India's long-standing dispute with the local subsidiary of British telecoms multinational Vodafone Group may come to an end through a one-time settlement, as the government seeks to strengthen ties with the UK.

The Rp2trn ($22.6bn) financial dispute could be settled through a waiver of interest and penalty fees, sources told Bloomberg.

British Prime Minister Keir Starmer is due to visit India this week, which a source says has accelerated efforts to reach a resolution.

The ongoing dispute concerns the way India calculates annual adjusted gross revenue (AGR), part of which is paid through licence and spectrum fees. Vodafone Idea, which was born from a merger between the British multinational's local subsidiary and Indian telecoms company Idea Cellular, has been plagued by debts for years and has not turned a profit since 2016.

Earlier this year, the Indian Government became Vodafone Idea's 49% shareholder. Officials have acknowledged that a solution must be reached, as public funds are now tied up in the beleaguered carrier.

Sources say officials are working on a framework that would avoid legal challenges with other telecom operators that also owe payments. Other carriers have challenged the AGR in court for years to no avail, but a source says the courts may be more receptive to hearing their arguments if the government changes its stance.

As ties with the US falter under the weight of tariff negotiations and uncertainty, the move would also constitute a strategic diplomatic effort to reinforce India's relationship with the UK as a stable economic partner. While foreign investment from the US has still flowed into India, some US tech giants are delaying India data centre deals over the uncertainty surrounding the trade conditions between the two countries, according to CNBC.