The government on Wednesday cleared a significant relief package for Vodafone Idea, freezing a large portion of its outstanding dues and granting a five-year moratorium on payments, a move seen as a crucial lifeline for the debt-ridden telecom operator.
The Union Cabinet, chaired by Prime Minister Narendra Modi, approved the freezing of adjusted gross revenue (AGR) dues of Vodafone Idea Ltd (VIL) amounting to Rs 87,695 crore.
According to sources familiar with the decision, the company will begin repaying these dues from the 2031–32 financial year, with the entire amount to be cleared by 2040–41.
AGR dues are payments telecom companies owe the government based on adjusted gross revenue, which forms the basis for calculating licence fees and spectrum usage charges. The definition of AGR includes all revenues earned by operators, including non-telecom income such as interest, rent and asset sales.
In addition, the AGR dues for FY2017–18 and FY2018–19, which were finalised following a Supreme Court order in September 2020, will continue to be paid between FY2025–26 and FY2030–31, without any modification, the sources said.
Vodafone Idea has been grappling with a prolonged financial crisis triggered by fierce price competition, a heavy debt burden and substantial AGR liabilities stemming from changes in the revenue definition.
The company has faced sustained losses, erosion of its subscriber base and constrained ability to invest in network expansion, even as competitors pushed ahead with 4G and 5G rollouts.
While multiple rounds of government relief and conversion of dues into equity have helped keep the operator afloat, its long-term prospects remain dependent on continued policy support, fresh capital infusion and an improvement in operational performance.
Some stakeholders had anticipated that the Cabinet might waive a portion, or even the entirety, of the AGR dues. Instead, the government opted for a moratorium, a step expected to provide the company with breathing room to stabilise its operations.
The frozen dues will be reassessed by a committee based on audit reports, sources said, adding that the committee’s decision will be binding on both sides.
According to the sources, the Cabinet’s decisions were aimed at safeguarding government interests, particularly as it now holds a 49 per cent stake in Vodafone Idea. The measures are also intended to facilitate orderly recovery of dues, maintain competition in the telecom sector and protect the interests of the company’s nearly 20 crore subscribers.