AGR dispute still a risk for GAIL, OIL and Powergrid, says Fitch

As per Fitch Ratings, India’s telecom-related regulatory dispute on the adjusted gross revenue (AGR) issue is still a risk for GAIL, Oil India Limited (OIL) and Power Grid Corporation of India Limited.

Further, Fitch Ratings continues to treat any payments that GAIL (India) Limited (BBB-/Stable), Oil India Limited (BBB-/Stable) and Power Grid Corporation of India Limited (BBB-/Stable) may have to make under a demand notice from the Department of Telecommunications (DoT) as an event risk for the companies’ ratings.

However, Fitch is not taking any immediate rating action on the three companies, as they were allowed by the Supreme Court (SC) to withdraw their clarification applications on February 14, 2020, and resolve their dispute with DoT outside the court. As per Fitch, this is in stark contrast to the court’s decision to demand immediate payments from the telecom companies that are also involved in the dispute.

Further, the rating agency added that it expects the three companies to eventually resolve the dispute, although the resolution timing is uncertain. A speedy solution is important to prevent disrupting the companies’ investment plans and damaging their performance, Fitch said. These companies are considering an appeal against the demand notices. As per Fitch, companies have the option to resolve the matter through alternate dispute-resolution mechanisms available to state-owned enterprises. This is in addition to the legal options available to telecom license holders in general.