A Long Shadow of AGR Dispute
The long-running Adjusted Gross Revenue (AGR) dispute that has haunted India’s telecom sector resurfaced in the Supreme Court this week as Vodafone Idea Ltd (VIL) sought relief from an additional ₹9,450-crore demand raised by the Department of Telecommunications (DoT). The case, central to the company’s financial survival, was scheduled for hearing on Monday but has now been deferred to October 13, giving both sides more time to prepare. The announcement sent Vodafone Idea’s shares tumbling by over 4.5%, reflecting investor unease over the uncertainty ahead.
The Case: Vodafone Idea’s Fresh Plea and Arguments
Senior advocate Mukul Rohatgi, representing Vodafone Idea, and Solicitor General Tushar Mehta, appearing for the government, jointly requested the adjournment. The company recently filed an amended petition before the apex court, seeking a waiver of interest and penalties on its AGR dues. It argued that the contested components of the dues remain unsettled and therefore cannot attract punitive charges.
Vodafone Idea maintains that it has already paid all undisputed dues based on self-assessment. Its latest petition also draws on the Supreme Court’s July 2024 ruling in the Mineral Area Development Authority vs. SAIL case, where the Court waived interest and penalties on certain tax demands. The company contends that a similar principle should apply to telecom AGR dues, especially since the primary amounts are still under reconciliation.
The Background: A Dispute That Shook Indian Telecom
The AGR issue dates back to 2019, when the Supreme Court ruled that telecom operators must pay statutory dues on their entire revenue, including non-telecom income. The verdict left private operators reeling, as DoT’s calculations far exceeded their own assessments.
In Vodafone Idea’s case, the DoT pegged total dues at ₹58,254 crore, while the company estimated ₹21,500 crore. Subsequent petitions seeking reassessment were rejected by the Court, and a plea for waiver of ₹45,000 crore in interest and penalties was dismissed in May 2024.
Currently, Vodafone Idea owes about ₹83,400 crore in total AGR liabilities, with annual payments of ₹18,000 crore starting this March. Including penalties and interest, its exposure could reach ₹2 trillion, an amount far beyond its cash flow capacity. Former CEO Akshaya Moondra had warned in August that resolving the AGR matter was crucial for raising bank funding and keeping the company afloat.
The New Demand and DoT’s Position
The latest dispute stems from the DoT’s fresh demand of ₹9,450 crore, which includes an additional ₹5,606 crore for FY2016–17 and other revised calculations for licence fees and spectrum usage charges up to FY2019.
The DoT insists these updated figures—calculated with interest and penalties up to October 2019 and 8% annual interest through March 2025—were not part of the Supreme Court’s September 2020 order. Officials argue that these updates are necessary for a comprehensive reconciliation.
However, Vodafone Idea contends that the principal amounts are still in dispute, and therefore, it cannot be treated as a defaulter. The company also warned that the DoT’s additional demands “threaten the company’s viability and the livelihood of thousands of employees.”
A Balancing Act for the Government
During earlier hearings, the Solicitor General acknowledged the complexity of the case, noting that the government now holds a significant equity stake in Vodafone Idea, making it both a regulator and a shareholder. He suggested the need for a balanced approach that safeguards consumer interests while ensuring the telecom operator’s sustainability.
The Centre has also indicated that efforts are underway to reach an amicable resolution, though no formal settlement has been announced.
Market Reaction and Industry Implications
Following the adjournment, Vodafone Idea’s stock fell nearly 4%, closing at ₹8.43 on the NSE, as traders reacted to yet another delay in legal clarity. The AGR controversy continues to cloud investor sentiment, with the company’s ability to raise capital and expand its 5G rollout dependent on a favourable court outcome.
Rival telcos such as Bharti Airtel have opted to pay their AGR dues or convert portions into equity, signaling divergent strategies within the sector.
A Pivotal Test for Telecom Reform
The Vodafone Idea case underscores a critical moment for India’s telecom ecosystem, where regulatory rigidity and fiscal stress intersect. The Supreme Court’s eventual decision—whether to allow relief or uphold DoT’s demand—will not only shape Vodafone Idea’s fate but also define the contours of telecom policy reform in India.
As the October 13 hearing approaches, both the government and industry will be watching closely. For Vodafone Idea, this is more than a legal battle—it’s a fight for survival and credibility in a sector vital to India’s digital future.
(With agency inputs)
