BSNL, MTNL may get Rs 3,000-cr aid from govt

The Department of Telecommunications (DoT) is expected to soon finalise a subsidy plan of Rs 2,500-3,000 crore (Rs 25-30 billion) for state-run telecom majors BSNL and MTNL to give them support.

The subsidy amount for BSNL will be given to support its operations, mainly wireline, in rural and far-flung areas from the universal service obligation fund (USOF), while MTNL will be given the support for its higher pension and other retirement payouts from the licence and spectrum fees which both the public sector undertakings (PSUs) give to the government, a senior DoT official said.

DoT plans to finalise the subsidy plan for both the PSUs, who have been losing revenues as well as market share, by June or July this year.

Moreover, the existing support to BSNL from USOF would end this year, which will have to be extended, the official added.

According to the internal initial estimates by the department, BSNL incurs a loss of about Rs 2,500 crore (Rs 25 billion) from its landline business, majority of which are social commitments in rural and far-flung areas.

The pension amount for MTNL stands at Rs 300-350 crore (Rs 3 to 3.5 billion) annually.

"BSNL is working out details of their unviable operations. The government will then decide whether to support these operations or discontinue some of the unviable services," the official said.

Similarly, MTNL will also submit their proposal for support from the government.

Earlier, BSNL was getting support from access deficit charge (ADC), under which all operators were paying 0.75 per cent of their total revenues.

ADC was used to support BSNL's unviable landline business in rural areas. However, telecom operator Trai had withdrawn ADC from April 1, 2008.

Subsequently, the government had decided to give a subsidy of Rs 2,000 crore (Rs 20 billion) per annum for the next three years to BSNL from USOF.

For the first time since its inception in 2000, BSNL had posted a loss of Rs 1,823 crore (Rs 18.23 billion) in the financial year 2009-10, while MTNL has incurred a loss of about Rs 671 for the third quarter ended December 31, 2010.

MTNL's net profit continues to be dragged down by retirement benefits, increase in dearness relief of pension and high wages.

BSNL is expected to post an increased loss of about Rs 2,500 crore (Rs 25 billion) in the 2010-11 financial year.

Due to the deteriorating performance of both the telecom PSUs, the department has also revived its proposal for the merger of BSNL and MTNL to synergise their business operations. The proposal is currently under consideration in the department.