Under the telecom policy designed by the Atal Behari Vajpayee government in 1999, companies that won telecom licences were supposed to pay a part of their adjusted gross revenue (AGR) to the government every year in lieu of an upfront payment of licence fees
In a major relief for Vodafone Idea, the Union Cabinet approved the freezing of the company's adjusted gross revenue (AGR) dues at Rs 87,695 crore, the level at which it stood on December 31, 2025, with payment rescheduled over 10 years starting in 2031-32.
The decision — having received approval from the Supreme Court in October 2025 — is a lifesaver for India’s third-largest telecom company. It allows the company management to focus on improving its services rather than worrying about repaying the AGR dues and protects the jobs of 10,000 people. The root cause of Vodafone’s problems, however, is persistent policy uncertainty.
Under the telecom policy designed by the Atal Behari Vajpayee government in 1999, companies that won telecom licences were supposed to pay a part of their adjusted gross revenue (AGR) to the government every year in lieu of an upfront payment of licence fees. A dispute, however, arose between telecom companies and the department of telecom (DoT) over the definition and components of AGR.
The DoT insisted that AGR would include core revenue from telecom services as well as non-core income from rents and interest. The telecom companies maintained that AGR would include only core income. They challenged the DoT order before TDSAT in 2003. The tribunal ruled in favour of the telecom companies in 2015. However, the government appealed against the verdict, leading to the Supreme Court ruling in favour of the DoT in 2019. The judgment made Vodafone’s operations unviable, resulting in the government acquiring a nearly 50 per cent stake in it.
An entrepreneur takes a huge risk when he or she sets up a business, as nobody can predict future market dynamics. Apart from making a profit, the entrepreneur also creates jobs for people. As such, the government or its agencies should not add to the list of woes that entrepreneurs face.
However, a vibrant telecom sector unravelled because of the policy inconsistency of successive governments. In the late 1990s, India offered GSM and CDMA licences, which were later converted into unified telecom licences — forcing CDMA-focused companies to invest heavily in GSM to survive.
When Vodafone entered India by acquiring Hutchison Whampoa’s stake in Hutch Essar, the income tax law was silent on the taxability of overseas transactions if the underlying asset was in India. But in 2012, going against all expected norms, the government gave itself the power to tax transactions retrospectively. The amendment was annulled in 2021 after Vodafone had lost most of its mojo.
Vodafone India finally got relief from the Supreme Court — which had earlier refused to change even clerical errors in calculations — in October 2025 — followed by the Union Cabinet’s decision on December 31, 2025.
During a hearing in the Supreme Court on Vodafone’s plea for relief, Solicitor General Tushar Mehta supported the petition, stating that the government has infused equity in Vodafone and that the government’s interest is the public interest. This statement is prescriptive of the problems that private companies face in India. The government, officials and judiciary must treat both state-run companies and private companies equally if India is to become an economic superpower. Otherwise, it does not augur well for the country.
