The Union Cabinet Wednesday approved a relief package for beleaguered telecom operator Vodafone Idea, freezing its hefty adjusted gross revenue (AGR) dues of Rs 87,695 crore and rescheduling their repayment over a 10-year period from FY32 to FY41, sources said. This comes after the Supreme Court allowed the government to reassess the telco’s statutory dues earlier this year.
Of the AGR dues that Vodafone Idea owes to the government, annual payments of Rs 18,000 crore were supposed to start in March 2026. However, the company had approached the Supreme Court related to the AGR issue, and said that if it was not able to secure relief from the payments, it would pose a big question mark over its financial stability and jeopardise the government’s stake in the telco.
As part of the fresh relief package, the Cabinet has decided to freeze the AGR dues of Vodafone Idea as on December 31 at Rs 87,695 crore, with the payment amount being rescheduled over financial years 2031-32 and 2040-41. The AGR dues for FY18 and FY19 shall be payable by the telco over the period FY26 to FY31 without any change.
“In October and November, the top court said that there shall be no impediment in reconsidering the AGR issue, keeping in view the public interest, substantial stake of Government of India in Vodafone Idea. In pursuance of the court’s observation, the relief package has been approved,” a senior government official said. “These steps will protect the interest of the government, enable orderly payment of dues, and ensure competition in the sector”.
The AGR dues frozen as on December 31 shall also be reassessed by the Department of Telecommunications (DoT). The outcome shall be decided by a committee appointed by the government and that shall be binding on both parties.
Queries sent to the DoT remained unanswered until publication.
Vodafone Idea is among the three privately-owned telecom operators in the country, with the government seemingly intent on keeping India’s telecom ecosystem a three-horse race. However, Vi’s precarious financial situation raises concerns about its longevity in the market.
“The telecom sector is highly concentrated and the government would, in the interest of consumers and competition, like to have multiple players in such critical sectors and therefore, survival of Vodafone Idea as a viable player is critical for the sector,” the official said.
In a petition in the Supreme Court earlier this year, Vodafone Idea had contended that it needed the relaxation, failing which its planned investments will not happen and any hopes of an improvement in its operational performance would be dashed. Including penalties and interest, its total liabilities to the government are estimated at around Rs 2 trillion.
With such a heavy cash burden and declining revenues and subscriber base, the company may not have enough cash flows to pay the dues. Hence, the Cabinet decision is being seen as a big boost for the company, which has been struggling to raise money from the market as investors stay away due to its high AGR obligations.
The Indian government also has a vested interest in keeping the telecom company afloat, given that it now owns close to 49 per cent of the debt-ridden telecom operator. This is after the company received another lifeline from the Centre, which converted an additional Rs 36,950 crore worth of the company’s dues into equity. The government is the single largest shareholder in Vi.
This was the second lifeline that the government has offered to the struggling telco. As part of its 2021 relief package for the company, the government in February 2023 had approved the conversion of Rs 6,133 crore of Vi’s interest dues into equity.
As on December 2024, Vodafone Idea’s total debt was around Rs 2.3 lakh crore. Of this, Rs 77,000 crore was AGR liability and Rs 1.4 lakh crore was spectrum liability.
