In a significant move to stabilize the telecom sector, the Union Cabinet on Wednesday approved a major relief package for debt-laden Vodafone Idea. The government has decided to freeze the company's contentious adjusted gross revenue (AGR) dues at the December 31 level of Rs 87,695 crore.
Details of the Relief Package
The cabinet's decision allows Vodafone Idea to reschedule the payment of this massive amount over a period of 10 years, with the repayment schedule set to commence from the financial year 2031-32. Officials clarified that the dues frozen at the current level will be subject to a reassessment by the Department of Telecommunications (DoT). This reassessment will be based on Deduction Verification Guidelines, and the final outcome will be determined by a committee appointed by the Centre, whose decision will be binding on both the government and the company.
Furthermore, the AGR dues for the financial years 2017-18 and 2018-19, which were finalized by a Supreme Court order in September 2020, remain unchanged. The company can pay these dues between the financial years 2025-26 and 2030-31.
Market Reaction and Company's Financial Strain
Despite the cabinet's decision, which provides a five-year relief window, the stock market reacted negatively. Vodafone Idea's shares plunged by 11% on the Bombay Stock Exchange, closing at Rs 10.8, after recovering 50 paise from the day's low of Rs 10.26. The company itself stated that it had not received any formal communication from the government regarding the decision, a clarification issued in response to queries from the stock exchanges.
This package represents the latest in a series of government efforts to support the beleaguered telecom operator. Vodafone Idea has been grappling with a severe financial crisis exacerbated by a massive fall in tariffs and the burden of AGR dues. The company is saddled with a total debt exceeding Rs 2 lakh crore, which includes the AGR dues. It reported a net loss of Rs 5,600 crore for the quarter ending September and has been consistently reporting losses since the year ended March 2017.
Broader Implications and Government's Stance
As a result of previous bailout measures, the Indian government has become the largest shareholder in Vodafone Idea, holding a 49% stake. The promoters, the Aditya Birla Group and Vodafone Group, have been trying to attract new investors as the company continues to lose market share.
Officials justified the latest decision by citing public interest, the government's substantial stake, and the need to protect the interests of Vodafone Idea's 20 crore (200 million) mobile subscribers. The government has consistently argued that for a healthy and competitive telecom sector, India needs at least three private players in addition to the state-run BSNL. This relief aims to ensure Vodafone Idea's survival as a going concern, maintaining competition in the critical telecom industry.
