Ministerial group okays MTNL, BSNL rescue

The Empowered Group of Ministers (EGoM) on telecom has endorsed, in principle, a proposal to rescue state-owned Bharat Sanchar Nigam Ltd (BSNL) and Mahanagar Telephone Nigam Ltd (MTNL) by bearing the cost of between Rs 12,000 crore and Rs 13,000 crore for the one-time payment to keep their spectrum allocation beyond 4.4 MHz.

However, the EGoM has also made it clear the financial support should be undertaken without any cash outgo by the government. How this is to be done would be worked out in consultation with the ministry of finance, if the Cabinet approves the decision.

The companies had written to the department of telecommunications (DoT) that the burden of the one-time payment for 2G spectrum should be borne by the government, as they did not have the money but would like to keep the additional spectrum to "serve the customers". DoT had recommended their case to the EGoM, adding it should be without a cash outgo.

If there had been any cash help, it would have upset the government's target to earn about Rs 40,000 crore this financial year from the one-time fee and spectrum auction. Already, based on the tepid response from operators to the coming auction (only six players have bid), analysts and top government officials expect it would be able to garner only between Rs 26,000 crore (worst case scenario) to, at best, Rs 35,000 crore.

While the government had offered a staggered payment scheme to operators, the burden on the state-owned companies in the first year, said analysts, could be Rs 3,000-4,000 crore.

The note prepared by DoT for the EGoM had said BSNL and MTNL were in serious financial problems since they had to fork out Rs 28,000 crore to the government when the 2010 auction price was applied to their spectrum holding in the 3G and broadband wireless access (BWA) waves. The spectrum was given to them prior to price fixation.

It also says modalities of the financial assistance would be finalised between DoT and the ministry of finance within three months from the date the Cabinet takes a final view on the issue.

The overall burden on the state-owned companies went up after the EGoM decided to tweak its earlier proposal that operators with more than 4.4 MHz would have to pay a one-time fee.

On the attorney general's advice, it added a clause that in cases where operators had more than 6.2 MHz, they would have to pay retrospectively from July 2008, the date when the government had decided to impose a one-time fee.

This would increase the burden on the two companies by around Rs 1,600 crore.

In 2011-12, BSNL made losses of Rs 8,800 crore and MTNL Rs 4,100 crore. BSNL had gone to the government with a request to return its BWA licence in 13-14 circles, for which it had paid Rs 8,300 crore.