The government finds itself in a serious dilemma over Vodafone Idea’s financial crisis, as the beleaguered telecom operator has approached the Supreme Court, seeking waiver of Rs 45,457 crore in adjusted gross revenue (AGR)-related dues.
Officials observed that the development once again, has brought to the fore, the fact that even the insolvency framework is inadequate to resolve the challenges of the telecom sector.
Previous attempts to use insolvency proceedings in the cases of Reliance Communications and Aircel, dating back to 2018, remain stuck due to legal and regulatory hurdles, primarily over disputes regarding spectrum ownership and treatment of government dues.
Industry analysts say the government now appears to be relying on the Supreme Court to take the final call.
Vodafone Idea has told the Supreme Court that it cannot meet its annual AGR payments of Rs 18,000 crore starting FY26, which is nearly twice its current operational cash generation of Rs 9,200 crore. The company, which has already paid around Rs 8,000 crore, says that without relief it will not be able to continue operations beyond FY26. Vodafone’s total AGR liability as on March 31, 2025 was Rs 83,400 crore, which includes Rs 28,294 crore in interest, Rs 6,012 crore in penalties, and Rs 11,151 crore in interest on penalty. The company is not contesting the principal amount of Rs 12,797 crore but has said in its petition that the compounded charges are financially crippling.
As such, it has sought a waiver of interest and penalties and proposes to pay the principal over 20 years, including a five-year moratorium. The telco says its inability to raise debt since 2019 has left it dependent on equity infusions. It has raised Rs 56,000 crore since the merger in 2018, of which Rs 27,000 crore came from promoters. The lack of new investment has hampered its ability to invest in its network and stifled revenue growth. The company has warned that its collapse would turn the market into a duopoly, curbing competition and hurting consumer interests.
Vodafone Idea’s appeal has been followed by that of Bharti Airtel and its affiliate Bharti Hexacom, which have also approached the Supreme Court, seeking a waiver of Rs 34,745 crore, of a total AGR liability of Rs 43,980 crore. Bharti is not contesting the principal of Rs 9,235 crore but has like Vodafone Idea, said that the added charges of interest, penalty, and interest on penalty threaten its financial stability. It has highlighted that it still faces additional liabilities, including Rs 53,784 crore in deferred spectrum dues and Rs 26,000 crore in debt maturities due in FY26. The company currently carries an overall debt burden of Rs 1.8 lakh crore.
Significantly, Bharti has also formally approached the government, seeking conversion of part of its dues into equity, a request prompted by the government’s earlier decision to convert Vodafone Idea’s dues into equity, making it the largest shareholder with a 48.99% stake. This has created a fresh challenge for the government, of ensuring a level playing field while avoiding selective relief that could invite legal and political scrutiny.
These developments follow the government’s abandoned proposal to waive interest and penalties on AGR dues. The department of telecommunications had earlier proposed to waive 50% of the interest and 100% of penalties and interest on penalty, a move that would have reduced Vodafone Idea’s dues by an estimated Rs 52,000 crore and Airtel’s by Rs 38,000 crore. However, according to officials, the plan was shelved after concerns that such a waiver, covering about 75% of the total AGR liabilities, would attract criticism from the Comptroller and Auditor General (CAG) and could trigger political backlash. Officials said that the proposal also risked appearing to override the 2019 Supreme Court judgment that defined AGR and mandated recovery.
Officials said that since the AGR liability arises from a judicial ruling, any significant relief should also flow from the judiciary to avoid the perception of executive overreach.
Officials also said that Vodafone Idea cannot be left to declare itself insolvent as more than 80% of its dues are owed to the government. Further, previous attempts to resolve telecom insolvencies have failed. In the cases of Reliance Communications and Aircel, spectrum dues totaling Rs 37,588 crore stalled resolution plans even after creditor approvals. The department of telecommunications insisted that since spectrum is a leased asset and not the property of the company, it must be returned upon default. But spectrum is essential to a telecom firm’s operations, without which no resolution plan would work.
In 2021, the NCLAT ruled that spectrum could be part of a resolution plan only after government dues are cleared, which has kept both Aircel and Reliance Communications cases unresolved. The matter continues before the Supreme Court, where the CoC of Aircel had argued that DoT’s dues are operational and cannot receive preferential treatment over financial creditors under IBC. Officials said that today even if the spectrum comes back to the government, there’s hardly any scope to auction it and recover the dues as telecom operators have enough airwaves and do not need more.
Meanwhile, the government’s four-year moratorium on AGR and spectrum payments, granted in 2021, ends in October 2025. From FY26, Vodafone Idea and Bharti will be required to begin annual payments of Rs 18,000-20,000 crore each. Analysts have said that in the absence of relief, Vodafone Idea could face a financial crisis in the second half of FY26 or FY27.