India is weighing a one-time settlement to end its long-running dispute with Vodafone Group Plc’s local venture, as the government looks to improve relations with the UK ahead of British Prime Minister Keir Starmer’s visit this week.
The move could reshape India’s telecom landscape while signalling a broader shift in New Delhi’s global partnerships amid changing geopolitical equations.
Officials are exploring a framework that would allow a waiver of interest and penalties and potentially reduce the principal dues.
If approved, the plan could resolve one of India’s most contentious tax and licence disputes, easing pressure on Vodafone Idea Ltd., the country’s third-largest wireless carrier.
Settlement could revive India’s telecom competition
The dispute, which involves nearly 2 trillion rupees ($22.5 billion) in adjusted gross revenue (AGR) dues, has weighed heavily on Vodafone Idea for years.
The operator, created through the merger of Vodafone India and Idea Cellular Ltd., has not posted a quarterly profit since 2016.
A favourable settlement could help the company attract long-awaited investment and restore competition in a sector dominated by Reliance Jio Infocomm Ltd. and Bharti Airtel Ltd. Government officials are drafting a framework to ensure any deal does not trigger similar demands from other operators, particularly Bharti Airtel and the Tata Group’s telecom arm, which have also sought relief.
India’s telecom ministry and Vodafone Idea have not commented on the proposal, but discussions are reportedly being accelerated in light of Starmer’s visit to New Delhi.
Officials say any relief would be balanced to prevent an unfair advantage to one player over another.
Diplomatic timing aligns with shifting global priorities
A breakthrough in the Vodafone case would come as India and the UK seek to deepen cooperation after signing a free trade agreement earlier this year.
Strengthening economic ties with London is a priority for Prime Minister Narendra Modi’s government, especially as relations with Washington have cooled following President Donald Trump’s return to the White House.
Efforts to reset ties with Beijing remain tentative, prompting New Delhi to focus on established partnerships. Analysts say that a resolution with Vodafone, one of Britain’s biggest corporate investors in India, would help anchor the UK more firmly as a strategic ally.
The development comes as India positions itself as a reliable economic partner amid global supply chain shifts, balancing its growing influence with pragmatic diplomacy.
Reviving Vodafone Idea could also protect India’s image as a stable investment destination, especially after past disputes over retrospective taxation deterred foreign investors.
Government weighs legal and fiscal implications
The Indian government, which became Vodafone Idea’s largest shareholder earlier this year through a debt-to-equity swap, has signalled that a solution is necessary.
A counsel told the Supreme Court last month that “some solution may be required” since public funds are now tied up in the carrier.
The dispute stems from how India calculates AGR — the revenue on which telecom firms pay licence and spectrum fees. Operators have long argued that non-telecom income should be excluded from AGR, but the Supreme Court previously upheld the government’s interpretation.
Officials are now examining whether a revised position could hold up in court without inviting challenges from other operators. One approach under discussion is to allow all telecom players to submit revival plans in exchange for concessions, ensuring the process remains equitable.
The Supreme Court is scheduled to hear Vodafone Idea’s petition challenging the government’s calculation of its dues on 6 October.
If New Delhi moves ahead with a relief framework, it would mark the most significant policy intervention in the telecom sector since the government took a near-majority stake in Vodafone Idea earlier this year.
A turning point for India’s telecom and trade strategy
Beyond the immediate fiscal implications, the settlement could set a precedent for how India resolves legacy corporate disputes.
It would demonstrate a shift towards negotiation rather than litigation — a move likely to reassure both domestic and international investors.
As New Delhi balances economic diplomacy with internal reform, the Vodafone settlement may serve as a test case for investor confidence, sectoral revival, and India’s broader trade ambitions with the UK.
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