Vodafone Idea, the Indian subsidiary of the UK-based telecoms operator and one of country's largest foreign investors, faces the prospect of liquidation as the Indian government’s bailout package for the industry did not find support in the Supreme Court. 

Due to intense competition, the industry has been suffering from falling average revenues per user and is saddled with a debt of $123bn. As per a Supreme Court ruling of October 2019, Vodafone Idea had to pay $7bn in outstanding fees linked to past frequency licences. With the company having debts of $14bn, Vodafone’s CEO, Nick Read, had earlier indicated that the group would not invest more in India and that without a government bailout, the venture may shut up shop.


In its hearing of March 18, the Supreme Court came down heavily on the Department of Telecommunications’ bailout package that sought to stagger the industry’s $13bn dues over 20 years, duly protecting their net present value using a discount rate of 8% based on the marginal cost of lending rate of the state-owned State Bank of India. The apex court held that that no further objections to its earlier order would be allowed against the assessed payable dues.

However, the court extended a slender lifeline when it stated that it would consider the government’s plea for reasonable time after a two week adjournment period.

A three-judge bench led by Justice Arun Mishra and comprising Justices S Abdul Nazeer and MR Shah used the strongest language against self-assessment of dues of the industry, stating that if this was permitted, it would be a fraud on the apex court. Officials who allowed reassessment of telecom dues would not be spared, they added, ordering the DoT to withdraw its petition.

The government talked of a reassessment based on self-assessment by the telcoms of how much they owed. This is bad news for Vodafone Idea as it has paid less than $1bn towards self–assessed principal payments for the period between 2007 to and 2019.

If Vodafone exits India, it is bound to have implications for India's FDI story. On one level, Professor KS Chalapati Rao of the Institute for Studies in Industrial Development felt that “foreign investors come to India after carefully assessing risks involved. So if the venture does not work out and leave, so be it.”

On another level, it does say a lot of the sentiment of foreign investors active in the country, as Mr Read spoke about the absence of a level playing field on the regulatory front.

N Chandra Mohan is an economics and business commentator based in New Delhi