Among the proposals under consideration is an extension of the repayment tenure from the current six years to 20 years. This could be accompanied by a shift from compound interest of 29-30 percent to a simple interest rate of 8-10 percent on outstanding dues, sources familiar with the matter told ET. Such a move would significantly reduce Vi’s annual payment obligations and overall liability, offering much-needed breathing space to the cash-strapped company.
“If such terms indeed apply to Vi, its annual payment burden will shrink significantly, although some are questioning whether telco’s existing cash flows are sufficient to honour even the most generous repayment covenants. A second option is to charge a token amount of around Rs 1,000-1,500 crore annually toward part payment of those dues until a final decision is taken on the broader AGR issue,” a source was quoted as saying.
“Apart from these two options, some other creative proposals are also being explored, and the relief may be given by either one or a combination of options,” said one of the persons cited above, as mentioned in the report.
Also Read: Vodafone Idea’s Financial Viability in Doubt as Govt Rules Out Further Equity Conversion: Report
Keep Vi Afloat
Another person reportedly said the government’s intent is to keep the company afloat. If Vi folds up, New Delhi would be the biggest loser: the Centre is the largest shareholder with a 49 percent stake, and a majority of the outstanding dues would come to the treasury.
“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 finalised, it would be legally tenable,” a second person was quoted as saying.
According to the report, if implemented prospectively, the change in interest computation alone could save Vi over Rs 16,000 crore, with much higher savings possible under retrospective application. Vi has outstanding AGR dues to the tune of Rs 83,400 crore as of March 2025, annual payment instalments of which fall due starting March 2026, and need to be paid until March FY31. Vi needs to pay Rs 18,064 crore by March of this financial year. With a switch to simple interest and an extended payment period, annual dues could be lowered to Rs 6,000–8,500 crore.
Also Read: Vodafone Idea Must Clear Government Dues, Says Minister
AGR Verdict
Currently, telecom operators like Vodafone Idea and Bharti Airtel, impacted by the Supreme Court’s 2021 AGR verdict, are liable to pay compound interest of approximately 29–30 percent annually on their outstanding dues. A shift to a simple interest structure at a rate of 8–10 percent would significantly reduce the total financial burden and limit the accumulation of dues in the years ahead.
“But since the company won’t be able to pay even that amount given its cash flows, the instalments could be extended to 20 years. In such a case, the annual outgo could be lower,” the first person cited above was quoted as saying. In its scenario-building for Vi, the government estimates that if the company is required to pay the full Rs 18,064 crore instalment due by end-FY26, it would not have funds to meet the liability in FY27 and thus may go bankrupt.
The urgency stems from the government’s position as Vi’s largest shareholder, following the March 2025 conversion of Rs 36,950 crore in spectrum dues into equity, which increased its stake to 49 percent. A potential collapse of the telco would inflict direct financial losses on the Centre and disrupt market competition.
Also Read: Government Stake in Vodafone Idea Rises to 48.99 Percent After Fresh Equity Allotment
Vi’s Dire Financial Outlook
Despite previous reliefs, Vi remains under severe financial strain. It needs to pay over Rs 20,000 crore annually—including both AGR and spectrum auction dues—even after the equity conversion. With a cash balance of Rs 9,930 crore at the end of March, the company has informed the government that it cannot meet payment obligations once the four-year moratorium on AGR and spectrum payments ends this fiscal.
Lenders Await Clarity
Vi is currently attempting to raise Rs 20,000–22,000 crore from lenders, who are seeking clarity on the AGR dues before proceeding. Earlier this month, the telco’s board also approved plans to raise up to Rs 20,000 crore through various financial instruments.
To DoT: Vodafone Idea Says It Can’t Operate Beyond FY 2025–26 as Banks Refuse Loans
According to the report, even if the annual instalments are reduced to Rs 6,000-8,500 crore each by extending the payment period, it would still not bring any tangible benefits and, given the telco’s cash flows, it may not meet the liabilities beyond 2028-29.
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