"The Minister has approved penalty of Rs 650 crore on SLD (subscriber local dialing) matter," a Telecom Ministry official told reporters.
An internal committee of Department of Telecom had alleged that Bharti Airtel had continued to route national and international calls as local calls (SLD) under a scheme till 2005 despite being told to stop it in 2003.
This caused loss to the government exchequer and state-run Bharat Sanchar Nigam Ltd (BSNL), it said.
The official said "demand notice will be issued this week".
Meanwhile, the company did not respond to emails sent for comments on the development.