The cabinet on Thursday approved foreign direct infusion of up to Rs 25,000 crore by the British telecom giant, Vodafone Plc, into its India joint venture Vodafone Idea Ltd.

Finance minister Arun Jaitley announced that the government had approved the FDI proposal of investing anywhere between Rs 5,000 crore to Rs 25,000 crore, floated by the telecom department.

The approval comes a month after, the board of directors of Vodafone Idea Ltd had approved Rs 25,000 crore fund-raising plan by way of rights issue to existing eligible equity shareholders.

The promoter shareholders -- Vodafone Group and Aditya Birla Group -- had informed the board that they intended to contribute up to Rs 11,000 crore and up to Rs 7,250 crore, respectively as part of such rights issue.

The promoter shareholders had also said that in case the rights issue was under-subscribed, each of the promoter shareholders reserves the right to take up part or whole of the unsubscribed portion, subject to stipulated law.

The Vodafone Idea board had also authorised the Capital Raising Committee to decide the nuances of the rights issue, including the instrument, issue price, rights entitlement ratio, record date, timing of the issue and other matters.

The proposed rights issue would enable Vodafone Idea Ltd to take on market competition intensified by Reliance Jio’s pricing strategy. The rights issue comes in the backdrop of the company also seeking a rescue package from the government including a two-year moratorium on its annual spectrum payment of about Rs 10,000 crore, citing high debt levels and stress on its balance sheet.

British telecom major Vodafone holds 45.1% stake in the combined entity, while Kumar Mangalam Birla-led Aditya Birla Group controls 26% and Idea shareholders own 28.9%.

The mega merger was announced a few months after the entry of Reliance Jio, whose aggressive pricing strategy have put stress on the financials of the entire industry.