The finance ministry has approved a plan to convert accrued interest on deferred adjusted gross revenue (AGR)-related debt for Vodafone Idea, totaling 16,130 crore, into equity.

The telecom department has the initiative now and must complete the deal in accordance with the earlier-announced package.

An official with knowledge of the developments said, “It (the equity conversion) has obtained the finance ministry’s clearance in line with the authorised (telecom relief) package.”

Since January of this year, the equity conversion, which required government approval, has been on hold. Since potential investors demand clarity on this matter, Vodafone Idea must complete its long-delayed 10,000 crore external fundraise via stock. In order to properly compete with rivals Reliance Jio and Bharti Airtel and stop customer losses, the carrier is also in discussions with banks for an additional 10,000 crore in debt. This is because it needs to invest in its 4G network and launch 5G.

Additionally, it requires funds to settle some of its nearly Rs 15,000 crore in trade payables, which include debts owed to tower firms, vendors of network equipment, and other suppliers. At the end of June, Vi had a net debt of more than Rs 1.98 lakh crore, including over Rs 1.16 lakh crore in unpaid spectrum fees as well as Rs 15,200 billion in debt to banks and other financial institutions. The company had Rs. 860 crore in cash and financial equivalents.

The government will retain around 33% of Vodafone Idea’s equity after the telecom department completes the conversion in accordance with the telecom bailout plan announced in September, leaving it the sole stakeholder in the losing company. The two co-promoters, the Aditya Birla Group and UK’s Vodafone Group Plc, will continue to jointly own 50.1% of the Indian carrier. According to brokerage Nomura, Vodafone will hold 31.8% and ABG 18.3%.