DoT seeking Finance Ministry’s approval for BSNL compensation

27 Apr 2011

India’s Department of Telecommunications (DoT) is believed to be preparing a request to the Ministry of Finance in which it will seek approval to reimburse state-owned telco Bharat Sanchar Nigam Ltd (BSNL) for all loss-making ventures associated with the operator’s social obligations. According to the Indian Economic Times, the telecoms regulator is expected to call for compensation for all of BSNL’s rural landline operations, alongside the costs borne by the telco for the upgrade of all Multiple Access Radio Relay-based (MARR-based) village public telephones (VPT) after 2002 across all 20 of the telecoms circles it operates in. Commenting on the proposal, the report cites an unnamed executive at the DoT as saying: ‘The government is exploring ways to improve BSNL’s financial position. The Telecom Commission is in talks with the Ministry of Finance to finalise the total quantum of annual reimbursement for all its loss-making but socially desirable activities. Such reimbursement is proposed to be funded out of the Universal Services Obligation Fund (USOF).’

The move comes amid rumours that BSNL may post a net loss of up to INR27.5 billion (USD611 million) for its 2010/11 financial year, while the telco faces further financial difficulties as it will soon stop receiving an annual INR20 billion subsidy from the USOF. The financial support has been provided to help maintain BSNL’s telecoms infrastructure in rural and remote areas, but was only scheduled to run for the first three years after the creation of the USOF, having been introduced to compensate the state-owned telco after access deficit charges were withdrawn in 2008.