--

-15

1192

1115

1192

149

5910

3005

801

3005

8097

689

4882

0315

4882

032

1586

660

MP

3409

2420

455

1172

867

5374

0640

5224

422

6250

314

6876

3811

7501

149

2036

1414

5524

311

3164

1947

3875

1

NE

8040

540

2026

8625

2479

7412

6239

984

5807

4896

408

2937

8516

4030

2031

7260

1219

036

6806

28

Odi

sha

1890

2194

5163

1345

9121

2822

9560

615

3805

611

1391

6166

8350

3731

6276

1455

5845

6873

325

5087

6

WB

2069

7412

418

6872

3371

3254

2022

795

1142

879

7154

340

5723

4723

9670

6077

5109

4862

009

2035

966

TOTA

L U

ASL

(R

TL

)15

1009

280

984

5310

436

9662

870

2025

1611

1347

6873

7913

7100

5305

298

2861

573

5889

0609

241

3317

8520

9761

87

(`

in c

rore

)

Serv

ices

/Com

pany

Tota

l am

ount

of

GR

/AG

RL

F Im

pact

SUC

Impa

ct

UA

SL (R

CL

)

8

68.7

8

79.2

6

23.1

9

UA

SL (R

TL

)

1

03.9

2

6.7

0

3.7

4

NL

D

2

37.6

9

14.2

6

-

ILD

123

.46

7

.41

-

GR

AN

D T

OTA

L

1,3

33.8

6

1

07.6

3

26.9

3


- 206 -

RCL/RTL

AN

NE

XU

RE

-5.1

2 (i)

[Par

a N

o. 5

.3.2

]Im

pact

on

paym

ent o

f LF

and

SUC

due

to In

tere

st in

com

e no

t con

side

red

for

GR

RC

L (A

mou

nt in

`)

Serv

ices

/LSA

2006

-07

2008

-09

2009

-10

Am

ount

of

GR

/AG

RL

F Im

pact

SUC

Impa

ct

(CD

MA

)A

mou

nt o

f G

R/A

GR

LF

Impa

ctSU

C Im

pact

(C

DM

A)

SUC

Impa

ct

(GSM

)A

mou

nt o

f G

R/A

GR

LF

Impa

ctSU

C Im

pact

(C

DM

A)

SUC

Impa

ct

(GSM

)

AP

5212

6744

5212

674

1324

019

3642

4198

936

4241

9997

6864

261

011

3197

2679

831

9726

8071

2450

413

9640

7

Bih

ar18

3216

8610

9930

142

6895

1775

0890

710

6505

3440

8270

5-

1749

0401

310

4942

4140

2279

2-

Che

nnai

1732

0570

1732

057

3966

41-

--

--

--

-

Del

hi61

7308

7461

7308

714

1363

738

8996

890

3889

9689

9080

179

6646

045

5146

100

4551

4610

8827

354

2027

608

Guj

arat

3737

4159

3737

416

9493

0422

7130

191

2271

3019

6091

427

3804

422

1835

133

2218

3513

4943

174

9688

65

Har

yana

9753

313

7802

6523

5055

7698

5012

6158

801

2064

669

1289

579

3828

9563

5063

217

6889

734

6705

HP

1713

997

1028

4042

679

2065

4227

1239

254

5576

64-

1665

8793

9995

2844

9787

-

J&K

2070

6212

424

4493

1275

646

7653

931

677

214

1389

0072

8334

0428

6587

6066

5

Kar

nata

ka37

3486

6837

3486

792

9982

2826

5436

828

2654

3775

8053

647

345

2712

0809

427

1208

0960

4335

711

8450

1

Ker

ala

3918

3557

3134

685

9991

8126

2504

559

2100

0365

7561

628

4572

818

6403

090

1491

2247

4461

316

8792

45

Kol

kata

2412

5716

2412

572

5524

7917

2556

987

1725

5699

4055

089

-12

8911

034

1289

1103

3029

409

-

Mah

aras

htra

4745

5597

4745

560

1224

354

2822

2758

528

2227

5881

2976

347

273

2973

8543

929

7385

4471

1753

412

9883

1

MP

2335

2935

1868

235

5814

8819

3786

161

1550

2893

5232

226

17

5626

518

1405

0121

4741

916

-

Mum

bai

6809

8756

6809

876

1613

941

4670

9177

246

7091

7711

8310

3883

558

4828

3098

848

2830

9910

1612

5123

6181

6

Odi

sha

7235

592

4341

3618

0166

5155

1473

3093

088

1391

890

-44

9142

7826

9485

712

1268

6-

Punj

ab16

7268

6313

3814

941

6499

9364

8247

7491

860

2511

562

1568

698

8274

3479

0619

522

0218

243

1629

Raj

asth

an24

3995

6219

5196

560

7549

1499

5331

311

9962

6540

2161

326

122

1579

1573

412

6332

5935

1885

274

4873

TN31

7928

0531

7928

188

0661

3447

2578

234

4725

7892

4523

560

051

2897

4074

728

9740

7564

5632

213

6667

8

UPE

3217

0704

2573

656

8911

2925

3526

487

2028

2119

6799

352

4416

427

8157

750

2225

2620

6198

217

1312

042

UPW

2474

9912

1979

993

6558

7318

5215

351

1481

7228

5335

258

3226

520

5947

039

1647

5763

4929

075

9714

32

WB

9335

729

7468

5823

2460

8524

1150

6819

292

2471

993

-74

2709

1559

4167

320

0531

5-

TOTA

L U

ASL

(RC

L)

5845

2480

153

7598

9514

5584

8340

8147

6096

3720

9079

410

7844

147

5808

1639

7368

2863

3622

2297

389

5005

2615

3512

96

NL

D10

3587

683

6215

261

-10

0157

8898

6009

4734

--

1351

9581

4781

1174

89-

-

ILD

1275

9342

476

5560

5-

6254

1594

137

5249

56-

-44

5431

630

2672

5898

--

GR

AN

D T

OTA

L81

5705

908

6763

0762

1455

8483

5708

4709

3546

9710

484

1078

4414

758

0816

5771

0726

4047

0066

359

8950

0526

1535

1296


- 207 -

RCL/RTL

Impa

ct o

n pa

ymen

t of L

F an

d SU

C d

ue to

Inte

rest

inco

me

not c

onsi

dere

d fo

r G

RR

TL

(Am

ount

in `

)

Serv

ices

/LSA

2008

-09

2009

-10

Am

ount

of G

R/A

GR

LF

Impa

ctSU

C Im

pact

Am

ount

of G

R/A

GR

LF

Impa

ctSU

C Im

pact

Ass

am15

6987

658

9419

259

5416

074

6977

4441

4186

466

2407

218

Bih

ar23

7490

169

1424

9410

1033

0822

9356

5334

5613

920

4070

092

HP

5920

2269

3552

136

1983

276

2383

6556

1430

193

7985

25

Kol

katta

3564

8057

3564

806

1158

562

3785

5374

3785

537

1230

300

MP

1741

9178

113

9353

4258

3542

510

9684

691

8774

775

3674

437

NE

5807

0201

3484

212

1945

352

1575

4046

9452

4352

7761

Odi

sha

1321

0771

879

2646

344

2560

959

0434

2435

4260

519

7795

5

WB

8484

8713

6787

897

2842

432

4712

5146

3770

012

1578

692

TOTA

L U

ASL

(RT

L)

9385

4656

562

9195

2633

9375

5145

6639

012

3204

8752

1626

4979


- 208 -

RCL/RTL

AN

NE

XU

RE

-5.1

2 (ii

) [Pa

ra 5

.3.2

]Im

pact

on

paym

ent o

f LF

and

SUC

due

to O

ther

inco

me

not c

onsi

dere

d fo

r G

R

RC

L (

Am

ount

in `

)

Serv

ices

/LSA

2006

-07

2008

-09

2009

-10

Am

ount

of

GR

/AG

RL

F Im

pact

SUC

Impa

ct

(CD

MA

)A

mou

nt o

f G

R/A

GR

LF

Impa

ctSU

C Im

pact

(C

DM

A)

SUC

Impa

ct

(GSM

)A

mou

nt o

f G

R/A

GR

LF

Impa

ctSU

C Im

pact

(C

DM

A)

SUC

Impa

ct

(GSM

)

AP

2077

2345

2077

235

5276

1810

8183

8110

8183

829

0139

1812

1694

8070

1694

807

3776

5674

021

Bih

ar73

0113

543

8068

1701

1652

7220

631

6332

1212

61-

9271

307

5562

7821

3240

-

Che

nnai

6902

193

6902

1915

8060

--

--

--

--

Del

hi24

5995

6124

5995

656

3330

1155

3628

1155

363

2696

9119

7424

1263

7324

1263

746

7920

1074

79

Guj

arat

1489

3486

1489

349

3782

9567

4601

267

4601

1809

2211

3011

7590

3111

7590

326

2028

5135

8

Har

yana

3886

665

3109

3393

669

2286

538

1829

2361

323

383

4207

926

3366

3493

766

1837

8

HP

6830

2340

981

1700

761

3453

3680

716

563

-88

3049

5298

323

842

-

J&K

8251

349

5117

9137

888

2273

941

673

6285

4417

715

191

3216

Kar

nata

ka14

8833

2814

8833

337

0595

8395

140

8395

1422

5150

1406

1437

6192

1437

619

3203

4662

788

Ker

ala

1561

4526

1249

162

3981

7077

9666

962

3734

2245

8913

5898

8085

079

0468

2364

8546

607

Kol

kata

9614

023

9614

0222

0161

5125

129

5125

1312

0441

68

3331

368

3331

1605

83-

Mah

aras

htra

1891

0908

1891

091

4879

0183

8246

483

8246

2414

6314

0415

7638

0015

7638

037

7286

6884

8

MP

9306

072

7444

8623

1721

5755

658

4604

5315

5403

-93

0960

674

4768

2513

59-

Mum

bai

2713

7142

2713

714

6431

5013

8731

3013

8731

335

1395

2482

2559

3893

2559

389

5386

2712

5195

Odi

sha

2883

361

1730

0271

796

1531

134

9186

841

341

-23

8081

514

2849

6428

2-

Punj

ab66

6560

353

3248

1659

7427

8145

422

2516

7459

646

652

3864

241

9091

1167

3322

880

Raj

asth

an97

2315

077

7852

2421

0644

5377

535

6302

1194

4677

683

7079

366

9663

1865

2739

484

TN12

6693

3412

6693

335

0941

1023

8728

1023

873

2745

9317

8415

3585

7015

3585

734

2237

7244

5

UPE

1281

9925

1025

594

3551

1275

3001

160

2401

2019

4813

1214

7445

7911

7956

632

8555

6954

9

UPW

9862

763

7890

2126

1363

5501

096

4400

8815

8463

958

1091

6835

8733

4726

1280

5149

4

WB

3720

259

2976

2192

634

2531

754

2025

4073

421

-39

3695

131

4956

1062

98-

TOTA

L U

ASL

(R

CL

)23

2931

314

2142

3151

5801

510

1212

2425

011

0514

9932

0308

817

251

2106

3687

919

2007

0647

4424

281

3741

NL

D41

2793

6924

7676

2-

2974

7976

1784

879

--

7166

4563

4299

874

--

ILD

5084

5582

3050

735

-18

5755

2911

1453

2-

-23

6114

2814

1668

6-

-

GR

AN

D T

OTA

L32

5056

266

2695

0648

5801

510

1695

4775

513

9509

0932

0308

817

251

3059

1287

024

9172

6547

4424

281

3741


- 209 -

RCL/RTLIm

pact

on

paym

ent o

f LF

and

SUC

due

to O

ther

inco

me

not c

onsi

dere

d fo

r G

RR

TL

(A

mou

nt in

`)

Serv

ices

/LSA

2008

-09

2009

-10

Am

ount

of G

R/A

GR

LF

Impa

ctSU

C Im

pact

Am

ount

of G

R/A

GR

LF

Impa

ctSU

C Im

pact

Ass

am55

5057

376

3330

3443

1914

9479

3129

0589

518

7743

5410

7952

53

Bih

ar83

9688

113

5038

1287

3652

6433

4195

9697

525

1758

1918

2524

68

HP

2093

1999

512

5592

0070

1222

010

6895

862

6413

752

3581

011

Kol

katta

1260

3995

312

6039

9540

9629

816

9763

735

1697

6373

5517

321

MP

6158

8556

749

2708

4520

6321

6749

1884

790

3935

0783

1647

8140

NE

2053

1737

112

3190

4268

7813

270

6495

6442

3897

423

6676

0

Odi

sha

4670

8998

728

0253

9915

6475

1526

4782

279

1588

6937

8870

206

WB

2999

9749

323

9997

9910

0499

1621

1334

348

1690

6748

7079

701

TOTA

L U

ASL

(R

TL

)33

1839

5855

2224

6301

111

9992

160

2047

8134

4614

3723

739

7294

0862

(` in

cro

re)

Inte

rest

inco

me

Oth

er in

com

e T

otal

(int

eres

t + o

ther

) inc

ome

Serv

ices

/Com

-pa

nyTo

tal a

mou

nt

of G

R/A

GR

LF

Impa

ctSU

C Im

pact

Serv

ices

/Com

-pa

nyTo

tal a

mou

nt

of G

R/A

GR

LF

Impa

ctSU

C Im

pact

Serv

ices

/Com

-pa

nyTo

tal a

mou

nt

of G

R/A

GR

LF

Impa

ctSU

C Im

pact

UA

SL (R

CL

)

8

63.9

7

78.8

1

22

.78

UA

SL (R

CL

)

5

6.48

5.

17

1.46

U

ASL

(RC

L)

92

0.45

8

3.97

2

4.24

NL

D

2

45.7

1

14.7

4

- N

LD

14.

27

0.85

- N

LD

25

9.98

1

5.60

-

ILD

119

.84

7.19

-

ILD

9.30

0.

56

-

ILD

12

9.14

7.7

5

-

UA

SL (R

TL

)13

9.52

9

.50

5

.02

UA

SL (R

TL

)

536

.62

36.

62

19.

30

UA

SL (R

TL

)

676.

14

46.

12

24.

32

GR

AN

D

TOTA

L

1,

369.

04

110.

24

27

.80

GR

AN

D

TOTA

L

616.

67

43.2

0

20

.76

GR

AN

D

TOTA

L

1,9

85.7

2

1

53.4

4

48.

56


- 210 -

RCL/RTL

ANNEXURE -5.13 [Para No. 5.3.4]Impact on payment of LF and SUC due to non-consideration of income from non trade investment

(Amount in `)

Amount shown in the Schedule O- Financial charges (Net) under the head 'Income from non-trade investments'

GL code Description of item Amount

6345600 Profit/Loss of sale of cumulative investment units 3305651923 (a)

6345800 Profit/Loss of sale of cumulative investment in PMS (Loss) -2216452461 (b)

Total (a-b) 1089199462 Say ` 108.92 crore

The loss of ` 221.65 Crore shown in GL code 6345800 above has been arrived as follow-

GL code Description of item Amount

6345800Reversal of Marked to Market (MTM)* gain for 08-09 in RCIL -MF FP Dr 3433283200

Profit/Loss & interest transferred by RCIL for 08-09 Cr 1216830739

Loss shown in accounts Say ` 221.65 crore 2216452461

* Process of revaluation to reflect its current market value instead of its acquisition price or book value, also called 'Marking to Market'

Services/LSA2008-09

Amount of GR/AGR LF Impact SUC Impact

Assam 182186882 10931213 6285447

Bihar 275611434 16536686 11989098

HP 68705253 4122316 2301626

Kolkatta 41370185 4137019 1344531

MP 202152563 16172205 6772111

NE 67391468 4043488 2257614

Odisha 153313283 9198797 5135995

WB 98468393 7877472 3298691

TOTAL UASL (RTL) 1089199462 73019196 39385114

(` in crore)


UASL (RTL) 108.92 7.30 3.94


- 211 -

RCL/RTL

ANNEXURE - 5.14 [Para No. 5.3.5]Summary of Reliance Communication Ltd's statements under Section 212 (8) of the Companies Act, 1956

relating to Subsidiary companies contained in the respective Annual Reports

(` in crore)

Investments by RCL 2006-07 2007-08 2008-09 2009-10 TOTAL

In subsidiaries 5358.50 13712.39 31342.32 31875.99 82289.20

In others 75.92 131.74 22.30 22.31 252.27

Total Investments 5434.42 13844.13 31364.62 31898.30 82541.47

Source: Annual report of RCL for the respective years

Statement showing Capital invested in profit making subsidiaries and Profit after Tax

(` in crore)

Year Total No. of Subsidiaries

No. of Profit making sub-

sidiaries

Capital invested in profit making subsidiaries Profit after tax/ (Loss) Proposed dividend

2006-07 13 5 1598.39 708.61 Nil

2007-08 14 6 8611.87 668.65 Nil

2008-09 16 6 29353.14 1118.01 Nil

2009-10 19 8 31748.42 1499.98 Nil

Total 62 25 71311.82 3995.25


- 212 -

RCL/RTL

AN

NE

XU

RE

-5.1

5 [P

ara

No.

5.4

.1]

Impa

ct o

n pa

ymen

t of S

UC

due

to n

on-c

onsi

dera

tion

of in

com

e fr

om sa

le/le

ase

of b

andw

idth

cha

rges

(Am

ount

in `

)

Serv

ices

/LSA

2006

-07

2007

-08

2008

-09

2009

-10

Am

ount

of G

R/

AG

RSU

C Im

pact

Am

ount

of G

R/

AG

RSU

C Im

pact

Am

ount

of G

R/

AG

RSU

C Im

pact

Am

ount

of G

R/

AG

RSU

C Im

pact

AP

1428

9248

636

2946

924

7431

991

6680

664

2955

5812

179

8006

919

9767

185

5393

714

Bih

ar30

3114

7070

6257

5003

054

1150

7017

3585

2539

9246

1058

0667

024

3355

3

Che

nnai

1106

4167

825

3369

412

5212

511

2942

494

4049

1817

1093

279

--

Del

hi25

2266

322

5776

899

5719

7954

813

4415

1976

6545

192

1801

3812

9842

9562

623

1309

47

Guj

arat

1222

2883

331

0461

228

8664

272

8053

733

2890

4615

978

0424

668

3389

9518

4515

3

Har

yana

6320

063

1523

1470

0807

518

2210

1051

7229

2839

6551

6033

913

9329

HP

2754

932

6859

856

9798

415

3846

4770

735

1288

1039

9769

810

7938

J&K

401

2994

6713

2924

933

231

8894

822

24

Kar

nata

ka22

0466

945

5489

627

3758

6364

810

1483

1971

9465

667

1942

5573

5867

1810

815

8413

89

Ker

ala

6124

4895

1561

745

9616

5062

2875

335

1070

7761

531

0525

145

3914

8913

1635

3

Kol

kata

2675

1831

861

2616

960

9846

008

1433

1381

8027

1003

218

8636

8612

2775

223

2885

218

Mah

aras

htra

1895

8058

848

9117

930

3439

605

9224

564

3633

0624

810

5358

8112

8424

465

3724

309

MP

1087

8239

727

0868

218

5760

708

5015

539

1732

0417

546

7651

319

0314

004

5138

478

Mum

bai

4940

2914

311

7084

9165

7428

991

1676

4439

1391

5763

8735

4851

9814

7258

2879

3755

0863

Odi

sha

2472

8697

6157

4545

0617

8512

1666

843

1727

9411

6566

510

3725

547

2800

590

Punj

ab51

1732

0612

7421

382

1657

6622

1847

694

2006

1525

4341

721

5179

6158

0985

Raj

asth

an11

8058

2229

3965

1222

3293

3300

2916

8533

8745

5041

8125

697

2193

94

TN20

0156

2255

4433

2288

4521

6979

7815

4565

056

4173

256

1633

1973

544

0963

3

UP(

E)60

0645

5416

6378

878

8652

3024

0539

090

3729

7324

4007

028

0414

3175

7119

UP(

W)

1181

3467

3130

5711

0677

9834

8636

1818

3703

5273

2711

0269

0931

9780

WB

3862

1887

9616

8525

7685

6769

5751

1037

0876

730

0755

414

3640

280

3878

288

TOTA

L U

ASL

(R

CL

)22

2726

1364

5413

4622

3757

5414

1097

8421

0755

0401

4446

1421

4109

243

9305

9189

1124

7525

7

(` in

cro

re)

Serv

ices

/Com

pany

Tota

l am

ount

of

GR

/AG

RSU

C Im

pact

UA

SL (R

CL

)

1,

588.

19

4

0.66


- 213 -

RCL/RTL

ANNEXURE -5.16 [Para No. 5.4.2]Impact on payment of SUC due to non-consideration of income from investment

(Amount in `)

Services/LSA2006-07

Amount of GR/AGR SUC Impact (CDMA)

AP 33721609 856529

Bihar 11852586 276165

Chennai 11204949 256593

Delhi 39934671 914504

Gujarat 24177930 614119

Haryana 6309571 152061

HP 1108812 27609

J&K 133951 2907

Karnataka 24161440 601620

Kerala 25348458 646386

Kolkata 15607305 357407

Maharashtra 30699770 792054

MP 15107380 376174

Mumbai 44054154 1044083

Odisha 4680818 116552

Punjab 10820870 269440

Rajasthan 15784460 393033

TN 20567265 569713

UP(E) 20811733 576485

UP(W) 16011106 424294

WB 6039430 150382

TOTAL UASL (RCL) 378138270 9418111

NLD 67012498 -

ILD 82542189 -

GRAND TOTAL 527692957 9418111

(` in crore)

Services/Company Total amount of GR/AGR SUC Impact

UASL (RCL) 37.81 0.94

NLD 6.70 -

ILD 8.25 -

GRAND TOTAL 52.77 0.94


- 214 -

RCL/RTL

ANNEXURE -5.17 [Para No. 5.5.1]Impact on payment of LF and SUC due to non-consideration of profit on transfer of OFU by RCL to RITL

(Amount in `)

Services/LSA2008-09

Amount of GR/AGR LF Impact SUC Impact (CDMA) SUC Impact (GSM)

AP 2733745073 273374507 73316582 457902

Bihar 1332257437 79935446 30641921 -

Delhi 2919538009 291953801 68149462 498803

Gujarat 1704680016 170468002 45717984 285534

Haryana 577795542 46223643 15495956 96781

HP 155016155 9300969 4185436 -

J&K 9574103 574446 237749 1604

Karnataka 2121405573 212140557 56894188 355335

Kerala 1970175233 157614019 56752277 343205

Kolkata 1295091800 129509180 30434657 -

Maharashtra 2118202440 211820244 61016304 354799

MP 1454423103 116353848 39269424 -

Mumbai 3505663461 350566346 88795476 627128

Odisha 386909225 23214554 10446549 -

Punjab 702858103 56228648 18850022 117729

Rajasthan 1125444464 90035557 30183408 196052

TN 2587270102 258727010 69388256 450702

UP(E) 1902792116 152223369 51031172 331466

UP(W) 1390096611 111207729 40042706 242155

WB 639760326 51180826 18521061 -

TOTAL UASL (RCL) 30632698894 2792652703 809370590 4359196

(` in crore)

Services/ Company Total amount of GR/AGR LF Impact SUC Impact

UASL (RCL) 3,063.27 279.27 81.37


- 215 -

RCL/RTL

ANNEXURE -5.18 [Para No. 5.5.2]Impact on payment of LF and SUC due to non-consideration of gain on revaluation of

investment on transfer to passive infrastructure to RTIL(Amount in `)

Services/LSA2007-08

Amount of GR/AGR LF Impact SUC Impact (CDMA)

AP 111551105 11155111 3011880

Bihar 51656181 3099371 1188092

Chennai 36031191 3603119 846733

Delhi 117036055 11703606 2750347

Gujarat 74768252 7476825 2086034

Haryana 23454981 1876398 609830

HP 7095905 425754 191589

J&K 2784894 167094 62103

Karnataka 84932886 8493289 2293188

Kerala 86435514 6914841 2584422

Kolkata 53248758 5324876 1251346

Maharashtra 95363555 9536356 2899052

MP 57373363 4589869 1549081

Mumbai 141810877 14181088 3616177

Odisha 17572905 1054374 474468

Punjab 31692960 2535437 855710

Rajasthan 48304179 3864334 1304213

TN 76244575 7624457 2325460

UP(E) 70380745 5630460 2146613

UP(W) 54690240 4375219 1722743

WB 24770879 1981670 668814

TOTAL UASL (RCL) 1267200000 115613547 34437894

(` in crore)


UASL (RCL) 126.72 11.56 3.44


- 216 -

RCL/RTL

ANNEXURE-5.19 [Para No.5.5.2]Impact on payment of LF and SUC due to non-consideration of gain on transfer of

passive infrastructure assets of RITL to RCL(Amount in `)

Services/LSA2007-08

Amount of GR/AGR LF Impact SUC Impact (GSM)

Assam 560152181 28007609 19325250

Bihar 849874979 42493749 37394499

HP 174283859 8714193 5838509

Kolkatta 131516786 13151679 4313751

MP 587484520 35249071 19680731

NE 219623387 10981169 7357383

Odisha 399373713 19968686 13379019

WB 293259925 17595595 9941511

TOTAL UASL (RTL) 3215569350 176161751 117230655

(` in crore)


UASL (RTL) 321.56 17.62 11.72


- 217 -

RCL/RTL

ANNEXURE-5.20 (Para 5.6)Impact on payment of LF and SUC due to non-consideration of refund of service Tax for GR by RCL

(Amount in `)

Services/LSA2009-10

Amount of GR/AGR LF Impact SUC Impact (CDMA) SUC Impact (GSM)

AP 41393933 4139393 1048691 109123

Bihar 22644223 1358653 561358 -

Delhi 58926206 5892621 989037 318182

Gujarat 28720234 2872023 582145 186985

Haryana 10277431 822195 219360 77843

HP 2156757 129405 59738 -

J&K 1798300 107898 802 48972

Karnataka 35112382 3511238 677328 172353

Kerala 24132969 1930638 689531 40384

Kolkata 16689670 1668967 382170 -

Maharashtra 38501473 3850147 835430 266726

MP 22737763 1819021 640255 -

Mumbai 62510473 6251047 1160321 242659

Odisha 5814898 348894 156004 -

Punjab 12794849 1023588 240022 113251

Rajasthan 20444809 1635585 428690 171453

TN 37511741 3751174 899601 110687

UP(E) 36012130 2880970 798513 252352

UP(W) 26663257 2133061 607054 226970

WB 9615601 769248 265204 -

TOTAL UASL (RCL) 514459100 46895767 11241254 2337938

(` in crore)

Services/Com-pany

Total amount of GR/AGR LF Impact SUC Impact

UASL (RCL) 51.45 4.69 1.36


- 218 -

RCL/RTL

AN

NE

XU

RE

5.2

1 (p

ara

No.

5.7

)St

atem

ent s

how

ing

inte

rest

on

LF

& S

UC

upt

o M

arch

201

5(A

mou

nt in

)

Sl

No.

Para

N

o.

No.

of M

onth

s(up

to M

arch

15)

9684

7260

TOTA

LR

ate@

(PL

R+2

)%14

.25

14.2

514

.25

13.7

5

Issu

es20

06-0

720

07-0

820

08-0

920

09-1

0

Inte

rest

on

LF

Inte

rest

on

SUC

Inte

rest

on

LF

Inte

rest

on

SUC

Inte

rest

on

LF

Inte

rest

on

SUC

Inte

rest

on

LF

Inte

rest

on

SUC

15.

2.2

AN

on c

onsi

dera

tion

com

mis

sion

/dis

coun

t pai

d to

RC

IL/

dist

ribut

ors (

` 11

70.5

1 cr

)38

3973

458

1041

1681

934

4938

347

1035

1745

027

8564

835

8137

6198

4660

5007

713

4949

893

1897

4870

77

25.

2.2

BN

on c

onsi

dera

tion

of g

ross

val

ue o

f end

use

rs re

venu

e (`

10

07.8

7 cr

)21

3728

207

5795

3748

3484

5626

010

4573

191

4828

0469

414

1040

093

2476

3105

871

7042

7916

6789

1532

35.

2.2

CN

on in

clus

ion

of C

RB

T re

venu

e (`

540

.84

cr)

5563

9399

1508

6973

1933

8598

558

0359

4822

1374

055

6466

9250

1840

5962

953

2964

7784

5547

717

45.

2.2

DB

ooki

ng o

f rev

enue

on

acco

unt o

f Sal

e of

SIM

car

ds b

y R

CIL

(` 1

03.1

7 cr

)-

--

-43

5979

9412

4117

4960

3299

4217

3012

6813

3640

953

55.

2.2

EB

ooki

ng o

f Rev

enue

of S

ale

of H

ands

ets b

y R

CIL

(`

252

3.95

cr)

3605

8957

0197

7761

311

9205

2088

127

6252

192

4747

9205

1387

3654

2525

3354

7334

390

5874

3706

88

65.

2.2

FB

ooki

ng o

f 'no

n re

fund

able

Up-

fron

t cha

rges

' in

resp

ect

of F

ixed

Wire

less

Pho

ne/T

erm

inal

(FW

P/T)

by

RC

IL

(` 2

48.2

9 cr

)

1749

2029

247

4307

3810

1875

273

3057

3198

7252

5877

2119

2414

2927

2184

8501

588

4862

9156

3

75.

2.3

Non

con

side

ratio

n of

com

mis

sion

net

ted

off (

` 1.

11 c

r)-

--

-22

4727

6876

675

7937

2553

2313

0675

3

85.

2.4

Net

ting

of R

even

ue w

ith E

xpen

ses (

`4.5

0 cr

)62

2931

1645

2219

5418

358

2756

1904

397

5548

3113

3256

337

5083

7491

266

95.

2.5

Net

ting

of d

isco

unt t

o di

strib

utor

s/ d

eale

rs/ f

ranc

hise

es o

n sa

le o

f pre

paid

pro

duct

s (`

392.

99 c

r)68

9214

8139

9651

3380

7595

0052

3456

5910

2486

824

5482

8300

9847

1327

4869

4658

5464

7288

2

105.

2.6

Non

incl

usio

n of

FO

C (F

ree

of C

harg

es) R

echa

rge

vouc

h-er

s dis

tribu

ted

to D

istri

buto

rs

(` 8

7.32

cr)

2961

0513

1828

8697

3059

9912

1798

3993

3294

7610

1423

4113

2669

8911

3727

1440

4555

4

115.

3.1

Non

con

side

ratio

n of

For

ex g

ain

(RC

L &

RTL

) 16

0680

744

3466

3932

2890

9302

084

2228

4445

8569

424

1080

4600

147

7887

362

1201

5667

917

3332

0008

125.

3.2

Non

con

side

ratio

n of

Oth

er a

nd in

tere

st in

com

e (R

CL

&

RTL)

1991

7336

142

8748

98-

-10

3018

1197

3557

5390

865

7997

482

1958

1870

324

8179

9548

135.

3.4

Net

ting

of re

venu

e by

` 1

08.9

2 cr

ore

aris

ing

on a

ccou

nt

of n

on in

clus

ion

of ‘I

ncom

e fr

om N

on-tr

ade

inve

stm

ent’

in G

ross

Rev

enue

of R

TL fo

r the

yea

r 200

8-09

--

--

9781

3661

5275

8759

--

1858

6026

1

145.

4.1

Non

con

side

ratio

n of

reve

nue

from

sale

/leas

e of

ban

d-w

idth

cha

rges

for S

UC

(` 1

588.

19 c

r)-

1139

9887

8-

1659

0187

0-

1904

0665

3-

1103

3583

558

0643

235

Con

td…

..


- 219 -

RCL/RTL

Sl

No.

Para

N

o.

No.

of M

onth

s(up

to M

arch

15)

9684

7260

TOTA

LR

ate@

(PL

R+2

)%14

.25

14.2

514

.25

13.7

5

Issu

es20

06-0

720

07-0

820

08-0

920

09-1

0

Inte

rest

on

LF

Inte

rest

on

SUC

Inte

rest

on

LF

Inte

rest

on

SUC

Inte

rest

on

LF

Inte

rest

on

SUC

Inte

rest

on

LF

Inte

rest

on

SUC

155.

4.2

Non

con

side

ratio

n of

Inco

me

from

in

vest

men

t for

SU

C (`

52.

77 c

r)-

1983

3040

--

--

--

1983

3040

165.

5.1

Non

-incl

usio

n of

Pro

fit o

f `30

63.2

7 cr

ore

aris

ing

as a

resu

lt of

tran

sfer

of

Opt

ic F

iber

Und

erta

king

(OFU

) by

RC

L to

Rel

ianc

e In

frat

el L

td

(RIT

L)

--

--

3740

9284

3410

9004

0623

--

4830

9690

58

175.

5.2

Non

-incl

usio

n of

gai

n of

` 1

26.7

2 cr

ore

on re

valu

atio

n of

inve

stm

ent

as a

resu

lt of

tran

sfer

of p

assi

ve

infr

astru

ctur

e to

RTI

L by

RC

L

--

1960

3526

758

3931

72-

--

-25

4428

439

185.

5.2

Non

-con

side

ratio

n of

gai

n fo

r `

321.

56 c

rore

from

the

trans

fer o

f pa

ssiv

e in

fras

truct

ure

asse

ts o

f RTL

fo

r com

puta

tion

of re

venu

e sh

are

--

2987

0129

219

8777

248

--

--

4974

7853

9

19

5

.6

Ref

und

of S

ervi

ce T

ax-

--

--

-46

0037

5013

3208

9959

3246

49

TO

TAL

4893

1660

8614

7213

8690

2806

3199

2011

5115

9520

6611

4029

3622

0125

5313

2295

3136

5278

2158

802

2221

2914

919

Say

` 2,

221.

29 c

rore


- 220 -

Idea

AN

NE

XU

RE

-6.0

1 [p

ara

6.2.

1(A

)]Im

pact

on

LF

and

SUC

due

to n

on-c

onsi

dera

tion

of d

isco

unt/

mar

gins

(Am

ount

in `

)D

isco

unt

Serv

ices

/ LSA

2006

-07

2007

-08

2008

-09

2009

-10

Am

ount

of

GR

/AG

RL

F Im

pact

SUC

Im

pact

Am

ount

of

GR

/AG

RL

F Im

-pa

ctSU

C Im

-pa

ctA

mou

nt o

f G

R/A

GR

LF

Impa

ctSU

C Im

pact

Am

ount

of

GR

/AG

RL

F Im

pact

SUC

Impa

ct

AP

-

-

-

8739

9849

6991

988

3801

893

3752

5521

737

5255

2216

3236

0224

9884

759

2498

8476

1086

9987

Del

hi32

8257

598

3282

5760

1395

0948

3153

4526

931

5345

2713

4021

74-

-

-

-

-

-

Guj

arat

-

-

-

- -

- 41

6914

7241

6914

713

9666

4

-

-

-

HP

-

-

-

4082

498

2449

5095

939

2175

2565

1305

154

5111

8590

2964

454

1779

2121

97

Kar

nata

ka

-

-

-

-

- -

- -

- 33

2462

8833

2462

910

8050

4

Ker

ala

-

-

-

1943

7792

411

6626

7584

5544

053

4522

097

4276

1768

2325

1711

6066

9597

448

5356

7826

3912

75

Mah

aras

htra

-

-

-

2188

1651

317

5053

2195

1851

861

8981

289

6189

8129

2692

5686

6095

7404

060

9574

0426

5164

71

MP

-

-

-

9442

9639

5665

778

4107

689

2394

0136

919

1521

1010

4139

6052

1038

364

4168

3069

2266

5169

Mum

bai

-

-

-

-

- -

1849

069

1849

0741

604

-

-

-

Odi

sha

-

-

-

-

- -

- -

- 18

7027

6511

2216

643

9515

Raj

asth

an

-

-

- 11

5072

223

9205

778

3854

919

1788

4950

514

3079

6059

9145

810

5323

005

8425

840

3528

321

UP(

W)

7967

9827

4780

790

3466

072

1202

5871

272

1552

352

3125

448

3341

169

3866

7294

2102

5341

4484

1531

435

8732

2519

5060

66

Tota

l UA

SL40

7937

425

3760

6549

1741

7020

1149

7826

2790

0265

4048

4678

2724

9564

3752

2199

7199

010

5881

212

2601

9101

5422

5452

266

1112

0950

4

Con

td…

..


- 221 -

Idea

AN

NE

XU

RE

-6.0

1 [p

ara

6.2.

1(A

)]…

..con

tdM

argi

n/C

omm

issi

on

(Am

ount

in `

)

Serv

ices

/ LSA

2007

-08

2008

-09

2009

-10

Am

ount

of G

R/

AG

RL

F Im

pact

SUC

Impa

ctA

mou

nt o

f GR

/A

GR

LF

Impa

ctSU

C Im

pact

Am

ount

of G

R/

AG

RL

F Im

pact

SUC

Impa

ct

AP

-

-

-

-

-

-

3523

077

3523

0815

3254

Ker

ala

1857

8175

1114

691

8081

51

-

-

-

64

6062

8951

6850

328

1037

4

MP

-

-

-

1330

0835

710

6406

6957

8586

411

1999

946

8959

996

4871

998

Tota

l UA

SL18

5781

7511

1469

180

8151

1330

0835

710

6406

6957

8586

418

0129

312

1448

0807

7835

625

(` in

cro

re)

Tota

l am

ount

of

GR

/AG

RL

F Im

pact

SUC

Impa

ct

698

.70

59.9

3

2

9.74


- 222 -

Idea

AN

NE

XU

RE

-6.0

2 [P

ara

6.2.

1 (B

)]Im

pact

on

LF

and

SUC

due

to n

on-c

onsi

dera

tion

of F

ree A

ir T

ime

(FAT

)/Un-

used

Air

time/

Free

talk

tim

e (A

mou

nt in

`)

Serv

ices

/ LSA

2006

-07

2007

-08

2008

-09

2009

-10

Am

ount

of

GR

/AG

RL

F Im

pact

SUC

Impa

ctA

mou

nt o

f G

R/A

GR

LF

Impa

ctSU

C Im

pact

Am

ount

of

GR

/AG

RL

F Im

pact

SUC

Impa

ctA

mou

nt o

f G

R/A

GR

LF

Impa

ctSU

C Im

pact

AP

--

-31

4487

025

1590

1368

02-

--

--

-

Del

hi-

--

--

-12

0973

1012

0973

151

4136

--

-

Guj

arat

8629

6437

6903

715

2890

931

--

--

--

--

-

Har

yana

4184

9647

225

1097

8814

0196

32-

--

--

--

--

Ker

ala

--

-23

0689

613

8414

1003

50-

--

--

-

Mah

aras

htra

--

-81

9055

2865

5244

235

6289

0-

--

4829

3335

148

2933

3521

0076

01

Mum

bai

--

--

--

--

-67

5801

8367

5801

815

2055

4

Raj

asth

an22

9441

2918

3553

076

8628

5087

2339

4069

787

1704

223

--

--

--

TN-

--

--

--

--

1383

814

1383

8132

520

UP(

E)15

2028

1012

1622

550

9294

6371

1153

5096

892

2134

324

--

--

--

UP(

W)

7736

5738

4641

944

3365

410

2050

8610

012

3051

6689

2124

520

9537

342

1676

2987

9114

874

2227

6761

017

8214

0996

9039

1

Tota

l UA

SL62

0305

586

3970

7202

2155

3895

4070

2688

628

4142

9116

5598

3422

1634

652

1797

2718

9629

010

7746

6495

873

0111

4332

2510

66

(` in

cro

re)

Tota

l am

ount

of

GR

/AG

RL

F Im

pact

SUC

Impa

ct

2

02.3

6

15

.91

8

.00


- 223 -

Idea

AN

NE

XU

RE

-6.0

3 [P

ara

6.2.

1(B

)]Im

pact

on

LF

and

SUC

due

to n

on-c

onsi

dera

tion

of F

ree

SMS/

Free

SIM (A

mou

nt in

`)

Serv

ices

/LSA

2006

-07

2008

-09

Am

ount

of G

R/

AG

RL

F Im

pact

SUC

Impa

ctA

mou

nt o

f G

R/A

GR

LF

Impa

ctSU

C Im

pact

AP

-

-

-

3614

1099

3614

110

1572

138

MP

1008

2230

6049

3437

9092

-

-

-

To

tal U

ASL

1008

2230

6049

3437

9092

3614

1099

3614

110

1572

138

(` in

cro

re)

Tota

l am

ount

of

GR

/AG

RL

F Im

-pa

ctSU

C Im

pact

4

.62

0.

42

0.2

0

AN

NE

XU

RE

- 6.

04 [P

ara

6.2.

1(B

)]Im

pact

on

LF

and

SUC

due

to n

on-c

onsi

dera

tion

of B

onus

/Bon

us A

irtim

e an

d Pr

omot

iona

l Tal

k Ti

me

(Am

ount

in `

)

Serv

ices

/LSA

2006

-07

2007

-08

2008

-09

2009

-10

Am

ount

of

GR

/AG

RL

F Im

pact

SUC

Impa

ctA

mou

nt o

f G

R/A

GR

LF

Impa

ctSU

C Im

pact

Am

ount

of

GR

/AG

RL

F Im

pact

SUC

Impa

ctA

mou

nt o

f G

R/A

GR

LF

Impa

ctSU

C Im

pact

AP

2457

4448

519

6595

5910

6898

8554

5082

8743

6066

323

7111

0-

--

--

-D

elhi

--

-12

8589

6612

8589

754

6506

2032

8492

220

3284

9286

3960

942

3542

3342

3542

318

0005

5G

ujar

at10

4296

829

8343

746

3493

944

1161

5068

992

9205

538

9104

813

8695

857

1386

9586

4646

311

8045

9750

8045

975

2695

402

Har

yana

--

--

--

--

-11

5693

3392

5547

3875

73K

eral

a-

--

3861

223

1716

80-

--

--

-M

ahar

asht

ra-

--

--

-64

3581

651

6435

8165

2799

5802

3953

6423

939

5364

2417

1983

44M

P-

--

--

-13

9195

078

1113

5606

6054

986

7675

6296

6140

504

3338

899

Mum

bai

--

--

--

3353

7949

3353

795

7546

0454

4548

9454

4548

912

2523

5Pu

njab

--

--

--

--

-20

9642

1677

191

19R

ajas

than

--

-56

5514

4345

2411

518

9447

328

4291

419

2274

3314

9523

763

5134

5541

141

0764

3317

2007

56TN

--

--

--

--

-33

397

3340

785

UP

(W)

4781

4028

688

2079

916

9267

410

1560

7363

1-

--

2317

4487

318

5395

9010

0809

02To

tal U

ASL

3505

1945

428

0319

9314

2046

2824

1800

671

1956

6607

8778

448

1442

5868

7613

5788

958

5761

5075

1406

4020

6812

3965

496

5393

7070

(` in

cro

re)

Tota

l am

ount

of

GR

/AG

RL

F Im

pact

SUC

Im-

pact

3

44.1

3

30

.74

1

3.45


- 224 -

Idea

AN

NE

XU

RE

-6.0

5 [P

ara

6.2.

1(B

)]Im

pact

on

LF

and

SUC

on

nett

ing

of r

efun

d of

Adm

in F

ee e

tc.

(Am

ount

in `

)

Serv

ices

/ LSA

2006

-07

2007

-08

2008

-09

Am

ount

of G

R/

AG

RL

F Im

pact

SUC

Impa

ctA

mou

nt o

f GR

/A

GR

LF

Impa

ctSU

C Im

pact

Am

ount

of G

R/

AG

RL

F Im

pact

SUC

Impa

ct

AP

--

-86

6057

269

2846

3767

35-

--

Del

hi-

--

--

-27

8961

927

8962

1185

59G

ujar

at-

--

--

-13

9064

513

9065

4658

7K

eral

a53

2137

6631

9282

623

1479

9-

--

--

-M

ahar

asht

ra

-

-

-

4836

400

3869

1221

0383

--

-To

tal U

ASL

5321

3766

3192

826

2314

799

1349

6972

1079

758

5871

1841

8026

441

8027

1651

46

(` in

cro

re)

Tota

l am

ount

of

GR

/AG

RL

F Im

pact

SUC

Impa

ct

7.

09

0

.47

0.

31

AN

NE

XU

RE

6.0

6 [P

ara

6.2.

1 (B

)]Im

pact

on

LF

and

SUC

due

to n

on-c

onsi

dera

tion

of P

CO

-Fre

e Pr

omot

iona

l Air

Tim

e/re

char

ge fe

e/ac

tivat

ion

char

ges

(Am

ount

in `

)

Serv

ices

/LSA

2008

-09

2009

-10

Am

ount

of G

R/A

GR

LF

Impa

ctSU

C Im

pact

Am

ount

of G

R/A

GR

LF

Impa

ctSU

C Im

pact

AP

-

-

-

3288

8442

232

8884

4214

3064

72K

arna

taka

-

-

-

2185

000

2185

0071

013

Ker

ala

1253

9557

710

0316

4654

5470

816

2023

297

1296

1864

7048

013

Mah

aras

htra

-

-

-

1660

3597

1660

360

7222

56M

P

-

-

-

31

0646

424

8517

1351

31M

umba

i81

7482

4481

7482

418

3933

525

5891

444

2558

9144

5757

557

Raj

asth

an

-

-

-

49

5971

7839

6777

416

6150

5TN

-

-

-

3942

3445

3942

345

9264

51U

P(W

)

-

-

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2067

4122

589

4122

5992

758

NE

-

-

-

-

-

-

-

-

-

1136

6568

2026

71

Odi

sha

-

-

-

-

-

-

-

-

-

8360

143

5016

0919

6463

Raj

asth

an

-

-

-

31

2000

6224

9600

510

4520

2

-

-

-

9122

6072

981

3056

1

TN

-

-

-

-

-

-

11

5018

4411

5018

427

0293

UPE

-

-

-

4020

9002

3216

720

1347

002

2681

816

2145

4589

841

1535

7728

1228

618

5144

84

UPW

5544

7933

269

2412

0

18

5720

0014

8576

080

7882

Tota

l UA

SL15

0833

210

8786

6552

526

4294

138

2086

0383

1026

6191

1225

0894

1099

611

4623

6025

7737

070

2241

6106

9196

936

(` in

cro

re)

Tota

l am

ount

of

GR

/AG

RL

F Im

pact

SUC

Impa

ct

53

.58

4

.45

2

.00


- 230 -

Idea

AN

NE

XU

RE

-6.1

2 [P

ara

6.3.

1]

Impa

ct o

n L

F an

d SU

C d

ue to

non

-con

side

ratio

n of

Inte

rest

Inco

me

(A

mou

nt in

`)

Serv

ices

/LSA

2007

-08

2008

-09

2009

-10

Tota

l Int

eres

tL

FSU

CTo

tal I

nter

est

LF

SUC

Tota

l Int

eres

tL

FSU

C

AP

1161

0578

792

8846

350

5060

231

9752

249

3197

5225

1390

9223

2182

7037

521

8278

8794

9513

1A

ssam

-

-

--

--

4274

2425

646

1004

5B

ihar

(AB

TL)

-

--

1048

7000

062

9220

024

6444

541

0968

638

2465

8221

9657

803

Del

hi91

6142

4091

6142

438

9360

519

7560

931

1975

6093

8396

340

1344

9947

813

4504

6657

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8936

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7133

860

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3961

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6104

1920

1662

511

2594

990

3046

9672

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630

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5557

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1335

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2620

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5801

016

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7588

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bai

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5311

248

4450

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--

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--

7577

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1117

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4844

9616

3876

120

1623

125

TN-

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-79

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8216

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6716

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3658

253

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9932

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454

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789

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Tota

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3339

6934

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4244

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7942

5519

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7225

1932

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--

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468

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Gra

nd T

otal

8495

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4627

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8319

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(` in

cro

re)

Serv

ices

Am

ount

of G

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AG

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F Im

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Impa

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5

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9

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2

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-

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Tota

l

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60.2

8

4

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- 231 -

IdeaA

NN

EX

UR

E-6

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[Par

a 6.

3.2]

Impa

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side

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Ser

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Am

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F Im

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/A

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Am

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2010

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7768

8211

8661

346

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Del

hi46

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119

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082

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778

Him

acha

l Pra

desh

9438

2756

630

2218

076

3857

445

8314

1795

0634

5379

920

7228

8116

4Ja

mm

u &

Kas

hmir

--

--

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1969

7511

818

4629

Kar

nata

ka (S

pice

)-

--

--

-29

3322

929

3323

9533

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a43

3358

1026

0014

918

8510

824

9632

797

1997

0624

1085

9027

9190

6743

7352

539

3997

943

Kol

kata

--

--

--

9581

7895

818

2155

9M

adhy

a Pr

ades

h47

6329

1128

5797

520

7203

223

6074

750

1888

5980

1026

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8791

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198

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Mah

aras

htra

8880

0959

7104

077

3862

842

4287

2835

842

8728

3618

6496

8415

3661

141

1536

6114

6684

260

Mum

bai

--

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5858

1920

5858

246

3181

2449

8700

2449

870

5512

21N

orth

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t-

--

--

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180

2051

803

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sha

--

--

--

2596

326

1557

8061

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ab (S

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8092

2001

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ajas

than

1046

5536

8372

4335

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5812

1075

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1947

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est

4273

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1W

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127

Tota

l UA

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3073

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in c

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Serv

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/ Com

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l am

ount

of

GR

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373.

92

3

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1

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9

0.

01

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Gra

nd T

otal

39

8.83

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36

14.

49


- 232 -

Idea

AN

NE

XU

RE

- 6.

14 [P

ara

6.3.

3] Im

pact

on

LF

and

SUC

due

to n

on-c

onsi

dera

tion

of M

isc.

Inco

me

(Am

ount

in `

)

Ser

vice

s/ L

SA20

07-0

820

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9

Am

ount

of G

R/A

GR

LF

Impa

ctSU

C Im

pact

Am

ount

of G

R/A

GR

LF

Impa

ctSU

C Im

pact

And

hra

Prad

esh

6898

8755

191

3001

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656

0397

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73

Del

hi12

4661

412

4661

5298

134

2345

434

2345

1454

97

Guj

arat

1082

5291

8660

2336

2647

9154

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9154

8530

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2266

746

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5818

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esh

5548

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2413

554

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2380

95

Mah

aras

htra

4485

443

3588

3519

5117

9108

022

9108

0239

6199

Mum

bai

--

-57

3120

5731

212

895

Raj

asth

an11

1979

689

584

3751

331

2892

325

0314

1048

19

UP

East

1012

564

8100

533

921

2072

793

1658

2369

439

UP

Wes

t86

9635

5217

837

829

4890

972

3912

7821

2757

Tota

l UA

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0525

5421

5567

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1492

2048

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2

NL

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801

1788

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6503

563

902

-

Gra

nd T

otal

2908

2355

2157

465

1107

027

5421

4255

4866

099

2121

592

(

` in

cro

re)

Serv

ices

/ Com

pany

Am

ount

of G

R/

AG

R L

F Im

pact

SUC

Impa

ct

Tota

l UA

SL

8.

22

0.69

0.

32

NLD

0.11

0.

01

-

Gra

nd T

otal

8.33

0.

70

0.32


- 233 -

IdeaA

NN

EX

UR

E -

6.15

[Par

a 6.

3.4]

Impa

ct o

n L

F an

d SU

C d

ue to

non

-con

side

ratio

n of

Pro

fit o

n Sa

le o

f Ass

ets

(Am

ount

in `

)

Serv

ices

/ LSA

2006

-07

200

7-08

2

008-

09

200

9-10

A

mou

nt o

f G

R/A

GR

LF

Impa

ctSU

C Im

-pa

ctA

mou

nt o

f G

R/A

GR

LF

Impa

ctSU

C Im

-pa

ctA

mou

nt o

f G

R/A

GR

LF

Impa

ctSU

C Im

-pa

ctA

mou

nt o

f G

R/A

GR

LF

Impa

ctSU

C Im

-pa

ctA

ndhr

a Pr

ades

h12

2160

197

728

5314

026

3693

2109

511

471

1206

7295

612

0672

9652

4927

468

5070

6850

729

801

Ass

am-

--

--

--

--

145

93

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ar-

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7800

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2768

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0)-

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9321

349

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1174

525

1174

5249

917

1060

359

1060

3645

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2335

830

2335

8399

273

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2293

818

3576

832

1985

2575

910

786

3001

945

3001

9410

0565

8250

9482

509

2764

1H

arya

na52

658

3159

1764

1267

076

042

417

1918

313

7535

5759

357

2847

4582

819

190

Him

acha

l Pra

desh

2907

174

6869

942

1640

823

2449

959

2633

158

62Ja

mm

u &

Kas

hmir

--

--

--

--

-15

09

4K

arna

taka

(Spi

ce)

--

--

--

--

-22

3722

473

Ker

ala

1934

8211

609

8416

1762

116

1057

2776

652

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4549

5224

7380

4500

7736

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1957

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--

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731

7316

Mad

hya

Prad

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5367

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2018

111

8530

171

118

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4547

618

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7763

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6M

ahar

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6828

237

128

6581

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6528

6320

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320

2619

8813

971

6471

631

2M

umba

i-

--

--

--

--

6868

068

6815

45N

orth

Eas

t-

--

--

--

--

262

1O

dish

a-

--

--

--

--

1980

119

47Pu

njab

(Spi

ce)

--

--

--

--

-17

3508

1388

175

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ajas

than

3223

625

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2244

)-

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6373

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648

Tam

il N

adu

--

--

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-23

2743

2327

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69U

P Ea

st33

014

2641

1106

7943

635

266

8652

692

290

1487

6411

901

4984

UP

Wes

t16

1164

696

699

7010

725

9167

415

5500

1127

38(4

1683

1)-

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1180

936

0945

1962

64W

est B

enga

l-

--

--

--

--

653

5215

Tota

l UA

SL47

7421

533

8259

2028

3273

8641

650

3355

3166

9513

6442

662

1342

6088

5862

425

1242

3825

1076

958

5108

18N

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6578

539

470

1582

895

00

1590

795

40

6039

536

240

Tota

l48

4000

034

2206

2028

3274

0224

450

4304

3166

9513

6458

569

1342

7043

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425

1248

4920

1080

582

5108

18

Not

e: N

egat

ive

figur

es n

ot c

onsi

dere

d fo

r cal

cula

tion

of G

R/A

GR

.

(` in

cro

re)

Serv

ices

/ Com

pany

Am

ount

of G

R/

AG

RL

F Im

pact

SUC

Impa

ct

Tota

l UA

SL

16

.10

1

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0

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NL

D

0

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0

.00

-

Tota

l

16

.12

1

.54

0

.69


- 234 -

Idea

ANNEXURE-6.16 [Para 6.4.1]Impact on LF and SUC due to writing off of Bad Debts from GR

(Amount in `)

2009-10

Services/ LSAAmount of GR/AGR LF Impact SUC Impact

AP 382398930 38239893 16634353

Delhi 171652171 17165217 7295217

Gujarat 417361535 41736154 13981611

Haryana 20911877 1672950 700548

Kerala 21490876 1719270 934853

Maharashtra 584077440 58407744 25407369

MP 67889501 5431160 2953193

UPW 56031875 4482550 2437387

Total UASL 1721814205 168854938 70344531

(` in crore)


172.18 16.89 7.03


- 235 -

IdeaA

NN

EX

UR

E-6

.17

[Par

a 6.

6] S

tate

men

t sho

win

g in

tere

st o

n L

F an

d SU

C u

pto

Mar

ch 2

015

(Am

ount

in `

)N

o. o

f Mon

ths(

upto

Mar

ch 1

5)96

8472

60

TOTA

LR

ate@

(PLR

+2)%

14.2

514

.25

14.2

513

.75

Sl

No.

Pa

ra N

o.Is

sues

2006

-07

2007

-08

2008

-09

2009

-10

Inte

rest

on

LF

Inte

rest

on

SUC

Inte

rest

on

LF

Inte

rest

on

SUC

Inte

rest

on

LF

Inte

rest

on

SUC

Inte

rest

on

LF

Inte

rest

on

SUC

16.

2.1(

A)

Mar

gin/

Dis

coun

t not

con

side

red

7919

3393

3667

7466

1545

3980

983

5527

4630

8919

705

1495

8485

023

5369

240

1167

8074

011

6461

7949

26.

2.1(

B)

Free

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3170

258

1977

517

1977

5249

438

Del

hi48

2587

4748

2587

513

5124

515

0643

9015

0643

942

1803

1633

3423

1633

342

4573

3680

1648

6280

1648

622

4461

6

Guj

arat

1696

8023

1696

802

4581

3771

7590

271

7590

1937

4915

2569

5115

2569

541

1938

1047

0270

1047

027

2826

97

Har

yana

7602

742

6082

1919

0069

1176

5758

9412

6129

4144

1013

8148

8110

5225

3454

2597

3653

2077

892

6493

41

HP

2341

093

1404

6663

210

2357

539

1414

5263

654

2386

801

1432

0864

444

4084

378

2450

6311

0278

J&K

--

--

--

1490

0289

4037

2563

1441

137

8865

1578

60

Kar

nata

ka20

0704

6920

0704

754

1903

5711

958

5711

9615

4223

7632

283

7632

2820

6072

1791

1238

1791

124

4836

03

Ker

ala

1153

8190

9230

5533

4608

1732

5388

1386

031

5024

3614

6545

7611

7236

642

4983

3154

2314

2523

385

9147

27

Kol

kata

2626

0139

2626

014

7352

8449

8688

9349

8688

913

9632

951

8194

9651

8195

014

5094

634

0068

4334

0068

495

2192

MP

2096

5202

1677

216

5660

6017

3525

0813

8820

146

8518

2046

7624

1637

410

5526

2624

2802

4919

4242

065

5567

NE

--

--

--

1853

511

1246

318

2763

310

9658

4569

1

Oris

sa15

9396

295

638

4303

756

4328

333

8597

1523

6974

5494

544

7297

2012

8419

3748

7311

6249

252

3122

Punj

ab20

6394

1316

5115

351

5985

3010

2053

2408

164

7525

5133

0259

9526

4208

082

5650

4457

6354

3566

108

1114

409

Raj

asth

an70

9932

356

7946

1916

8216

7167

7213

3734

245

1353

2640

6163

2112

493

7129

6652

4679

1441

9743

314

1663

4

TN24

5099

024

5099

6127

524

5636

424

5636

6140

943

7752

243

7752

1094

3816

4907

6916

4907

741

2269

UPE

9488

074

7590

4623

7202

1243

5665

9948

5331

0892

1336

0036

1068

803

3340

0128

0784

0222

4627

270

1960

UPW

5501

693

4401

3514

8546

1094

0924

8752

7429

5405

1160

3116

9282

4931

3284

2915

2758

2332

221

7871

24

WB

2134

703

1707

7661

906

5713

963

4571

1716

5705

1124

6026

8996

8232

6135

1912

6607

1530

129

5546

72

Tota

l U

ASL

2295

2018

520

9133

0362

6097

027

7840

111

2483

6887

7643

299

2709

8482

723

5161

4773

4385

050

1696

297

4269

0387

1357

5985

(` in

cro

re)

Am

ount

of G

R/

AG

RL

FSU

C

128

.00

11.

20

3

.48


- 240 -

Tata

AN

NE

XU

RE

-7.0

5 [P

ara

No.

7.2.

3]Im

pact

on

Lic

ence

fee

and

SUC

due

to n

on-c

onsi

dera

tion

of a

djus

tmen

ts sh

own

in tr

ial b

alan

ce n

ette

d of

f fro

m th

e re

venu

e by

TT

ML

(Am

ount

in `

)

Serv

ices

/ L

SA

2006

-07

2007

-08

2008

-09

2009

-10

Am

ount

of

GR

/AG

RL

FSU

CA

mou

nt o

f GR

/A

GR

LF

SUC

Am

ount

of

GR

/AG

RL

FSU

CA

mou

nt o

f G

R/A

GR

LF

SUC

Mah

aras

htra

(in

clud

ing

Mum

bai)

4428

7329

644

2873

3014

5262

4438

6404

624

3864

0462

1267

4072

2669

7462

426

6974

6287

5676

838

1043

420

3810

4342

1249

8224

Tota

l UA

SL44

2873

296

4428

7330

1452

6244

3864

0462

438

6404

6212

6740

7226

6974

624

2669

7462

8756

768

3810

4342

038

1043

4212

4982

24

(` in

cro

re)

Tota

l am

ount

of

GR

/AG

RL

FSU

C

147.

73

14.

77

4.85


- 241 -

Tata

ANNEXURE -7.06 [Para No.7.2.4]Impact on Licence fee and SUC due to non-consideration of miscellaneous income

netted off from the revenue by TTSL (Amount in `)

Services/ LSA2008-09 2009-10

Amount of GR/AGR LF Impact SUC Impact Amount of GR/

AGR LF Impact SUC Impact

AP 765 77 23 103900290 10390029 3065059

Assam 704672 42280 17617 536730 32204 13418

Bihar 11053997 663240 298458 53931706 3235902 1456156

Delhi 127 13 4 - - -

Gujarat - - - 17307330 1730733 467298

Haryana 14667375 1173390 366684 69643359 5571468 1741084

HP - - - 6359811 381589 171715

Karnataka 9048822 904882 244318 138627194 13862719 3742934

Kerala - - - 43530205 3482416 1262376

Kolkata 788 79 22 37722762 3772276 1056237

MP 14285144 1142812 385699 124420110 9953609 3359343

NE 673752 40425 16844 - - -

Orissa - - - 49455315 2967319 1335294

Punjab 21560126 1724810 539003 58172847 4653828 1454321

Rajasthan 37350884 2988071 1008474 80677016 6454162 2178279

TN - - - 72869644 7286964 1821741

UPE 17188715 1375097 429718 30273280 2421862 756832

UPW 5040019 403202 136081 1021855 81748 27590

WB - - - 28157205 2252576 816559

Total UASL 131575187 10458378 3442945 916606660 78531404 24726236

(` in crore)

Total amount of GR/AGR

LF Impact

SUC Impact

104.82 8.90 2.82


- 242 -

Tata

ANNEXURE -7.07 [Para No.7.2.4]Impact on Licence fee and SUC due to non-consideration of other revenue heads shown in trial

balance netted off from the revenue(Amount in `)

2009-10

Services/ LSA Amount of GR/ AGR LF SUC

Maharashtra (including Mumbai) 84986842 8498684 2787568

Total UASL 84986842 8498684 2787568

(` in crore)

Total amount of GR/AGR

LFImpact

SUCImpact

8.50

0.85 0.28


- 243 -

Tata

ANNEXURE -7.08 [Para No.7.2.5]Impact on Licence fee and SUC due to non-consideration of revenue towards

OPEX receipt for infra sharing by TTSL(Amount in `)

Services/ LSA

2008-09 2009-10

Amount of GR/AGR LF Impact SUC Impact Amount of GR/

AGR LF Impact SUC Impact

AP 15025641 1502564 443256 33014092 3301409 973916

Bihar 2158804 129528 58288 2578639 154718 69623

Delhi 30202518 3020252 845671 26755357 2675536 749150

Gujarat 7345586 734559 198331 14029487 1402949 378796

Haryana 5969 478 149 - - -

HP 1233347 74001 33300 - - -

J&K 7806 468 195 366275 21977 9157

Karnataka 29263822 2926382 790123 31481393 3148139 849998

Kerala 2915 233 85 - - -

Kolkata 12093 1209 339 - - -

MP - - - 11454799 916384 309280

Orissa 4113840 246830 111074 4756591 285395 128428

Punjab 3352283 268183 83807 498292 39863 12457

Rajasthan 146330 11706 3951 - - -

TN 3735225 373523 93381 13363178 1336318 334079

Total UASL 96606179 9289916 2661949 138298103 13282688 3814884

(` in crore)

Total amount of GR/AGR LF Impact SUC Impact

23.49 2.26 0.65


- 244 -

Tata

AN

NE

XU

RE

-7.0

9 [P

ara

No.

7.2.

6]Im

pact

on

Lic

ence

fee

& S

UC

on

net f

orex

gai

n re

alis

ed w

hich

was

not

con

side

red

for

gros

s rev

enue

by

TT

SL d

urin

g 20

06-0

7 to

200

9-10

(A

mou

nt in

`)

Serv

ices

/ LSA

2006

-07

2007

-08

2009

-10

Am

ount

of G

R/

AG

RL

F Im

pact

SUC

Impa

ctA

mou

nt o

f GR

/A

GR

LF

Impa

ctSU

C Im

pact

Am

ount

of G

R/

AG

RL

F Im

pact

SUC

Impa

ct

AP

8357

0883

570.

8224

653

1028

0018

410

2800

1830

3260

530

4587

030

3045

8703

8985

317

Ass

am-

--

--

-71

7362

743

0418

1793

41

Bih

ar15

9351

9561

.07

4302

2832

9107

1699

746

7648

8610

7331

129

6439

868

2897

940

Che

nnai

2079

1520

791.

5351

9822

8233

3822

8233

457

0583

--

-

Del

hi83

5202

8352

0.23

2338

610

9499

221

1094

9922

3065

978

2998

0645

529

9806

4583

9458

1

Guj

arat

4208

8942

088.

9411

364

4405

6801

4405

680

1189

534

9433

2020

9433

202

2546

965

Har

yana

1553

0412

424.

3338

8322

3409

2717

8727

455

8523

7597

8294

6078

264

1899

457

HP

2630

615

78.3

471

041

0491

424

6295

1108

3395

8244

257

4947

2587

26

J&K

--

--

--

8714

069

5228

4421

7852

Kar

nata

ka55

2923

5529

2.32

1492

966

4838

0266

4838

017

9506

321

2826

353

2128

2635

5746

312

Ker

ala

2210

6817

685.

4564

1132

5023

4526

0018

894

2568

8144

9542

6515

963

2362

037

Kol

kata

2579

9725

799.

7172

2432

1388

1132

1388

189

9887

8477

9154

8477

915

2373

816

MP

1295

0410

360.

3534

9719

5224

4615

6179

652

7106

7932

1136

6345

691

2141

671

NE

--

--

--

4106

564

2463

9410

2664

Oris

sa81

952

4917

.12

2213

1292

5685

7755

4134

8993

5395

2060

3237

124

1456

706

Punj

ab24

4844

1958

7.54

6121

3151

7391

2521

391

7879

3581

9955

4565

5964

420

4988

9

Raj

asth

an19

4257

1554

0.53

5245

3263

7431

2610

994

8812

1182

3084

8565

8467

922

2232

9

TN25

2432

2524

3.24

6311

3055

7666

3055

767

7639

4215

1673

754

1516

7375

3791

844

UPE

1861

6314

893.

0146

5425

6774

7720

5419

864

1937

6656

8219

5325

458

1664

205

UPW

2008

3316

066.

6454

2232

8107

1626

2485

788

5889

9715

4132

7772

331

2623

162

WB

9611

776

89.3

227

8714

5320

2811

6256

242

1429

4351

6577

3481

326

1261

981

Tota

l UA

SL50

5876

646

6610

1383

1066

5260

290

6048

0826

1818

8901

1947

1565

8817

4915

425

5317

6793

(` in

cro

re)

Tota

l am

ount

of

GR

/AG

RL

F Im

pact

SUC

Impa

ct

261.

75

2

3.59

7

.15


- 245 -

Tata

AN

NE

XU

RE

-7.1

0 [P

ara

No.

7.2.

6]Im

pact

on

Lic

ence

fee

on n

et F

orex

gai

n re

alis

ed w

hich

was

not

con

side

red

for

gros

s rev

enue

by

TT

ML

(Am

ount

in `

)

Ser

vice

s/ L

SA20

06-0

720

07-0

820

08-0

920

09-1

0

Am

ount

of

GR

/AG

RL

F Im

pact

SUC

Im-

pact

Am

ount

of

GR

/AG

RL

F Im

pact

SUC

Im

pact

Am

ount

of G

R/

AG

RL

F Im

pact

SUC

Im-

pact

Am

ount

of

GR

/AG

RL

F Im

pact

SUC

Impa

ct

Mah

aras

htra

(in

clud

ing

Mum

bai)

8719

0314

8719

031

2859

842

2202

9534

722

0295

3572

2568

711

5479

212

1154

7921

3787

718

1696

1601

416

9616

0155

6340

5

Tota

l USA

L87

1903

1487

1903

128

5984

222

0295

347

2202

9535

7225

687

1154

7921

211

5479

2137

8771

816

9616

014

1696

1601

5563

405

(` in

cro

re)

Tota

l am

ount

of G

R/A

GR

LF

Impa

ctSU

C Im

pact

59.

26

5

.93

1.94


- 246 -

Tata

AN

NE

XU

RE

-7.1

1 [P

ara

No.

7.3.

1]Im

pact

on

Lic

ence

fee

and

SUC

due

to n

on-c

onsi

dera

tion

of in

tere

st in

com

e fo

r gr

oss r

even

ue b

y T

TSL

(A

mou

nt in

`)

Serv

ices

/ L

SA

2006

-07

2007

-08

2008

-09

2009

-10

Am

ount

of

GR

/AG

RL

F Im

pact

SUC

Im-

pact

Am

ount

of

GR

/AG

RL

F Im

pact

SUC

Impa

ctA

mou

nt o

f G

R/A

GR

LF

Impa

ctSU

C Im

-pa

ctA

mou

nt o

f G

R/A

GR

LF

Impa

ctSU

C Im

pact

AP

6618

4924

6618

492

1952

455

2502

1148

2502

115

7381

2452

6841

4552

6841

415

5418

274

8624

351

7486

2435

2208

4418

Ass

am-

--

--

-25

0443

1502

762

6117

6315

8410

5789

544

0790

Bih

ar12

6200

0775

7200

3407

4068

9519

041

3711

1861

7017

0292

5610

2175

545

9790

2638

0209

515

8281

2671

2265

7

Che

nnai

1646

6104

1646

610

4116

5355

5510

855

5511

1388

78-

--

--

0

Del

hi66

1448

6066

1448

618

5205

626

6516

6626

6516

774

6247

6083

2343

6083

234

1703

306

7368

7449

273

6874

4920

6324

86

Guj

arat

3333

2843

3333

284

8999

8710

7232

4710

7232

528

9528

1922

9458

1922

946

5191

9523

1852

443

2318

5244

6260

016

Har

yana

1229

9499

9839

6030

7487

5437

691

4350

1513

5942

1245

7488

9965

9931

1437

1867

4203

314

9393

6346

6855

1

HP

2083

303

1249

9856

249

9991

1959

947

2697

619

0999

811

4600

5157

023

5520

5214

1312

363

5905

J&K

--

--

--

1995

1411

971

4988

2141

7736

1285

064

5354

43

Kar

nata

ka43

7894

2043

7894

211

8231

416

1818

8816

1818

943

6911

3062

6288

3062

629

8269

1052

3091

842

5230

9184

1412

3480

Ker

ala

1750

7755

1400

620

5077

2579

1093

963

2875

2294

1716

0327

2312

8261

846

4949

2001

8945

316

0151

5658

0549

4

Kol

kata

2043

2392

2043

239

5721

0778

2245

678

2246

2190

2916

2158

8316

2158

845

4045

2083

7308

620

8373

0958

3444

6

MP

1025

6259

8205

0127

6919

4751

684

3801

3512

8295

9659

342

7727

4726

0802

1949

5818

315

5966

5552

6387

1

NE

--

--

--

6504

539

0316

2610

0932

5260

5595

2523

31

Oris

sa64

9028

938

9417

1752

3831

4605

918

8764

8494

468

9758

141

3855

1862

3513

2605

207

7956

312

3580

341

Punj

ab19

3907

4015

5125

948

4769

7671

205

6136

9619

1780

1511

6087

1209

287

3779

0220

1531

436

1612

2515

5038

286

Raj

asth

an15

3843

8912

3075

141

5379

7943

818

6355

0521

4483

1770

3302

1416

264

4779

8920

2300

592

1618

4047

5462

116

TN19

9916

9319

9916

949

9792

7437

612

7437

6118

5940

2434

7264

2434

726

6086

8237

2788

907

3727

8891

9319

723

UPE

1474

3373

1179

470

3685

8462

4979

449

9983

1562

4512

4353

2899

4826

3108

8316

3613

631

1308

9090

4090

341

UPW

1590

5215

1272

417

4294

4179

8599

563

8880

2156

2217

4022

9013

9218

346

9862

2387

8872

619

1030

9864

4729

6

WB

7612

068

6089

6522

0750

3537

037

2829

6310

2574

7452

790

5962

2321

6131

1069

5652

385

5652

231

0173

9

Tota

l UA

SL

4006

3513

336

9537

8310

9536

4516

1921

655

1472

0787

4427

105

3385

4656

730

6353

9692

6674

547

8578

7625

4299

1307

413

0699

729

(` in

cro

re)

Tota

l am

ount

of G

R/A

GR

LF

Impa

ctSU

C Im

pact

568.

69

51.2

2 15

.53


- 247 -

Tata

AN

NE

XU

RE

-7.1

2 [P

ara

No.

7.3.

2]Im

pact

on

Lic

ence

fee

and

SUC

due

to n

on-c

onsi

dera

tion

of r

even

ue o

n pr

ofit o

n sa

le o

f inv

estm

ents

for

gros

s rev

enue

by

TT

SL

(Am

ount

in `

)

vi

ces/

LSA

2006

-07

2007

-08

2008

-09

2009

-10

Am

ount

of

GR

/AG

RL

F Im

pact

SUC

Impa

ctA

mou

nt o

f G

R/A

GR

LF

Impa

ctSU

C Im

pact

Am

ount

of

GR

/AG

RL

F Im

pact

SUC

Impa

ctA

mou

nt o

f G

R/A

GR

LF

Impa

ctSU

C Im

pact

AP

1513

1763

1513

176

4463

8749

5172

4951

714

608

1185

4700

9011

8547

009

3497

1368

2051

7075

7620

5170

758

6052

5374

Ass

am-

--

--

-56

3533

733

8120

1408

8348

3217

7228

9930

612

0804

4

Bih

ar28

8529

417

3118

7790

313

6457

8187

3684

3831

8308

522

9909

8510

3459

4372

2985

776

4337

9147

1952

0616

Che

nnai

3764

621

3764

6294

116

1099

3610

994

2748

--

--

--

Del

hi15

1226

0315

1226

042

3433

5274

4052

744

1476

813

6881

6422

1368

8164

238

3268

6020

1950

5479

2019

5054

856

5461

53

Guj

arat

7620

839

7620

8420

5763

2122

1421

221

5730

4326

9083

643

2690

8411

6826

5363

5423

379

6354

2338

1715

6431

Har

yana

2812

016

2249

6170

300

1076

1386

0926

9028

0311

639

2242

4931

7007

791

5117

9212

040

9433

7012

7948

03

HP

4763

0228

578

1286

019

773

1186

534

4297

7748

2578

665

1160

399

6454

7624

3872

857

1742

786

J&K

--

--

--

4489

350

2693

6111

2234

5869

8238

3521

894

1467

456

Kar

nata

ka10

0115

1210

0115

127

0311

3202

4232

024

8647

6891

3614

568

9136

1418

6066

7614

3360

4845

1433

6048

438

7073

31

Ker

ala

4002

773

3202

2211

6080

1565

5812

525

4540

3607

5964

028

8607

7110

4620

3054

8646

616

4389

1729

1591

0752

Kol

kata

4671

428

4671

4313

0800

1548

0715

481

4335

3648

8101

336

4881

0110

2166

6857

1074

985

5710

7499

1599

0100

MP

2344

874

1875

9063

312

9403

675

2325

3921

7349

287

1738

7943

5868

431

5343

0960

542

7447

6814

4263

59

NE

--

--

--

1463

597

8781

636

590

2766

1939

1659

716

6915

48

Oris

sa14

8386

589

032

4006

462

261

3736

1681

1552

0564

093

1233

841

9055

236

3422

735

2180

5364

9812

414

Punj

ab44

3327

735

4662

1108

3215

1814

1214

537

9534

0134

009

2721

0721

8503

350

5523

2450

444

1859

6013

8081

13

Raj

asth

an35

1731

128

1385

9496

715

7209

1257

742

4539

8350

111

3186

8009

1075

5453

5544

3248

344

3545

9914

9696

77

TN45

7067

245

7067

1142

6714

7191

1471

936

8054

7848

935

5478

4893

1369

6223

1021

6790

6310

2167

906

2554

1977

UPE

3370

756

2696

6084

269

1236

8498

9530

9227

9813

013

2238

5041

6995

325

4484

0556

635

8724

4511

2101

39

UPW

3636

386

2909

1198

182

1580

4412

644

4267

3915

7689

531

3261

5210

5725

7665

4433

211

5235

4657

1766

9697

WB

1740

336

1392

2750

470

6999

856

0020

3016

7698

650

1341

5892

4863

261

2931

2900

123

4503

2085

0074

1

Tota

l UA

SL91

5966

2984

4869

025

0431

632

0444

929

1326

8761

376

1779

1443

6893

4108

920

8515

266

1311

6106

519

1178

2356

6635

8200

510

(` in

cro

re)

Tota

l am

ount

of

GR

/AG

RL

F Im

pact

SUC

Impa

ct

2,

082.

87

187

.63

5

6.93


- 248 -

Tata

AN

NE

XU

RE

-7.1

3 [P

ara

No.

7.3.

2]Im

pact

on

Lic

ence

fee

and

SUC

due

to n

on-c

onsi

dera

tion

of r

even

ue o

n pr

ofit o

n sa

le o

f inv

estm

ents

for

gros

s rev

enue

by

TT

ML

(A

mou

nt in

`)

Serv

ices

/ LSA

2006

-07

2007

-08

2008

-09

2009

-10

Am

ount

of

GR

/AG

RL

FSU

CA

mou

nt o

f G

R/A

GR

LF

SUC

Am

ount

of

GR

/AG

RL

FSU

CA

mou

nt o

f G

R/A

GR

LF

SUC

Mah

aras

htra

(in

clud

ing

Mum

bai)

4700

000

4700

0015

4160

7000

0070

000

2296

030

0000

3000

098

4060

0000

6000

019

680

Tota

l UA

SL47

0000

047

0000

1541

6070

0000

7000

022

960

3000

0030

000

9840

6000

0060

000

1968

0

(` in

cro

re)

Tota

l am

ount

of

GR

/AG

RL

F Im

pact

SUC

Impa

ct

0

.63

0.06

0.02


- 249 -

Tata

AN

NE

XU

RE

-7.1

4 [P

ara

No.

7.3.

3]Im

pact

on

Lic

ence

fee

and

SUC

on

sale

of fi

xed

asse

ts n

ot c

onsi

dere

d fo

r gr

oss r

even

ue b

y T

TSL

(Am

ount

in `

)20

07-0

820

08-0

920

09-1

0

Serv

ices

/ LSA

Am

ount

of G

R/

AG

RL

F Im

pact

SUC

Impa

ctA

mou

nt o

f GR

/A

GR

LF

Impa

ctSU

C Im

pact

Am

ount

of G

R/

AG

RL

F Im

pact

SUC

Impa

ct

AP

7695

8221

7695

822

2270

268

5541

3604

5541

360

1634

701

5606

1958

5606

196

1653

828

Ass

am-

--

2634

1815

805

6585

1320

370

7922

233

009

Bih

ar21

2077

2112

7246

357

2608

1791

1507

1074

690

4836

1119

7552

5111

8531

553

3392

Che

nnai

1708

5996

1708

600

4271

50-

--

--

-

Del

hi81

9732

5181

9732

522

9525

163

9839

4363

9839

417

9155

055

1820

5155

1820

515

4509

7

Guj

arat

3298

1780

3298

178

8905

0820

2256

9720

2257

054

6094

1736

2649

1736

265

4687

92

Har

yana

1672

4853

1337

988

4181

2113

1028

8510

4823

132

7572

1398

4482

1118

759

3496

12

HP

3073

019

1843

8182

972

2008

952

1205

3754

242

1763

734

1058

2447

621

J&K

--

-20

9850

1259

152

4616

0390

296

234

4009

8

Kar

nata

ka49

7710

7049

7710

713

4381

932

2129

7432

2129

786

9750

3917

2588

3917

259

1057

660

Ker

ala

2433

1889

1946

551

7056

2516

8633

4613

4906

848

9037

1499

1514

1199

321

4347

54

Kol

kata

2405

9740

2405

974

6736

7317

0559

9517

0560

047

7568

1560

4359

1560

436

4369

22

MP

1461

4884

1169

191

3946

0210

1597

7381

2782

2743

1414

5997

6211

6798

139

4194

NE

--

-68

414

4105

1710

7558

5045

351

1889

6

Oris

sa96

7641

958

0585

2612

6372

5493

143

5296

1958

8399

3035

859

5821

2681

20

Punj

ab23

5945

3318

8756

358

9863

1589

9221

1271

938

3974

8115

0920

1112

0736

137

7300

Raj

asth

an24

4330

1719

5464

165

9691

1862

0474

1489

638

5027

5315

1496

1012

1196

940

9039

TN22

8760

6422

8760

657

1902

2560

8646

2560

865

6402

1627

9169

0727

9169

169

7923

UPE

1922

2659

1537

813

4805

6613

0795

7710

4636

632

6989

1225

2474

9801

9830

6312

UPW

2456

2741

1965

019

6631

9418

3038

6714

6430

949

4204

1788

2084

1430

567

4828

16

WB

1087

8960

8703

1731

5490

7838

904

6271

1222

7328

8009

614

6407

6923

2279

Tota

l UA

SL49

8026

819

4527

7125

1361

6566

3560

8597

932

2225

5497

4683

635

8391

528

3219

4743

9787

663

(` in

cro

re)

Tota

l am

ount

of

GR

/AG

RL

F Im

pact

SUC

Impa

ct

121

.25

1

0.97

3

.32


- 250 -

Tata

ANNEXURE -7.15 [Para No.7.3.3]Impact on licence fee sale of fixed assets not considered for gross revenue by TTML

(Amount in `)

2009-10

Services/ LSA Amount of GR/AGR LF Impact SUC Impact

Maharashtra (including Mumbai) 354889478 35488948 11640375

Total UASL 354889478 35488948 11640375

(` in crore)Total amount of

GR/AGR LF Impact SUC Impact

35.49 3.55 1.16


- 251 -

Tata

ANNEXURE -7.16 [Para No.7.4.1]Impact on Licence fee and SUC due to non-consideration of bad debts written off (adjusted from

respective revenues) in respect of TTSL of 2009-10(Amount in `)

Services/ LSA Amount of GR/AGR LF Impact SUC Impact

AP 1034024491 103402449 30503722

Bihar 10303059 618184 278183

Delhi 633150438 63315044 17728212

Gujarat 192080943 19208094 5186185

Haryana 19408344 1552668 485209

HP 2933027 175982 79192

Karnataka 299570488 29957049 8088403

Kerala 32454902 2596392 941192

Kolkata 36034160 3603416 1008956

MP 56738984 4539119 1531953

Orissa 7011030 420662 189298

Punjab 39706081 3176486 992652

Rajasthan 32004900 2560392 864132

TN 252895892 25289589 6322397

UPE 36797881 2943830 919947

UPW 32572636 2605811 879461

WB 5173210 413857 150023

Total UASL 2722860466 266379024 76149117

(` in crore)Total amount of


272.29

26.64

7.61


- 252 -

Tata

AN

NE

XU

RE

-7.1

7 [P

ara

No.

7.4.

2]Im

pact

on

Lic

ence

fee

and

SUC

due

to n

on-c

onsi

dera

tion

of le

ased

line

and

por

t cha

rges

incl

uded

in th

e ac

cess

cha

rges

cla

imed

as d

educ

tion

by T

TSL

(A

mou

nt in

`)

Serv

ices

/ LSA

2006

-07

2007

-08

2008

-09

2009

-10

Am

ount

of G

R/

AG

RL

F Im

pact

SUC

Impa

ctA

mou

nt o

f G

R/A

GR

LF

Impa

ctSU

C Im

pact

Am

ount

of

GR

/AG

RL

F Im

pact

SUC

Impa

ctA

mou

nt o

f G

R/A

GR

LF

Impa

ctSU

C

Impa

ct

AP

1102

9876

211

0298

7632

5381

377

3715

0677

3715

122

8245

997

0065

7697

0065

828

6169

478

2267

2278

2267

223

0768

8

Ass

am-

--

--

-26

3935

9015

8361

565

9840

4482

9829

2689

790

1120

746

Bih

ar21

3045

9312

7827

657

5224

1654

6212

9927

7344

6748

3027

9777

1816

787

8175

5429

8942

2317

9365

380

7144

Che

nnai

1822

8451

1822

845

4557

1118

6227

1518

6227

246

5568

--

--

--

Del

hi44

5499

8944

5499

912

4740

042

8294

3942

8294

411

9922

461

2946

8561

2946

917

1625

158

7194

9358

7194

916

4414

6

Guj

arat

4100

0795

4100

080

1107

021

3589

7125

3589

713

9692

2266

9991

3066

9991

318

0897

742

8798

4742

8798

511

5775

6

Har

yana

2138

5356

1710

828

5346

3411

6253

5593

0028

2906

3432

7709

4926

2167

681

9274

2281

6904

1825

352

5704

23

HP

1538

6399

9231

8441

5433

1045

5269

6273

1628

2292

1342

0302

8052

1836

2348

6334

754

3800

8517

1038

J&K

--

--

--

3258

456

1955

0781

461

1303

6799

7822

0832

5920

Kar

nata

ka45

0768

5445

0768

512

1707

552

8128

5852

8128

614

2594

752

9524

6052

9524

614

2971

629

5200

5329

5200

579

7041

Ker

ala

2453

6853

1962

948

7115

6921

4355

2517

1484

262

1630

4254

0483

3403

239

1233

674

3289

5298

2631

624

9539

64

Kol

kata

1670

6631

1670

663

4677

8613

0620

2113

0620

236

5737

3134

9070

3134

907

8777

7421

3714

8621

3714

959

8402

MP

1865

7137

1492

571

5037

4339

1922

5131

3538

010

5819

164

4567

4251

5653

917

4033

239

0918

3031

2734

610

5547

9

NE

--

--

--

1236

1590

7416

9530

9040

4000

7473

2400

448

1000

187

Oris

sa29

9962

6017

9977

680

9899

2593

2115

1555

927

7001

6722

8275

7013

6965

461

6344

2567

6346

1540

581

6932

61

Punj

ab26

5570

9821

2456

866

3927

1156

9329

9255

4628

9233

4502

6512

3602

121

1125

663

2730

9914

2184

793

6827

48

Raj

asth

an25

2159

5720

1727

768

0831

2833

0959

2266

477

7649

3648

4168

2338

7334

613

0725

433

2772

7526

6218

289

8486

TN29

7325

3229

7325

374

3313

4526

8457

4526

846

1131

711

5290

5827

5290

583

1322

646

3876

2713

3876

271

9690

68

UPE

2171

4806

1737

184

5428

7024

6582

5919

7266

161

6456

2912

6178

2330

094

7281

5424

3714

2519

4971

460

9286

UPW

1786

7353

1429

388

4824

1911

6896

0193

5168

3156

1927

0714

1621

6571

373

0928

1779

7919

1423

834

4805

44

WB

5448

2237

4358

579

1579

985

3475

4974

2780

398

1007

894

3933

8802

3147

104

1140

825

2273

2316

1818

585

6592

37

Tota

l UA

SL58

2698

063

5139

3980

1599

2653

5220

5397

046

4229

2814

2336

7079

9796

938

6906

3084

2168

9750

6495

5261

954

1582

2717

5025

64

(` in

cro

re)

Tota

l am

ount

of G

R/A

GR

LF

Impa

ctSU

C Im

pact

255.

41

22.1

0 6.

94


- 253 -

Tata

AN

NE

XU

RE

-7.1

8 [P

ara

No.

7.4.

2]Im

pact

on

Lic

ence

fee

and

SUC

due

to n

on-c

onsi

dera

tion

of le

ased

line

and

por

t cha

rges

incl

uded

in th

e ac

cess

cha

rges

cl

aim

ed a

s ded

uctio

n b

y T

TM

L

(Am

ount

in `

)

Serv

ices

/ L

SA

2006

-07

2007

-08

2008

-09

2009

-10

Am

ount

of

GR

/AG

RL

FSU

CA

mou

nt o

f G

R/A

GR

LF

SUC

Am

ount

of

GR

/AG

RL

FSU

CA

mou

nt o

f G

R/A

GR

LF

SUC

Mah

aras

htra

(in

clud

ing

Mum

bai)

1891

6836

818

9168

3762

0472

220

5385

522

2053

8552

6736

645

2681

8684

826

8186

8487

9652

920

9906

596

2099

0659

6884

936

Tota

l UA

SL18

9168

368

1891

6837

6204

722

2053

8552

220

5385

5267

3664

526

8186

848

2681

8684

8796

529

2099

0659

620

9906

5968

8493

6

(` in

cro

re)

Tota

l am

ount

of

GR

/AG

RL

FSU

C

87.2

6 8.

73

2.86


- 254 -

Tata

AN

NE

XU

RE

-7.1

9 [P

ara

No.

7.4.

3]Im

pact

on

SUC

due

to n

on-c

onsi

dera

tion

of r

even

ue fr

om sh

arin

g/le

asin

g of

Infr

astr

uctu

re/b

andw

idth

link

s for

pay

men

t of S

UC

by

TT

SL

(Am

ount

in `

)

Serv

ices

/ LSA

2006

-07

2007

-08

2008

-09

2009

-10

Am

ount

of G

R/A

GR

SUC

Impa

ctA

mou

nt o

f GR

/AG

RSU

C Im

pact

Am

ount

of G

R/A

GR

SUC

Impa

ctA

mou

nt o

f GR

/AG

RSU

C Im

pact

AP

2854

7811

684

2160

442

8650

588

1264

5192

2848

6473

384

0351

041

7656

346

1232

0862

Ass

am-

--

-26

568

664

1856

466

4641

2

Bih

ar97

1977

826

2434

3544

4044

9569

8933

2144

4289

6790

3521

7324

595

0867

8

Che

nnai

8638

0098

2159

502

1050

7162

126

2679

1-

--

-

Del

hi20

1006

556

5628

184

1021

5753

428

6041

179

1961

0922

1749

115

2035

594

4256

997

Guj

arat

1071

1621

228

9213

816

5636

253

4472

179

1024

8305

127

6704

210

0494

399

2713

349

Har

yana

1949

5053

4873

7645

8552

8211

4638

237

7482

494

371

1752

0762

4380

19

HP

1472

130

3974

859

5248

616

0717

1614

5243

5970

0928

718

9251

J&K

--

--

--

1786

114

4465

3

Kar

nata

ka57

8707

480

1562

5102

7770

7227

920

9809

5210

1493

2276

2740

3171

1081

8917

2729

2110

77

Ker

ala

1040

4813

130

1739

693

7284

5527

1812

573

2408

3721

2398

419

8908

984

5768

361

Kol

kata

2208

9794

6185

1418

1886

7950

9283

6556

473

1835

8186

0168

9824

0847

3

MP

3460

4054

9343

0913

2584

561

3579

783

5616

4676

1516

446

2859

6624

377

2108

9

NE

--

--

--

7243

1918

108

Oris

sa36

9945

0399

8852

3545

5272

9572

9299

1394

026

7676

8040

7946

2171

015

Punj

ab41

6669

0910

4167

358

2581

4014

5645

439

4637

6698

6594

6121

1186

1530

280

Raj

asth

an42

0612

2511

3565

358

1150

7315

6910

727

9510

6975

4679

1542

8744

041

6576

1

TN10

6249

362

2656

234

1090

5349

927

2633

730

9627

114

7740

678

4927

9849

712

3199

62

UPE

2355

6671

5889

1790

0987

3422

5246

831

3796

0278

4490

1499

3113

437

4827

8

UPW

1557

0329

4203

9996

9373

6626

1730

925

5299

5768

9309

1684

9337

245

4932

1

WB

2550

3805

7396

1025

9713

5475

3169

1628

5473

4722

7925

4241

663

7373

008

Tota

l UA

SL17

4172

0206

4766

7645

2384

2312

2064

9889

4121

1476

6361

5730

7115

4065

4116

2311

0502

952

(`

in c

rore

)

Tota

l am

ount

of G

R/A

GR

SU

C Im

pact

1,0

30.6

1 28

.05


- 255 -

TataA

NN

EX

UR

E -7

.20

[Par

a N

o.7.

4.4]

Impa

ct o

n L

icen

ce fe

e an

d SU

C d

ue to

non

-con

side

ratio

n of

Ren

tal I

ncom

e by

TT

SL

(Am

ount

in `

)

Serv

ices

/ LSA

2006

-07

2007

-08

2008

-09

2009

-10

Am

ount

of

GR

/AG

RL

F Im

pact

SUC

Im

pact

Am

ount

of

GR

/AG

RL

F Im

pact

SUC

Impa

ctA

mou

nt o

f G

R/A

GR

LF

Impa

ctSU

C

Impa

ctA

mou

nt o

f G

R/A

GR

LF

Impa

ctSU

C

Impa

ct

AP

5976

411

5976

4117

6304

1904

0406

1904

041

5616

9218

7874

0618

7874

155

4228

1058

2987

1058

299

3121

98

Ass

am-

--

--

-15

2793

9168

3820

5215

2231

291

1303

8

Bih

ar43

4277

2605

711

725

1088

088

6528

529

378

2712

367

1627

4273

234

2454

645

1472

7966

275

Che

nnai

5668

0456

680

1417

084

2780

8427

821

070

2308

499

2308

5057

712

3078

000

3078

0076

950

Del

hi23

3784

123

3784

6546

040

8671

640

8672

1144

2839

3803

139

3803

1102

6591

2314

791

2315

2554

48

Guj

arat

1147

465

1147

4630

982

1626

853

1626

8543

925

1244

835

1244

8333

611

1465

929

1465

9339

580

Har

yana

4236

6733

893

1059

282

4967

6599

720

624

8064

4664

516

2016

128

1584

522

5268

7039

6

HP

7138

742

8319

2715

1579

9095

4093

1236

4574

1933

3837

7110

422

6266

1018

20

J&K

--

--

--

1291

677

532

335

8471

921

5083

8961

8

Kar

nata

ka15

5244

515

5245

4191

624

9356

624

9357

6732

627

5803

927

5804

7446

714

9869

114

9869

4046

5

Ker

ala

6262

4850

100

1816

112

0019

096

015

3480

613

1707

810

5366

3819

555

9269

4474

216

219

Kol

kata

7039

9670

400

1971

213

7816

4713

7816

538

5886

1049

748

1049

7529

393

1839

196

1839

2051

497

MP

5560

3644

483

1501

380

4891

6439

121

732

7397

4859

180

1997

321

9896

717

5917

5937

2

NE

--

--

--

1171

170

329

312

595

756

315

Oris

sa22

2920

1337

560

1947

7297

2863

812

887

5461

2532

768

1474

597

9840

5879

026

456

Punj

ab74

3981

5951

818

600

2458

461

1966

7761

462

1027

580

8220

625

690

9416

348

7533

0823

5409

Raj

asth

an64

1092

5128

717

309

1322

256

1057

8035

701

1569

566

1255

6542

378

1789

290

1431

4348

311

TN68

8720

6887

217

218

1128

380

1128

3828

210

2222

763

2222

7655

569

1111

802

1111

8027

795

UPE

5710

0045

680

1427

510

1117

380

894

2527

993

1011

7448

123

275

1174

577

9396

629

364

UPW

6737

9553

904

1819

213

3757

710

7006

3611

512

5255

110

0204

3381

910

9051

787

241

2944

4

WB

2622

8620

983

7606

5366

1342

929

1556

248

2462

3859

713

991

7340

2058

722

2128

7

Tota

l UA

SL18

2003

7117

0093

250

5182

5421

3440

5162

743

1520

174

4399

5322

4094

621

1228

482

5980

3010

5131

747

1611

257

(` in

cro

re)

Tota

l am

ount

of G

R/

AG

RL

F Im

pact

SUC

Impa

ct

17.

62

1

.61

0

.49


- 256 -

Tata

AN

NE

XU

RE

-7.2

1 [P

ara

No.

7.5]

Stat

emen

t sho

win

g in

tere

st o

n L

F &

SU

C u

pto

Mar

ch 2

015

(TT

SL)

(Am

ount

in `

)

Sl N

o.

Para

N

o.

No.

of M

onth

s(up

to M

arch

15)

9684

7260

TOTA

LR

ate@

(PL

R+2

)%14

.25

14.2

514

.25

13.7

5

Issu

es20

06-0

720

07-0

820

08-0

920

09-1

0

Inte

rest

on

LF

Inte

rest

on

SUC

Inte

rest

on

LF

Inte

rest

on

SUC

Inte

rest

on

LF

Inte

rest

on

SUC

Inte

rest

on

LF

Inte

rest

on

SUC

17.

2.1

Com

mis

sion

2334

7469

469

2053

3418

7696

524

5644

7536

1475

3457

844

6269

8113

8951

561

4224

3264

9201

8047

3

27.

2.2

Dis

coun

ts21

1802

3801

6272

3507

316

9705

0246

5004

9081

215

3714

3342

4553

6628

612

6338

5248

3773

8192

585

7607

6732

37.

2.3

Adj

ustm

ents

4404

0080

1318

4604

4211

3626

1296

0039

3150

1312

9837

534

4187

8361

1331

7752

2088

3330

9

47.

2.4

Star

ter K

it an

d M

isc

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00

00

1400

9634

4612

035

7703

7637

2425

5912

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1521

7

57.

2.5

OPE

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com

e0

00

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4444

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1026

913

0300

3526

1131

533

1960

28

67.

2.6

Fore

x G

ain

9826

0729

1259

1025

5177

730

8412

490

017

1588

311

5216

5303

3584

2050

6

77.

3.1

Inte

rest

Inco

me

7781

8773

2306

6629

2496

0686

7506

635

4103

7980

1241

3369

4217

3558

012

8213

654

7367

5330

6

87.

3.2

Profi

t on

sale

of i

nves

tmen

t17

7915

9352

7369

049

3975

1485

5792

3414

386

2793

1890

311

5582

4126

3513

8708

127

3365

2311

97.

3.3

Profi

t on

sale

of a

sset

00

7677

2259

2308

8360

4316

4074

1305

6480

3158

2358

9601

489

1972

6502

1

107.

4.1

Bad

deb

ts0

00

00

026

1312

156

7470

0664

3360

1282

0

117.

4.2

LL &

Por

t Cha

rges

1082

2752

333

6779

7678

7150

9624

1347

2392

5142

0929

0547

4053

1280

6817

1696

4343

6621

977

127.

4.3

Diff

eren

ce b

etw

een

Lice

nce

fee

AG

R &

Spe

ctru

m u

sage

AG

R0

1003

8045

60

1101

9577

40

7676

6372

010

8401

045

3957

4364

7

137.

4.4

Non

con

side

ratio

n of

rent

al in

com

e in

GR

3581

891

1063

832

8753

989

2577

620

5484

994

1645

626

5034

135

1580

609

2972

2695

TOTA

L26

0394

0962

8733

7885

222

1910

8179

7683

9130

528

4824

8919

9318

0859

636

3448

7576

1203

0296

5515

0823

9404

3

S

ay `

150

8.24

cro

re


- 257 -

Tata

Stat

emen

t sho

win

g in

tere

st o

n L

F &

SU

C u

pto

Mar

15

(TT

ML

)(A

mou

nt in

`)

Para

No.

No.

of M

onth

s(up

to M

arch

15)

9684

7260

TOTA

LR

ate@

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14.2

514

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13.7

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07-0

820

08-0

920

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Inte

rest

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Inte

rest

on

LF

Inte

rest

on

SUC

Inte

rest

on

LF

Inte

rest

on

SUC

Inte

rest

on

LF

Inte

rest

on

SUC

7.2.

1C

omm

issi

on-

--

--

--

--

7.2.

2D

isco

unts

5834

5725

019

1373

977

5507

8614

518

0657

856

5392

2204

717

6864

832

4627

7633

615

1790

638

2836

9290

80

7.2.

3A

djus

tmen

ts93

2620

5130

5899

5365

5190

8121

4902

5935

7628

7711

7302

2437

3795

4912

2604

9230

7994

485

7.2.

4St

arte

r Kit

and

Mis

c R

ev-

--

--

-83

3702

827

3454

511

0715

73

7.2.

5O

PEX

inco

me

--

--

--

--

-

7.2.

6Fo

rex

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n18

3608

8960

2237

237

3534

5712

2519

3415

4691

4450

7387

916

6389

7054

5758

211

6628

228

7.3.

1In

tere

st In

com

e-

--

--

--

--

7.3.

2Pr

ofit o

n sa

le o

f inv

estm

ent

9897

4532

4636

1186

9338

931

4018

713

181

5885

919

306

1603

538

7.3.

3Pr

ofit o

n sa

le o

f ass

et-

--

--

-34

8139

0311

4189

6046

2328

63

7.4.

1B

ad d

ebts

--

--

--

--

-

7.4.

2LL

& P

ort C

harg

es39

8358

4113

0661

5634

8253

3511

4227

1035

9252

6111

7834

8620

5913

9067

5397

617

4204

155

7.4.

3D

iffer

ence

bet

wee

n lic

ense

fee

AG

R &

spec

trum

usa

ge A

GR

--

--

--

--

TO

TAL

=73

5905

776

2413

7709

368

8602

711

2258

6169

062

6419

516

2054

6560

258

0596

035

1904

3549

934

9466

3922

Say

` 34

9.47

cro

re


- 258 -

Aircel

AN

NE

XU

RE

- 8.0

1 [P

ara

8.2.

1 A

]St

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the

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Air

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mou

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08

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2

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Deb

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red

to c

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5109

1524

0436

740

4030

3288

628

7916

983

9908

9752

4

Deb

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ed in

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Rev

enue

hea

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coun

t of "

Dis

coun

t of

fere

d to

cus

tom

ers"

4615

2419

7

-

-

62

2217

046

7746

367

Deb

it en

try n

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ed in

the

Rev

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hea

ds o

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coun

t of "

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o Ta

lk

Tim

e Tr

ansf

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7696

6957

0080

820

2846

010

9122

695

9016

4

Am

ount

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unde

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3300

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lk T

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usag

e",

whi

ch w

as g

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et o

ff ag

ains

t rev

enue

, whi

le d

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"Tot

al

Inco

me

as p

er F

inan

cial

s"69

8275

7654

9321

6311

398

2935

6454

2471

3162

0

Tota

l net

ting

off a

gain

st re

venu

e52

2503

055

2469

0304

162

1372

744

3245

8683

417

1536

5675

Am

ount

add

ed b

ack

in re

venu

e w

hile

cal

cula

ting

GR

/AG

R -

unde

r de

scrip

tion

"Pro

mo

talk

tim

e gi

ven

as d

isco

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69

8285

4209

779

2163

1139

865

4744

922

7766

911

Am

ount

add

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in re

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hile

cal

cula

ting

GR

/AG

R -

unde

r de

scrip

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"Goo

dwill

wai

ver a

nd ro

yalty

dis

coun

t"

2540

4373

3246

2939

1909

8986

-

7696

6298

Am

ount

not

con

side

red

for A

GR

4964

0039

821

0230

323

3859

6236

031

8039

385

1410

6324

66

Say

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cro

re

49.

64

2

1.02

38.

60

3

1.80

141.

06


- 259 -

AircelA

NN

EX

UR

E-8

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[Par

a 8.

2.1

A]

Impa

ct o

n pa

ymen

t of L

F an

d SU

C d

ue to

non

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side

ratio

n of

wai

vers

dis

coun

ts p

rom

otio

n of

fers

etc

(Am

ount

in `

)

Serv

ices

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SA

Com

pany

2

006-

07

200

7-08

2

008-

09

200

9-10

A

mou

nt o

f G

R/A

GR

L

F Im

pact

S

UC

Im

pact

A

mou

nt o

f G

R/A

GR

L

F Im

pact

S

UC

Im

pact

A

mou

nt o

f G

R/A

GR

L

F Im

pact

S

UC

Im

pact

A

mou

nt o

f G

R/A

GR

L

F Im

pact

S

UC

Impa

ct

Ass

amD

WL

2348

3614

090

6223

2042

9912

258

6844

00

00

00

Bih

arD

WL

00

017

3240

310

3944

4071

132

1288

1927

775

5095

4905

5729

422

440

HP

DW

L16

2798

3837

7922

789

1980

9111

885

4655

8193

549

1619

25J&

KD

WL

4067

124

4095

630

5361

1832

271

7615

0908

190

545

3546

335

732

2144

840

Ker

ala

DW

L-

--

--

--

--

6384

546

5107

6415

0037

Kol

kata

DW

L-

--

--

--

--

-657

898

--

NE

DW

L23

117

1387

543

--

--

--

--

-O

rissa

DW

L18

5565

1113

443

6110

680

641

251

00

013

2046

2879

2278

3103

09W

BD

WL

3086

724

6972

51

--

--

--

--

TO

TAL

DW

L U

ASL

5166

8331

618

1284

722

5652

213

5391

5507

120

2846

012

1708

4766

920

0038

4813

6739

648

5551

AP

AL

--

--

--

4869

248

6911

4496

9889

096

9889

2279

24D

elhi

AL

--

--

--

7712

177

1217

3513

6528

9513

6529

030

7190

Kar

nata

kaA

L-

--

--

-10

9151

1091

525

6579

6821

079

6821

1872

53M

ahar

ash-

traA

L-

--

--

--

--

2682

322

2682

3263

035

Mum

bai

AL

--

--

--

--

-91

5364

691

5365

2059

57TN

AL

3079

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224

6355

1113

3955

5913

3181

033

1065

4483

5793

375

2849

2941

528

4929

4212

3944

3020

3093

665

2030

9367

8834

574

TO

TAL

AL

3079

4388

224

6355

1113

3955

5913

3181

033

1065

4483

5793

375

2851

6437

828

5164

3812

3998

7424

6249

629

2462

4963

9825

933

Che

nnai

AC

L18

7939

833

1879

3983

7987

443

7479

2767

7479

277

3178

693

9641

6795

9641

680

4097

714

5178

5908

5178

591

2200

901

TO

TAL

AC

L18

7939

833

1879

3983

7987

443

7479

2767

7479

277

3178

693

9641

6795

9641

680

4097

714

5178

5908

5178

591

2200

901

TO

TAL

UA

SL49

6400

398

4346

1112

2139

5848

2102

3032

318

2691

5190

2713

938

3609

634

3827

9825

1654

5257

3180

3938

531

1709

4912

5123

85

ISP

DW

L-

--

--

-23

5272

614

1164

--

--

G

RA

ND

TO

TAL

4964

0039

843

4611

1221

3958

4821

0230

323

1826

9151

9027

139

3859

6236

038

4209

8916

5452

5731

8039

385

3117

0949

1251

2385

(` in

cro

re)

Serv

ices

/Com

pany

Tota

l am

ount

of G

R/A

GR

LF

Impa

ctSU

C Im

pact

ISP

0.

24

0

.01

-

DW

L U

ASL

2.

48

0

.17

0.0

6

AL

UA

SL

97.

25

8

.84

4.1

4

AC

L U

ASL

41.

09

4

.11

1.7

5

GR

AN

D T

OTA

L

141

.06

13

.13

5.9

5


- 260 -

Aircel

AN

NE

XU

RE

-8.0

3 [P

ara

8.2.

1 B

]Im

pact

on

paym

ent o

f LF

and

SUC

due

to n

on-c

onsi

dera

tion

of F

ull T

alk

time

(FT

T)

(Am

ount

in `

)

Serv

ices

/ L

SA

Com

pany

200

6-07

2

007-

08

200

8-09

2

009-

10

Am

ount

of

GR

/AG

R

LF

Impa

ct

SU

C

Impa

ct

Am

ount

of

GR

/AG

R

LF

Impa

ct

SU

C Im

pact

A

mou

nt o

f G

R/A

GR

L

F Im

-pa

ct

SU

C

Impa

ct

Am

ount

of

GR

/AG

R

LF

Im-

pact

S

UC

Im

pact

Ass

am

DW

L -

--

1265

1752

775

9105

242

3833

732

7460

224

1964

7613

1096

9918

1777

1134

610

6626

8159

5333

0

Bih

ar

DW

L -

--

5619

5226

3371

714

1320

588

7497

4705

4498

482

1761

906

--

-

Kol

kata

D

WL

--

--

--

1192

6263

1192

626

2683

4188

3813

588

3814

1988

58

NE

DW

L -

--

8503

2126

5101

928

1998

255

1932

0513

011

5923

0845

4032

140

7166

5324

4299

995

6841

Oris

sa

DW

L -

--

5567

0865

3340

252

1308

265

1277

4988

076

6499

330

0212

287

1997

852

3199

2049

19

WB

D

WL

--

-13

0966

861

1047

7349

3077

721

4970

7110

3976

569

1168

117

1203

2212

9625

7728

2757

T

OTA

L D

WL

--

-45

4382

605

2988

2294

1194

3166

7850

2331

348

5725

9121

7107

2424

8018

325

1547

5269

7596

706

TN

A

L 45

8904

3236

7123

519

9623

4-

--

--

--

--

T

OTA

L A

L 45

8904

3236

7123

519

9623

4-

--

--

--

--

T

OTA

L U

ASL

45

8904

3236

7123

519

9623

445

4382

605

2988

2294

1194

3166

7850

2331

348

5725

9121

7107

2424

8018

325

1547

5269

7596

706

(` in

cro

re)

Serv

ices

/Com

pany

Tota

l am

ount

of G

R/

AG

RL

F Im

pact

SUC

Impa

ct

DW

L

1

48.7

4

9.3

9

4

.12

AL

4.59

0.3

7

0

.20

TOTA

L U

ASL

153

.33

9

.76

4.3

2


- 261 -

Aircel

AN

NE

XU

RE

-8.0

4 [P

ara

8.2.

1 C

]Im

pact

on

paym

ent o

f LF

and

SUC

due

to n

on-c

onsi

dera

tion

of F

ree A

irtim

e (F

AT)

(Am

ount

in `

)

Serv

ices

/ L

SA

Com

pany

2

006-

07

200

7-08

2

008-

09

200

9-10

Am

ount

of

GR

/AG

R

LF

Impa

ct

SU

C

Impa

ct

Am

ount

of

GR

/AG

R

LF

Im-

pact

S

UC

Im

pact

A

mou

nt o

f G

R/A

GR

L

F Im

pact

S

UC

Im

pact

A

mou

nt o

f G

R/A

GR

L

F Im

pact

S

UC

Im

pact

HP

DW

L -

--

--

-18

0320

1081

942

3840

7300

2443

895

72

Ker

ala

DW

L -

--

--

-54

055

4324

1270

1481

5311

852

3482

UPE

D

WL

--

--

--

--

-92

4683

7397

521

730

UPW

D

WL

--

--

--

--

-22

1187

1769

551

98

WB

D

WL

3091

6224

733

7265

--

--

--

--

-

T

OTA

L D

WL

3091

6224

733

7265

--

-23

4375

1514

455

0817

0132

312

7960

3998

1

AP

AL

--

--

--

7497

1674

972

1761

890

8433

990

8434

2134

82

Del

hi

AL

--

--

--

--

-41

5365

841

5366

9345

7

Kar

nata

ka

AL

--

--

--

--

-20

0991

420

0991

4723

3

Mah

aras

htra

A

L -

--

--

--

--

8486

7184

867

1994

4

Mum

bai

AL

--

--

--

--

-69

6286

369

6286

1566

64

TN

A

L 16

0856

193

1286

8495

6997

244

2917

7723

2334

218

1269

231

--

-55

1492

0955

1492

123

9899

1

T

OTA

L A

L 16

0856

193

1286

8495

6997

244

2917

7723

2334

218

1269

231

7497

1674

972

1761

878

2086

5478

2086

529

2977

1

Che

nnai

A

CL

--

--

--

2830

4178

2830

418

1202

928

3402

9072

3402

907

1446

236

T

OTA

L A

CL

--

--

--

2830

4178

2830

418

1202

928

3402

9072

3402

907

1446

236

T

OTA

L U

ASL

16

1165

355

1289

3228

7004

510

2917

7723

2334

218

1269

231

2928

8268

2920

533

1226

054

1139

3904

911

3517

3244

1598

8

(`

in c

rore

)

Serv

ices

/Com

pany

Tota

l am

ount

of

GR

/AG

RL

F Im

pact

SUC

Impa

ct

DW

L

0.2

3

0.

02

0.0

1

AL

26.

90

2.31

1

.12

AC

L

6.2

3

0.

62

0.2

6

TOTA

L U

ASL

33.

36

2.95

1

.39


- 262 -

Aircel

ANNEXURE-8.05 [Para 8.2.1 D]Impact on payment of LF and SUC due to non-consideration of Discount ER

(Amount in `)

Services/LSA Company 2009-10


Karnataka AL 12015448 1201545 282363

Maharastra AL 2615017 261502 61453

Mumbai AL 13534767 1353477 304532

TOTAL UASL (AL) 28165232 2816523 648348

(` in crore)


TOTAL UASL (AL)

2.82

0.28

0.06


- 263 -

AircelA

NN

EX

UR

E-8

.06

[Par

a 8.

2.3]

Impa

ct o

n pa

ymen

t of L

F an

d SU

C d

ue to

non

-con

side

ratio

n of

Com

mis

sion

(Am

ount

in `

)

Serv

ices

/L

SAC

ompa

ny20

06-0

720

07-0

820

08-0

920

09-1

0

Am

ount

of

GR

/AG

RL

F Im

pact

SUC

Im

pact

Am

ount

of

GR

/AG

RL

F Im

pact

SUC

Im

pact

Am

ount

of

GR

/AG

RL

F Im

pact

SUC

Im

pact

Am

ount

of

GR

/AG

RL

F Im

pact

SUC

Im

pact

Ass

amD

WL

2643

1141

1585

868

7004

2578

1959

8346

9175

926

1956

510

9255

413

6555

325

3660

056

1355

3318

981

3199

145

4036

2

Bih

arD

WL

1283

3377

0030

1613

9083

3683

4500

3268

4634

9294

5520

9576

782

0842

6741

1195

4044

672

1584

163

HP

DW

L40

178

2411

944

9351

9656

112

2197

727

6934

916

6161

6508

091

6636

854

9982

2154

10

J&K

DW

L34

3907

820

6345

8081

817

7394

1010

6436

541

6876

4225

1708

2535

102

9929

1574

8834

5644

9300

717

5976

1

Ker

ala

DW

L-

--

--

-21

6690

1733

550

9216

2140

3912

9712

338

1030

Kol

kata

DW

L-

--

--

-79

4470

379

4470

1787

5627

5418

3927

5418

461

9691

NE

DW

L20

8414

9612

5049

048

9775

5281

3433

3168

806

1241

116

7673

7962

4604

278

1803

342

1112

5903

766

7554

226

1458

7

Odi

sha

DW

L42

1191

225

2715

9898

021

9370

0013

1622

051

5520

2743

0567

1645

834

6446

1844

5504

1526

7302

510

4693

5

UPE

DW

L-

--

--

-34

327

811

0521

6988

4173

2597

26

UPW

DW

L-

--

--

-13

010

312

7774

3210

2219

530

0270

WB

DW

L27

6384

222

1107

6495

016

5788

7213

2631

038

9603

2659

1716

2127

337

6249

0553

6507

3642

9205

912

6079

2

TO

TAL

DW

L57

8559

8035

2663

614

3890

920

2108

231

1245

8071

5531

503

3281

2803

620

5416

4887

9561

856

4039

876

3681

7954

1458

2727

AP

AL

--

--

--

7695

576

9618

0822

8432

1022

8432

153

6815

Del

hiA

L-

--

--

-42

718

4272

961

3174

1139

3174

114

7141

76

Kar

nata

kaA

L-

--

--

-16

1278

1612

837

9015

8523

5015

8523

537

2530

Mah

aras

htra

AL

--

--

--

--

-61

3000

561

3000

1440

55

Mum

bai

AL

--

--

--

--

-22

6651

2222

6651

250

9965

TNA

L14

5965

875

1167

7270

6349

516

2319

0815

218

5526

5210

0880

0528

0470

379

2804

7038

1220

0462

4421

6781

544

2167

8219

2343

00

TO

TAL

AL

1459

6587

511

6772

7063

4951

623

1908

152

1855

2652

1008

8005

2807

5133

128

0751

3312

2070

2154

1399

641

5413

9964

2151

1842

Che

nnai

AC

L68

3417

4068

3417

429

0452

497

1032

4297

1032

441

2688

810

0628

501

1006

2850

4276

711

1078

7348

910

7873

4945

8462

3

TO

TAL

AC

L68

3417

4068

3417

429

0452

497

1032

4297

1032

441

2688

810

0628

501

1006

2850

4276

711

1078

7348

910

7873

4945

8462

3

TO

TAL

UA

SL27

2163

595

2203

8080

1069

2948

5311

1962

540

7210

4819

7463

9670

9507

868

5867

9631

2527

9351

1213

3130

0510

1745

267

4067

9192

(` in

cro

re)

Serv

ice/

Com

-pa

nyTo

tal a

mou

nt o

f GR

/AG

RL

F Im

pact

SUC

Impa

ct

DW

L

1

15.2

0

7

.33

3.0

3

AL

120

.00

11.2

4

5

.02

AC

L

37.

40

3.7

4

1

.59

TOTA

L U

ASL

272

.60

22.3

1

9

.64


- 264 -

Aircel

AN

NE

XU

RE

-8.0

7 [P

ara

8.2.

4]Im

pact

on

paym

ent o

f LF

and

SUC

due

to n

on-c

onsi

dera

tion

of In

com

e on

acc

ount

of M

arke

t Sto

ck

(Am

ount

in `

)

Serv

ices

/LSA

Com

pany

2008

-09

2009

-10

Am

ount

of G

R/A

GR

LF

Impa

ctSU

C Im

pact

Am

ount

of G

R/A

GR

LF

Impa

ctSU

C Im

pact

Bih

ar

DW

L 25

5861

1535

260

13-

--

T

OTA

L D

WL

2558

6115

352

6013

--

-

AP

AL

1329

133

3159

5064

5950

613

984

Del

hi

AL

2105

211

4788

0465

8804

619

810

Kar

nata

ka

AL

2979

298

7044

6185

4461

910

485

Mah

aras

htra

A

L -

--

1746

3417

463

4104

Mum

bai

AL

--

-61

7634

6176

313

897

TN

A

L 81

0614

881

0615

3526

1713

0959

4513

0959

456

9674

T

OTA

L A

L 81

1256

281

1256

3527

6615

8099

2615

8099

363

1954

Che

nnai

A

CL

2439

333

2439

3310

3672

7340

571

7340

5731

1974

T

OTA

L A

CL

2439

333

2439

3310

3672

7340

571

7340

5731

1974

TO

TAL

UA

SL10

8077

5510

7054

146

2450

2315

0497

2315

050

9439

28

(` in

cro

re)

Serv

ice/

Com

pany

Tota

l am

ount

of G

R/A

GR

LF

Impa

ctSU

C Im

pact

DW

L

0

.03

0.0

0

0.

00

AL

2.3

9

0

.24

0.10

AC

L

0

.98

0.1

0

0.

04

TOTA

L U

ASL

3.4

0

0

.34

0.14


- 265 -

AircelA

NN

EX

UR

E-8

.08

[Par

a 8.

2.5]

Impa

ct o

n pa

ymen

t of L

F an

d SU

C d

ue to

non

-con

side

ratio

n of

Site

shar

ing

inco

me

(Am

ount

in `

)

Serv

ices

/LSA

Com

pany

2006

-07

2007

-08

2008

-09

2009

-10

Am

ount

of

GR

/AG

RL

F Im

pact

SUC

Impa

ctA

mou

nt o

f G

R/A

GR

LF

Impa

ctSU

C Im

pact

Am

ount

of

GR

/AG

RL

F Im

pact

SUC

Impa

ctA

mou

nt o

f GR

/A

GR

LF

Impa

ctSU

C Im

pact

Ass

am

DW

L 24

2130

1452

864

1625

1061

815

0637

8410

682

0920

549

2552

2750

0893

1069

455

8642

3119

08 B

ihar

D

WL

--

-97

8860

758

7316

2300

3243

7047

1226

2228

310

2706

136

7412

9722

0447

886

3420

HP

DW

L -

--

--

-17

3273

8810

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3906

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UA

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4831

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9277

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45

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.26


- 266 -

Aircel

AN

NE

XU

RE

-8.0

9 [P

ara

8.2.

6]Im

pact

on

paym

ent o

f LF

and

SUC

due

to n

on-c

onsi

dera

tion

of F

orex

gai

n in

com

e(A

mou

nt in

`)

Serv

ices

/LSA

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pany

2006

-07

2007

-08

2008

-09

2009

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Am

ount

of

GR

/AG

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F Im

pact

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Impa

ctA

mou

nt o

f G

R/A

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nt o

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pact

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am

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1053

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1445

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-31

100

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of G

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09

AC

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0.00

0.

00

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G

RA

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TAL

15.1

3 1.

23

0.31


- 267 -

AircelA

NN

EX

UR

E-8

.10

[Par

a 8.

2.7]

Impa

ct o

n pa

ymen

t of L

F an

d SU

C d

ue to

non

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side

ratio

n of

Inte

rezs

t on

depo

sits

(Am

ount

in `

)

Serv

ices

/LSA

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pany

2006

-07

2007

-08

2008

-09

2009

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Am

ount

of

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/AG

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F Im

pact

SUC

Im

pact

Am

ount

of G

R/

AG

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F Im

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C Im

-pa

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nt o

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Impa

ctSU

C Im

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Ass

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WL

1896

3782

411

3782

6950

2540

288

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6152

9952

829

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1512

3720

4907

411

4406

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9546

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1728

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L91

7345

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121

558

1745

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1047

081

4101

0711

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9449

2817

8421

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313

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5156

5H

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WL

7615

2045

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1789

616

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898

532

3859

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0592

560

356

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8650

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ala

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00

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4647

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4934

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473

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2968

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2968

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WL

1289

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DW

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9916

1059

247

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1858

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5359

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6218

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5361

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DW

L U

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4044

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424

6701

7710

0736

9623

1549

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1426

4841

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--

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1828

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--

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AL

--

--

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1115

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4852

3314

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239

1431

2424

5715

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A

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--

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--

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2185

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4044

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0736

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1161

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877

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7036

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1706

7656

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3246

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-32

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/Com

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l am

ount

of G

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18

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RA

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98.8

9

6.7

4

2.

66


- 268 -

Aircel

AN

NE

XU

RE

-8.1

1 [P

ara

8.2.

8]Im

pact

on

paym

ent o

f LF

and

SUC

due

to n

on-c

onsi

dera

tion

of In

tere

st o

n In

vest

men

ts(A

mou

nt in

`)

Serv

ices

/LSA

Com

pany

2008

-09

2009

-10

Am

ount

of G

R/A

GR

LF

Impa

ctSU

C Im

pact

Am

ount

of G

R/A

GR

LF

Impa

ctSU

C Im

pact

AP

AL

2336

234

5526

4086

926

4087

6206

0

Del

hiA

L37

0037

083

3907

470

3907

4787

918

Kar

nata

kaA

L52

3652

412

319

8015

419

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4653

4

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aras

htra

AL

--

-77

5018

7750

218

213

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bai

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--

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4103

527

4104

6167

3

TNA

L14

2459

9614

2460

061

9701

5811

9306

5811

931

2528

190

TO

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AL

1425

7267

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6199

6270

1638

5370

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528

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nnai

AC

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/Com

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l am

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of

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/AG

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8

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7

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L U

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9

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0.

90

0.3

7


- 269 -

Aircel

ANNEXURE-8.12 [Para 8.2.9 (i)]Impact on payment of LF and SUC due to non-consideration of Corporate income (Composite contract/

Software services/Project management income)(Amount in `)

Services/LSA Company

2006-07 2008-09

Amount of GR/AGR LF Impact SUC Impact Amount of


Assam DWL 406195115 24371707 10764171 221803 13308 7430

Bihar DWL 1964555 117873 46167 77908 4675 1831

HP DWL 1580999 94860 37153 6524 391 153

J & K DWL 67880050 4072803 1595181 82932 4976 1949

Kerala DWL - - - 375 30 9

Kolkata DWL - - - 19271 1927 434

Orissa DWL 69068138 4144088 1623101 58787 3527 1382

WB DWL 43061173 3444894 1011938 56463 4517 1327

NE DWL 276207065 16572424 6490866 143819 8629 3380

TOTAL DWL UASL 865957093 52818649 21568577 667882 41981 17894

NLD DWL - - - 33968 2038 -

ILD DWL - - - 28194 1692 -

ISP DWL 69545244 4172715 - 19796 1188 -

GRAND TOTAL 935502337 56991364 21568577 749840 46898 17894

(` in crore)


DWL UASL 86.67 5.29 2.16

NLD 0.00 0.00 -

ILD 0.00 0.00 -

ISP 6.96 0.41 -

TOTAL UASL 93.63 5.70 2.16


- 270 -

Aircel

AN

NE

XU

RE

-8.1

3 [P

ara

8.2.

9(ii)

]Im

pact

on

paym

ent o

f LF

and

SUC

due

to n

on-c

onsi

dera

tion

of N

otic

e Pa

y(A

mou

nt in

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mou

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R/A

GR

LF

Impa

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C

Impa

ct K

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aD

WL

--

--

--

5876

147

0113

8169

8341

5586

716

411

Ass

amD

WL

3669

7922

019

9725

3107

9818

648

1041

224

6993

214

8196

8274

345

2145

2712

915

147

Bih

ar

DW

L31

348

1881

737

5081

0330

486

1194

023

2126

813

9276

5455

023

6937

1421

655

68H

PD

WL

8366

502

197

1477

8688

6734

7328

9787

1738

768

1057

8088

3468

513

585

J&K

DW

L15

0175

9011

3529

2429

2514

576

5709

1481

766

8890

634

822

1113

517

6681

126

168

Kol

kata

DW

L86

321

8632

021

8535

2185

349

1718

9616

118

9616

4266

439

2093

239

2093

8822

1N

ED

WL

1971

9811

832

4634

1745

5010

473

4102

1445

352

8672

133

966

3396

0920

377

7981

Oris

saD

WL

1702

2810

214

4000

3446

1720

677

8098

1650

699

9904

238

791

1616

018

9696

137

976

UPE

DW

L-

--

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-19

3624

1549

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5014

1058

211

2847

3314

9U

PWD

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--

--

--

4030

932

2594

740

763

3261

958

WB

DW

L23

0557

1844

554

1858

0255

4642

013

636

1736

938

1389

5540

818

1634

955

1307

9638

421

TO

TAL

DW

L U

ASL

1241

173

8253

428

240

2527

568

1720

0162

287

1358

4597

9315

1534

2041

1204

1886

9550

4328

3585

AP

AL

--

--

--

3356

033

5678

962

8133

6281

314

761

Del

hiA

L-

--

--

-24

614

2461

554

1433

143

1433

1432

246

Kar

nata

kaA

L-

--

--

-17

8542

1785

441

9620

0507

420

0507

4711

9M

ahar

asht

raA

L-

--

--

--

--

2637

1226

371

6197

Mum

bai

AL

--

--

--

2662

4626

625

5991

1798

996

1799

0040

477

TNA

L67

6619

6766

229

433

1190

200

1190

2051

774

2043

577

2043

5888

896

2280

790

2280

7999

214

TO

TAL

AL

6766

1967

662

2943

311

9020

011

9020

5177

425

4654

025

4654

1004

2484

0984

984

0985

2400

15C

henn

aiA

CL

1807

0418

070

7680

8507

9085

079

3615

984

0768

8407

735

733

1867

081

1867

0879

351

TO

TAL

AC

L18

0704

1807

076

8085

0790

8507

936

159

8407

6884

077

3573

318

6708

118

6708

7935

1

TOTA

L U

ASL

2098

496

1682

6765

353

4568

558

3761

0015

0220

1697

1905

1270

246

4781

9822

3188

1619

8273

660

2951

NL

DD

WL

--

-12

1573

-26

9238

1615

4-

2985

9617

916

-IL

DD

WL

--

--

--

2233

7513

403

-26

7085

1602

5-

ISP

DW

L45

2036

2712

2-

6887

3941

324

-10

0153

060

092

-64

9863

3899

2-

G

RA

ND

TO

TAL

2550

532

1953

8965

353

5258

511

4174

9715

0220

1846

6048

1359

894

4781

9823

5343

6020

5566

960

2951

(` in

cro

re)

Serv

ices

/Com

pany

Tota

l am

ount

of

GR

/AG

RL

F Im

pact

SUC

Impa

ct

NL

D

0.0

6

0.0

0

-

IL

D

0.0

5

0.0

0

-

IS

P

0.2

8

0.0

2

-

D

WL

UA

SL

2.9

4

0.2

1

0.0

7 A

L U

ASL

1.2

8

0.1

3

0.0

4 A

CL

UA

SL

0.3

7

0.0

4

0.0

2 G

RA

ND

TO

TAL

4

.98

0

.40

0

.13


- 271 -

AircelA

NN

EX

UR

E-8

.14

[Par

a 8.

2.9(

iii)]

Impa

ct o

n pa

ymen

t of L

F an

d SU

C d

ue to

non

-con

side

ratio

n of

Oth

er In

com

e (A

mou

nt in

`)

Serv

ices

/LSA

Com

pany

2006

-07

2007

-08

2008

-09

2009

-10

Am

ount

of

GR

/AG

RL

F Im

pact

SUC

Im

pact

Am

ount

of

GR

/AG

RL

F Im

pact

SUC

Im

pact

Am

ount

of

GR

/A

GR

LF

Impa

ctSU

C

Impa

ctA

mou

nt o

f GR

/A

GR

LF

Impa

ctSU

C Im

pact

Ass

amD

WL

--

--

--

--

-22

2914

413

3749

7467

6B

ihar

DW

L-

--

--

--

--

1165

865

6995

227

398

HP

DW

L-

--

--

--

--

1507

2790

4435

42J&

KD

WL

9200

155

2021

62-

--

--

-28

5099

917

1060

6699

8K

eral

aD

WL

--

-10

3182

5-

--

1402

210

1121

7732

952

Kol

katta

DW

L-

--

--

--

--

4971

9149

719

1118

7N

ED

WL

2201

413

2151

7-

--

--

-16

7515

410

0509

3936

6O

rissa

DW

L91

455

21-

--

--

-76

7876

4607

318

045

UPE

DW

L-

--

--

--

--

1725

5413

804

4055

UPW

DW

L-

--

--

--

--

2004

2616

034

4710

WB

DW

L31

7525

475

--

--

--

3653

1529

225

8585

TO

TAL

DW

L U

ASL

1181

0471

5027

7510

3182

5-

- -

1147

7462

7513

4529

1515

AP

AL

--

--

--

--

-12

490

1249

294

Del

hiA

L-

--

--

--

--

1848

018

4841

6K

arna

taka

AL

--

--

--

--

-93

6593

722

0M

ahar

asht

raA

L-

--

--

--

--

3665

367

86M

umba

iA

L-

--

--

--

--

1296

312

9629

2TN

AL

--

--

--

--

-27

4869

2748

711

957

TO

TAL

AL

- -

- -

- -

- -

- 33

1832

3318

313

264

Che

nnai

-

--

--

-92

8578

9285

839

465

--

-

TOTA

L A

CL

- -

- -

- -

9285

7892

858

3946

5-

- -

TO

TAL

UA

SL11

8104

7150

2775

1031

825

9285

7892

858

3946

511

8092

9478

4529

3047

79N

LD

DW

L-

--

897

54-

--

-14

7218

088

331

-IL

DD

WL

--

--

--

--

-83

3424

5000

5-

ISP

DW

L-

--

--

--

--

7432

9544

598

-

GR

AN

D T

OTA

L11

8104

7150

2775

1928

136

592

8578

9285

839

465

1485

8193

9674

6330

4779

(` in

cro

re)

Serv

ices

/Com

pany

Tota

l am

ount

of G

R/A

GR

LF

Impa

ctSU

C Im

pact

NL

D

0.15

0

.01

-

IL

D

0.08

0

.01

-

IS

P

0.08

0

.00

-

D

WL

UA

SL

1.16

0

.08

0.03

A

L U

ASL

0.03

0

.00

0.00

A

CL

UA

SL

0.09

0

.01

0.00

G

RA

ND

TO

TAL

1.

59

0.1

1

0.

03


- 272 -

Aircel

ANNEXURE -8.15 [Para 8.2.10]Statement showing the Profit on Sale of Assets Netted off with Loss on sale of assets-

Dishnet Wireless Ltd -2007-2008(Amount in `)

GL Account Name of the Account Amount(Credit amount/Gain)

Amount (Debit amount/Loss)

4900022 Profit on Sale of Plant & Machinery 6800

4900023 Profit on Sale of Office Equipment 43498

4900024 Profit on Sale of Computer System & software 1573407

4900025 Profit on Sale of Furniture and Fittings 121917

4900026 Profit on Sale of Vehicles 368136

4900028 Profit on Sale of Bandwidth 98225000

4900029 Profit on Sale of Low VSAT 31300

3350209 Loss on Sale of Plant & Machinery 203365

3350210 Loss on Sale of Office Equipment 69834

3350211 Loss on Sale of Computer System & Software 6977

3350210 Loss on Sale of Furniture and Fittings 556345

Gross figure 100370058 836521

Net Amount as per Financial Statement 99533537

Say ` 10.04 crore


- 273 -

Aircel

ANNEXURE -8.16 [Para 8.2.10]Statement showing the Profit on Sale of Assets Netted off with Loss on sale of assets-Aircel Ltd -2009-2010

(Amount in `)

Period GL Account and Name of the Account GL Balance Amount

Amount as per TB/SAP

Gross Revenue of Profit on

sale of assets

Amount included in

the AGR

Amount not considered in

the AGR

2006-07 GL-4900026-Profit on sale of Vehicles 335189 335189 335189 335189 -

2007-08 GL-4900026-Profit on sale of Vehicles 2201771 2201771 2201771 2201771 -

2008-09 GL-4900026-Profit on sale of Vehicles - - - -

2009-10 GL-3303009-R&M Others 236468441** 236468441** 238775552*** - 238775552

2009-10 GL-3350209-Loss on sale of P&M 2005987* 2005987* - - -

As per Financial statement (Sch-12) -Other income (Net amount was booked.)

234462454#*

TOTAL 238775552

Say ` 23.88 crore

*Represents debit balance/loss .#* Represents ** minus *** This is after netting off the debit balances of ` 2307112 (under the Business Areas of Karnataka- ` 63600 Andhra Pradesh- ` 220476 Delhi- ` 2020466 and Rest of Maharashtra- ` 2570) which has been added back to arrive at Gross Revenue.*** Includes ` 2307112 being the debit balances added back.


- 274 -

Aircel

ANNEXURE -8.17 [Para 8.2.10]Statement showing the Profit on Sale of Assets Netted off with Loss on sale of assets

M/s Aircel Cellular Ltd -2007-2008 and 2009-10

(Amount in `)

Period GL Account and Name of the Account

GL Balance as per TB

Amount as per Finance Statement

Gross revenue of Profit on

sale of assets

Amount included in

the AGR

Amount not considered in the

AGR

2006-07 GL-4900022- Profit on sale of Plant & Machinery - - - - -

2007-08 GL-4900022- Profit on sale of Plant & Machinery 220835 220835 220835 75800 145035

2008-09 GL-4900022-Profit on sale of Plant and Machinery 322981 322428* 322981 322981 -

2009-10 GL-3303009-Repairs & Maintenance –Others 72404196 72404196 72404196 - 72404196

Total 72549231

Say ` 7.25 crore

*The loss on Sale of Furniture and Fittings ( Account Head 3350212) – ` 553 has been adjusted.


- 275 -

Aircel

AN

NE

XU

RE

- 8.1

8 [P

ara

8.2.

10]

Impa

ct o

n pa

ymen

t of L

F an

d SU

C d

ue to

non

-con

side

ratio

n of

Pro

fit o

n Sa

le o

f Ass

ets

(Am

ount

in `

)

Serv

ices

/LSA

Com

pany

2007

-08

2009

-10

Am

ount

of G

R/A

GR

LF

Impa

ctSU

C Im

pact

Am

ount

of G

R/A

GR

LF

Impa

ctSU

C Im

pact

Ass

amD

WL

7977

8947

867

2672

6-

--

Bih

arD

WL

1576

2794

5837

04-

--

HP

DW

L14

833

890

349

--

-J&

KD

WL

1886

0811

316

4432

--

-K

olka

taD

WL

364

--

-N

ED

WL

5070

4830

423

1191

6-

--

Oris

saD

WL

2306

2613

838

5420

--

-W

BD

WL

1673

7613

390

3933

--

-

TOTA

L D

WL

UA

SL20

6394

312

7186

5648

1

-

-

-

AP

AL

--

-64

5645

6456

515

173

Del

hiA

L-

--

9553

0695

531

2149

4K

arna

taka

AL

--

-48

4112

4841

111

377

Mah

aras

htra

AL

--

-18

9478

1894

844

53M

umba

iA

L-

--

2926

703

2926

7065

851

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L-

--

2335

7430

823

3574

3110

1604

82

TOTA

L A

L

-

-

-

2387

7555

223

8775

5510

2788

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henn

ai

1450

3514

503

6164

7240

4196

7240

420

3077

178

TO

TAL

AC

L14

5035

1450

361

6472

4041

9672

4042

030

7717

8

TOTA

L U

ASL

2208

977

1416

8962

644

3111

7974

831

1179

7513

3560

08N

LD

DW

L98

2327

4758

9396

5-

--

-IS

PD

WL

7336

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02-

--

-

GR

AN

D T

OTA

L10

0515

093

6040

056

6264

431

1179

748

3111

7975

1335

6008

(` in

cro

re)

Serv

ices

/Com

pany

Tota

l am

ount

of

GR

/AG

RL

F Im

pact

SUC

Impa

ct

NL

D

9.

82

0

.59

-

IS

P

0.

01

0

.00

-

D

WL

UA

SL

0.

21

0

.01

0.0

1 A

L U

ASL

23.

88

2

.39

1.0

3 A

CL

UA

SL

7.

25

0

.73

0.3

0 G

RA

ND

TO

TAL

4

1.17

3.7

2

1

.34


- 276 -

Aircel

AN

NE

XU

RE

-8.1

9 [P

ara

8.3.

2]Im

pact

on

paym

ent o

f LF

due

to n

on-c

onsi

dera

tion

of e

xces

s ded

uctio

n cl

aim

ed o

n ac

coun

t of I

nter

net s

ervi

ces

(Am

ount

in `

)

Com

pany

GL

Cod

e D

escr

iptio

n 2

006-

07

200

7-08

2

008-

09

200

9-20

10

Tot

al

DW

L (I

SP)

4004

119

INC

OM

E FR

OM

LEA

SE L

INE

REG

ISTR

ATIO

N

INTE

R C

O

--

-15

0360

1503

60

4004

120

INC

OM

E FR

OM

LEA

SE L

INE

REN

TAL

INTE

R C

O

--

-27

3808

3627

3808

36

4006

003

INC

OM

E FR

OM

LEA

SE L

INE-

MO

NTH

LT R

ENTA

L 12

4231

455

1824

4948

726

9994

150

2458

6289

382

2537

985

4006

004

INC

OM

E FR

OM

LEA

SE L

INE-

REG

ISTR

ATIO

N

CH

AR

GES

18

8774

765

6663

512

3401

9316

0078

9036

8024

65

4008

001

INC

OM

E FR

OM

WIF

I 17

5066

178

9574

4621

4529

2718

3295

098

4006

900

INC

OM

E FR

OM

INTE

R D

IVIS

ION

AL

SERV

ICES

(A

mou

nt re

late

s to

Port

Cha

rges

onl

y)36

8594

327

3336

975

7152

097

3576

323

7265

95

Tota

l13

1555

806

1925

3906

529

0368

008

2994

3046

091

3893

340

As P

ER A

GR

1363

4489

821

0442

383

3012

6652

731

7149

012

9652

0282

0

Am

ount

exc

ess c

laim

ed a

s ded

uctio

n47

8909

217

9033

1810

8985

1917

7185

5251

3094

80

LF

Am

ount

2873

4610

7419

965

3911

1063

113

3078

569

(` in

cro

re)

Am

ount

of G

R/A

GR

LF

Impa

ct (@

6%)

5.13

0.31


- 277 -

AircelA

NN

EX

UR

E-8

.20

[Par

a 8.

4]St

atem

ent s

how

ing

inte

rest

on

LF

and

SUC

upt

o M

ar 2

015

(Am

ount

in `

)

Sl

No.

A

nnex

No.

of M

onth

s(up

to M

arch

15

)96

8472

60

TOTA

LR

ate@

(PL

R+2

)%14

.25

14.2

514

.25

13.7

5

Issu

es

2006

-07

2007

-08

2008

-09

2009

-10

Inte

rest

on

LF

Inte

rest

on

SUC

Inte

rest

on

LF

Inte

rest

on

SUC

Inte

rest

on

LF

Inte

rest

on

SUC

Inte

rest

on

LF

Inte

rest

on

SUC

18.

2.1A

Wai

vers

, Dis

coun

ts, P

rom

o of

fers

, etc

9152

2169

4505

6243

3097

7320

1530

6490

5146

7255

2216

3379

3051

3500

1225

9863

2992

6621

9

28.

2.1B

Ful

l Tal

k Ti

me

7731

034

4203

750

5066

8659

2025

0930

6506

5945

2908

2837

1518

0910

7452

207

1996

3627

2

38.

2.1C

FAT

2715

1082

1475

0380

3957

919

2152

118

3912

232

1642

374

1113

5808

4331

990

6903

3903

48.

2.1D

Dis

coun

t ER

--

--

--

2762

949

6360

1633

9896

5

58.

2.3

Com

mis

sion

4640

8680

2251

7644

6904

6938

3348

2148

7860

4941

3386

3230

9980

9942

3990

5422

4236

3894

6

68.

2.4

Mar

ket s

tock

--

--

1434

055

6194

8122

7101

592

5974

5250

524

78.

2.5

Site

shar

ing

reve

nue

8759

257

4089

944

1851

9432

8528

823

2643

4577

1068

7368

1927

5154

7482

634

1037

7719

0

88.

2.6

Fore

x16

509

-14

8115

617

545

4433

0110

3493

1083

2585

2951

972

1584

6561

98.

2.7

Inte

rest

on

depo

sits

5605

4010

2121

3596

2510

2048

1072

4137

1146

0969

4465

157

1707

1019

6718

229

1528

0916

4

108.

2.8

Inte

rest

on

inve

stm

ent

--

--

1909

848

8304

7774

3976

829

8790

013

1679

92

118.

2.9(

i)C

orpo

rate

(Com

posi

te)

Inco

me

1200

1472

045

4199

83-

-62

823

2397

0-

-16

5521

496

128.

2.9(

ii)N

otic

e Pa

y41

1458

1376

2370

7911

2547

1318

2166

164

0576

2016

567

5914

8265

8199

1

138.

2.9(

iii)

Oth

er In

com

e15

056

5845

231

912

4389

5286

594

9060

2989

8114

4643

6

148.

2.10

Profi

t on

sale

of a

sset

s-

-10

2415

6810

6220

--

3052

6071

1310

1960

5397

5819

158.

3.1

Ded

uctio

n of

Bad

Deb

t writ

-te

n of

f-

--

--

-24

2340

1110

2994

5534

5334

66

168.

3.2

ISP

Ded

uctio

n60

5104

-18

2142

1-

8759

54-

1042

891

-43

4537

0

TO

TAL

3586

8907

915

7395

007

2125

2460

290

8231

3424

3617

950

1041

7520

727

5061

252

1099

4408

215

5223

0313

Say

` 1

55.2

2 cr

ore


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Airtel

ANNEXURE 9.01 [Para 9.2.7]Disallowance of deduction claim in spite of availability of proof

Name of the TSP

Deduction disallowed by

CCA (` in crore)

Audit Observation Response of CsCA

BAL 7.85

Deduction claim disallowed despite availability of required document

Out of 4 LSAs, in 3 LSAs CCA accepted audit observation and reply awaited from one LSA

VODAFONE 378.33

Deduction claim disallowed despite availability of required document by 8 CsCA

CsCA Gujarat, Haryana and Mumbai replied that the cases would be considered during re-verification. CCA Kerala informed that bank statements were not available and CCA Punjab replied that invoices not available while in both the cases relevant document were available. Reply from other CsCA were awaited.

RCL 128.17

CCA Kolkata and CCA Bhopal disallowed the deduction claims of PSTN charges despite availability of proof documents

CCA Kolkata replied that the amount was inadvertently disallowed by arithmetical mistake.

Replies from CCA Bhopal was awaited

IDEA 23.78

(i) Deduction claim of ` 11.69 crore in respect of PSTN charges,

(ii) ` 14.50 crore national / international roaming charges

(i) CCA Bangalore accepted the contention of audit and stated that fact will be intimated to DoT hqrs. CCA Punjab replied that claim was disallowed inadvertently

(ii) CCA Delhi replied that invoices have been raised by MACH and payment was also paid to MACH and hence deduction was not allowed. However DoT specifically stated that Roaming settlement of account authenticated by operator may be considered.

In respect of inter-circle roaming, Pr. CCA Delhi accepted audit contention

TTSL /TTML 85.76

Deduction on IUC disallowed despite availability of auditor certificate and proof of payment

CCAs replied that (i) the matter would be replied on request from licensee (ii) the claimed amount was not reflected in the auditor’s certificate

CCA


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Airtel

NNEXURE 9.02 [Para 9.2.9(f)]

Delay in submission of verification report by CsCA and re-verification

(A ) Delay in submission of verification report by CsCA

Year No. of LSAs

No. of LSAs where details

of delay available

No. of LSAs that submitted verification

reports on or before due date

No. of LSAs that did

not submit verification

reports on or before due

date

Delay ranging from ( in months)

2006-07 116 13 Nil 13 3 to 302007-08 117 16 Nil 16 4 to 682008-09 220 20 Nil 20 7 to 532009-10 220 18 Nil 18 8 to 50

(B) Delay in re-verification

Year No. of LSAs No. of LSAs where re-verification completed

No. of LSAs where re-verification pending

2007-08 17 4 132008-09 20 3 172009-10 20 3 17

CCA


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Airtel

ANNEXURE 10.01[Para 10.2.1]

Under assessment of LF due to omission of revenues during assessment by DoT

S. No Year Name of Company

Disclosed In

Nature of Income Amount(in `)

Remarks

1 2006-07 VIL RECO Recovery of Bad Debts Written Off

6428126

2 2006-07 VIL SCH-12 Forex Gain Net 23100000 3 2006-07 VWL RECO Bad Debts written

off857458

4 2008-09 VEL AGR STT Bad Debts written off

102151052

5 2009-10 VEL SCH-13 Misc. Income 28300000

6 2009-10 VEL SCH-16 Net of recovery on account of sharing of infrastructure

12600000

7 2009-10 VWL SCH-11 Misc. Income 106100000 Balance amount between Sch-11 and AGR(15.66 crore -5.05 crore) of ` 10.61 crore in respect of Misc. Income shown in Sch-11 of P&L Account was not considered for as-sessment during 2009-10 resulted in short assessment of AGR by ` 10.61 crore.

8 2009-10 VIL RECO Profit on Sale of Fixed Assets

1522370

9 2009-10 VSL RECO Interest Income 2156255

10 2009-10 VSL RECO Forex Gain Net 39746821

11 2009-10 VSL RECO Profit on Sale of Fixed Assets

71553233

12 2009-10 VSL RECO Interest Income 2046977 13 2009-10 VSL RECO Profit on Sale of

Fixed Assets4182018


15 2009-10 VSL RECO Forex Gain Net 9046438


17 2009-10 VSL RECO Forex Gain Net 54334299 18 2009-10 VSL RECO Profit on Sale of

Fixed Assets829849

19 2009-10 VSL RECO Interest Income 1538191 20 2009-10 VSL RECO Forex Gain Net 24157126 21 2009-10 VSL RECO Profit on Sale of

Fixed Assets6841955

22 2009-10 VSL RECO Interest Income 1833599 23 2009-10 VSL RECO Forex Gain Net 35727387 24 2009-10 VSL RECO IRU Income 459012756

25 2009-10 VSL RECO Profit on Sale of Fixed Assets

67172073

DoT


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Airtel

26 2009-10 VSL SCH-13 Net of recovery on account of sharing of infrastructure

84100000

27 2009-10 VCL RECO Interest Income 16505826 28 2009-10 VCL RECO Forex Gain Net 69816932

29 2009-10 VCL RECO Profit on Sale of Fixed Assets

3052541

30 2009-10 VCL SCH-12 Net of recovery on account of sharing of infrastructure

74400000

31 2009-10 VSPL RECO Interest Income 1124590 32 2009-10 VSPL RECO Forex Gain Net 3996073 33 2009-10 VSPL RECO Forex Gain Net 3831597

34 2009-10 VSPL RECO Forex Gain Net 47658128 35 2009-10 VSPL RECO Forex Gain Net 16040392

36 2009-10 VSPL RECO Forex Gain Net 5051665

37 2009-10 VSPL RECO Profit on Sale of Fixed Assets

29217221

38 2009-10 VSPL RECO Insurance 1996254

39 2009-10 VSPL SCH-12 Net of recovery on account of sharing of infrastructure

80500000

Total 1500794063

Say ` 150.08 crore

DoT


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Airtel

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Pro

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Rev

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160

2165

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4149

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l41

4533

72

DoT


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Airtel

ANNEXURE – 10.03 [Para 10.2.4]Statement showing delay in submission of documents by RCL

(in days)

Sl. No. Name of the LSA 2006-07 2007-08 2008-09 2009-10

1 Odisha 34-215 117-223 - 90

2 Delhi 676-936 658-917 643-901 456-622

3 Patna 600-810 720-1110 720-870

4 Bangalore 480 1470 1230 1020

5 U.P. West 443-701 1513-1772 1148-1406 783-1041

6 U.P. East 789-1047 158-682 51-1296 1002-1260

7 Kerala 31-289 283-542 1310-1568 663-921

DoT


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Airtel

Glossary of Terms and abbreviations1 Access Service Access Services is the collection, carriage, transmission and delivery of voice and/

or non-voice messages over Licensee's network by deploying circuit and/or packet switched equipment

2 AGR Adjusted Gross Revenue - AGR is Gross revenue reduced by permissible deductions (i.e. PSTN related call charges paid to other telecom service providers for carriage of calls (IUC)/Roaming and service/sales tax actually paid to the Government, as per the license agreement

3 Basic Services A Service Provider must offer customers the ability to place and receive voicegrade calls over all distances utilizing the public switched telephone network or successor network

4 BSOs Basic Service Operators - They were permitted to offer “limited-mobility” services over Wireless Local Loop (WLL (M)) using CDMA technology in their coverage areas

5 BWA Broadband wireless access

6 CAG Comptroller and Auditor General of India

7 Call Charges Call charges are variable and are used to pay for the cost of the equipment to route a call from the caller's exchange to the recipient's exchange.

8 CAPEX Capital Expenditure

9 Carrier Service Provision of wired or wireless facilities to originate, terminate or transit calls, charging for interconnection, settlement or termination of domestic or international calls, charging for jointly used facilities including pole attachments, charging for the exclusive use of circuits, a leased circuit or a dedicated link including a speech circuit, data circuit or a telegraph circuit

10 CCA Controller of Communication Accounts

11 CDMA Code Division Multiple Access (CDMA) is a technology for providing wireless services.

12 CMTS Cellular Mobile Telephone Service - It is a type of short-wave analog or digital telecommunication service in which a subscriber has a wireless connection from a mobile phone to a relatively nearby transmitter. The transmitter's span of coverage is called a cell. As the cellular telephone user moves from one cell or area of coverage to another, the telephone is effectively passed on to the local cell transmitter.

13 Data Service Provision of access to wired or wireless facilities and services specifically designed for efficient transmission of data

14 DoT Department of Telecommunications

15 Entry fee One time non-refundable Entry Fee fixed by DoT has to be paid by the Licensee prior to signing of the License agreement.

16 FAT Free Air Time

17 Fixed license fee regime

During the National Telecom Policy-1994 regime, licensees were selected through a bidding process and were to pay to the Government a fixed amount of annual license fee, agreed during the bidding process.

18 FOC Free of Cost

19 FTT Full talk time

20 GR GR - The Gross Revenue shall be inclusive of installation charges, late fees, sale proceeds of handsets (or any other terminal equipment etc.), revenue on account of interest, dividend, value added services, supplementary services, access or interconnection charges, roaming charges, revenue from permissible sharing of infrastructure and any other miscellaneous revenue, without any set-off for related item of expense, etc.


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21 GSM Global System for Mobile communication is a technology for providing wireless services.

22 ILD International Long Distance - The ILD Service is basically a network carriage service (also called Bearer) providing International connectivity to the Network operated by foreign carriers.

23 Installation charges Charges for installation of customer terminal equipment

24 Interconnection charges

A ‘charge’ levied by network operators on other service providers to recover the costs of the interconnection facilities (including the hardware and software for routing, signaling, and other basic service functions) provided by the network operators.

25 Internet Services Internet services provides for accessing, using, or participating in the Internet

26 Internet Telephony Internet telephony offers digital telecommunications services based on Voice over Internet Protocol (VoIP) that are provisioned via the Internet

27 IOT Inter Operator traffic

28 IP-I Infrastructure provider category- I -No license is issued for IP-I. Companies registered as IP-I can provide assets such as Dark Fibre, Right of Way, Duct space and Tower.

29 IP-II Infrastructure provider category- II - An IP-II license can lease / rent out /sell end to end bandwidth i.e. digital transmission capacity capable to carry a message. Issuance of IP-II License has been discontinued w.e.f. 14.12.05.

30 ISP Internet Service Provider

31 ISP (IT) Internet Service Provider (including Internet Telephony)

32 IUC Interconnection Usage Charges as defined at serial 24.

33 License Fee The Licensee shall pay Licence Fee as a percentage of Adjusted Gross Revenue (AGR) for providing telecom services on basis of licenses granted by DoT.

34 LSAs Licensed Service Areas (Circle)

35 Microwave Access Microwave (MW) Access is normally in the frequency band 10 GHz and beyond for GSM and CDMA based telecom service providers

36 Microwave Backbone

Microwave (MW) Backbone networks are generally below 10 GHz frequency band for GSM and CDMA based telecom service providers

37 MoC&IT Ministry of Communications and IT

38 NLD National Long Distance - National Long Distance (NLD) service refers to the carriage of switched-bearer telecommunications services over a long distance network i.e., a network connecting different short distance charging areas (SDCAs)

39 NTP-94 National Telecom Policy-1994

40 NTP-99 New Telecom Policy-1999

41 OPEX Operating Expenditure

42 PSPs Private Service Providers

43 PSTN charges Public Switched Telecom Network charges

44 Revenue sharing regime

New Telecom Policy - 99 introduced the 'Revenue Share Regime' in which telecom service providers, in place of the fixed license fee were required to pay a percentage of their Adjusted Gross Revenue (AGR) as licence fee

45 Roaming charges Roaming is the ability for a cellular customer to automatically make & receive voice calls, send & receive data, or access other services when traveling outside the geographical coverage area of the home network, by means of using a visited network. The charges for this facility is Roaming charges


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46 Sales Tax Sales tax is a consumption tax imposed by the government on the sale of goods and services

47 Service Tax Service tax is a tax levied by the government on service providers on certain service transactions, but is actually borne by the customers. It is categorized under Indirect Tax and came into existence under the Finance Act, 1994

48 SUC Spectrum Usage Charges - In addition to License Fee, wireless service providers are required to pay Spectrum Usage Charges as a percentage of AGR.

49 Supplementary services

GSM offers three basic types of services: Telephony services or teleservices, Data services or bearer services & Supplementary services. Supplementary services are additional services that are provided in addition to teleservices and bearer services. These services include caller identification, call forwarding, call hold, call waiting, conferencing, number identification, closed user group and barring of outgoing (international) calls

50 TB Trial Balance

51 TDSAT Telecom Disputes Settlement and Appellate Tribunal

52 Terminal equipment

A device that constitutes a point of termination of a communications circuit or channel. Terminal equipment includes all customer premises equipment (CPE), including voice terminal equipment and data terminal equipment (DTE)

53 TRAI Telecom Regulatory Authority of India

54 UASL Unified Access Services License - The UASL services cover collection, carriage, transmission and delivery of voice and/or non-voice messages over licensee’s network in the designated service area and include provision of all types of access services. Access Service Provider can also provide Internet Telephony, Internet Services and Broadband Services. If required, access service provider can use the network of NLD/ILD service licensee. The access service includes but not limited to wireline and / or wireless and fixed wireless access.

55 UL Unified License - The Licensee may establish, operate and maintain Telecommunication Networks and telecommunication services using any technology as per prescribed standards in the service area as per scope of services authorized under this License. In case, the Licensee obtains Access Spectrum, the terms and conditions of the allotment of spectrum regarding use of technology shall be applicable.

56 USO Universal Service Obligation - NTP’99 provided that the resources for meeting the USO would be raised through a ‘Universal Access Levy (UAL)’, which would be a percentage of the revenue earned by the operators under various licenses.

57 Value added services

Value-added service (VAS) is a popular telecommunications industry term for non-core services, or in short, all services beyond standard voice calls and fax transmissions. In the telecommunication industry, on a conceptual level, value-added services add value to the standard service.

58 VSAT Very Small Aperture Terminal - VSAT License is to establish, install, operate and maintain VSAT Closed Users Group Domestic Data Network service via INSAT Satellite System on non- exclusive basis within territorial boundary of India.

59 WFD Wireless Finance Division of DoT

60 WLL (M) Wireless in Local Loop (Mobile)

61 WPC Charges Charges levied by the Wireless Planning & Coordination Wing of DoT

Report No. 4 of 2016 - CAG

Documents

Transcript of Report No. 4 of 2016 - CAG