The central government, the biggest equity owner in Vodafone Idea, is considering various frameworks to grant relief to the ailing telco in the Rs 84,000 crore AGR dues case as the payment deadline nears. This is amid several reports that have been suggesting the grave possibility of potential breakdown or dissolution of the company owing to low capitalization, given that the company is required to pay the remaining AGR dues from the coming year. 

Keeping in mind its sluggish performance and not-so-impressive balance sheet, the telco had earlier approached the government to increase its stake in the company in lieu of the AGR dues, which the government has lately rejected. Instead, the government is looking into the issue through various other frameworks. One of the frameworks being weighed is to increase the AGR repayment tenure from the existing six years to 20 years and also apply simple interest on the outstanding amount instead of compound interest or any other similar interest, the ET report states. 

Telco’s Financial Distress 

While the government weighs options to grant relief, some have pointed towards the telcos' cash flow, which is not sufficient even to bear a generous repayment amount. In such a case, suggestions of charging a token amount of around ₹1,000-1,500 crore annually toward part payment of those dues until a final decision is taken on the broader AGR issue can also be suggested, the ET report states. 

To read more about telco's financial condition, click here!  

What makes the government so interested? 

The government is quite enthusiastic about it for two simple reasons. First, being the majority shareholder of the company (49%) after the conversion of the ₹36,950 crore of spectrum auction arrears into equity in March. Second, a majority of the outstanding dues, fully if the company survives in the long run, would come to the treasury eventually. 

Slashing Interest Rates 

At present, telcos like Vi and Bharti Airtel, impacted by the Supreme Court’s 2021 AGR ruling, are paying compound interest of around 29–30% annually on their outstanding dues. Converting this to a simple interest rate of 8–10% could significantly reduce their overall liability and curb future accumulation. However, the government estimates that the telco won’t be able to pay the amount even when calculated with simple interest, so the installments can be increased to 20 years. 

To read about Vi's latest collab with AST SpaceMobile to bring satellite broadband in India, click here! 

Lack of Options 

“Since the known or existing options (such as waiving the interest and penalties) are not working out, something new has to be forged. But whatever option is finalized, it would be legally tenable,” said a second person in the ET report. 

Brokerage firms such as Motilal Oswal and auditors like Batliboi & Associates have raised concerns over the lack of relief on AGR dues, warning that Vodafone Idea’s financial health remains precarious. The company continues to struggle with inadequate cash flow to sustain its operations. For the January–March quarter, Vodafone Idea posted a net loss of ₹7,166 crore, widening from ₹6,609 crore in the previous quarter. To address its funding gap, the board has approved plans to raise ₹20,000 crore through a mix of equity and debt, with talks currently underway with potential lenders.