Raja asks FM to reimburse spectrum money to BSNL, MTNL

"BSNL is the only service provider giving connectivity to the far-flung rural areas. The service rendered by BSNL in the rural areas of the country cannot be replicated," Raja said in a letter to the Finance Minister.

Upon discovery of the price for 3G and Broadband Wireless Access (BWA) spectrum, BSNL and MTNL recently paid Rs 18,500.38 crore and Rs 11,097.97 crore, respectively, to the government.

"Both BSNL and MTNL have made a desperate request for reimbursement of the charges paid," Raja said.

The Finance Minister had raised over Rs 1,06,262 crore from sale of spectrum for both 3G and BWA services. This would help the government to cut it fiscal deficit by almost one percentage point in the current financial year.

This spectrum had been allotted to BSNL and MTNL for all the circles in which they were operating in August, 2008. Both PSUs were not required to participate in the auction process.

They had no option to choose whether to participate or not in the auction, but were made party to an agreement that they would have to match the highest bid amount discovered under the auction for both 3G and BWA.

Raja emphasised that in terms of the New Telecom Policy, 1999, BSNL (then DoT) was not required to pay an entry fee for Cellular Mobile Licenses, which were bundled with initial spectrum of 4.4 Mhz.

Similarly, BSNL was also exempted from payment of 2G spectrum charges of Rs 1,650 crore in view of its immense social and rural obligations, he added.

MTNL virtually had to raise the entire amount for spectrum through loans from different banks to pay the government. Similarly, BSNL, which is likely to post losses for the last financial year, was made to pay a huge amount to the government.

Having paid over Rs 18,500 crore, BSNL's future expansion plans may get hampered for want of funds, company officials said.

Raja said that the BWA spectrum allocated to BSNL is being used mainly for rural connectivity to bridge the digital divide as per the initiative of the Department of Information Technology.

Raja also said the costing for the same was done without accounting for the increase in the cost of BWA spectrum over the reserve price.

The cost of BWA spectrum is six times the estimated reserve price, which would put financial pressure on the project, the minister said in his letter.

MTNL's BWA business model is also likely to fail if BSNL's BWA project becomes financially unviable, Raja said, adding that MTNL, which is providing services in the hyper competitive markets of Delhi and Mumbai, has borrowed heavily to finance payment of spectrum charges.

"In view of the deteriorating financial health, it may not be able to service this heavy debt," the minister said seeking the Finance Minister's support to save the PSUs.