The Union Cabinet on Wednesday approved a fresh relief package for Vodafone Idea, freezing its outstanding adjusted gross revenue (AGR) dues at Rs 87,695 crore as on December 31, 2025, granting a five-year moratorium on payments, and clearing the way for a reassessment of the capped statutory charge. The move offers near-term relief to the financially stressed telecom operator while deferring a final resolution of its liabilities.
The measures are aimed at protecting the government’s financial interest as it holds about 48.9% equity in Vodafone Idea, while ensuring orderly recovery of statutory dues, preserving competition in a highly concentrated telecom market, and safeguarding services for the company’s roughly 200 million subscribers, officials familiar with the decision said.
Shift to a 10-Year Repayment Window
Payments on the frozen amount will now begin only from FY32 and be spread out until FY41, providing the company with a significant cash-flow reprieve over the next several years, sources said.
In parallel, the frozen AGR dues will be reassessed by the department of telecommunications under the deduction verification guidelines issued in 2020, taking into account audit reports and reconciliations. The reassessment will be undertaken by a government-appointed committee, whose decision will be binding on both the Centre and the company, sources added.
The Cabinet decision follows an earlier Supreme Court order, which allowed the government to reconsider the additional AGR demand raised for periods up to FY17 and to undertake a comprehensive reassessment and reconciliation of all AGR dues, including interest and penalties.
AGR represents the revenue base on which telecom operators are required to pay licence fees and spectrum usage charges. Vodafone Idea’s liabilities shot up after a Supreme Court ruling in 2019 which upheld the government’s interpretation of what constitutes AGR, leading to large backdated demands, including interest and penalties.
Officials said that AGR dues for FY18 and FY19–finalised pursuant to a September 2020 order of the SC – will not be reopened. These amounts will continue to be paid between FY26 and FY31 without any change. The annual outgo under this head is estimated at around Rs 120 crore, translating into roughly Rs 700–800 crore over the six-year period, according to sources.
Why Shares Crashed Despite the Relief
Vodafone Idea, in a filing to BSE seeking clarification, said it had not yet received any formal communication from the government on the Cabinet decision. “As and when there is any development which requires disclosure, we will do the needful,” the company said.
Vodafone Idea’s shares on the BSE closed down 10.85% at Rs 10.26 on Wednesday. Earlier in the day on the back of speculation that the Cabinet is likely to approve a relief package, shares had rallied and touched a high of Rs 12.8, up 6.04%. However, it fell once the details of the package were known.
“The fall was more due to profit booking since there was anticipation around the package,” an analyst said. Experts also attributed part of the reason to some disappointment around the provisions in the package. “Some market participants had expected the Cabinet to consider an outright waiver of a portion of the AGR dues. Instead, the government has opted for a moratorium combined with reassessment, buying time for the company to stabilise operations without immediately foregoing its claims,” Pareekh Jain, founder and chief executive, EIIRTrend said.
The latest relief comes against the backdrop of Vodafone Idea’s prolonged financial stress, driven by intense price competition, elevated debt levels and the legacy burden of AGR dues. The company has struggled to arrest subscriber losses and fund network investments, even as larger rivals accelerated spending on 4G and 5G rollouts.
While successive rounds of policy support, including conversion of dues into equity, have helped keep the operator afloat, its long-term viability remains contingent on continued regulatory backing, fresh capital infusion and a sustained improvement in operating performance.
The company continues to post heavy losses. It reported a loss of Rs 12,132 crore in the first half of the current financial year, with its net worth at a negative Rs 82,460 crore as of September 30. Total debt stood at Rs 2.02 lakh crore at the end of the reported quarter.
There have, however, been early signs of operational improvement. The company’s consolidated net loss narrowed year-on-year to Rs 5,524 crore in the second quarter ended September 2025, aided by lower finance costs on bank debt and a rise in average revenue per user following tariff hikes.
Earlier this month, Vodafone Idea said its subsidiary, VITIL, had completed a Rs 3,300 crore fundraise through the issuance of non-convertible debentures.