The Telecom Regulatory Authority of India (Trai) has recommended a subsidy of Rs 600 crore to state-run Bharat Sanchar Nigam (BSNL), a move that will help the cash-strapped company in maintaining rural wireline connections installed before April 1, 2002.
The Department of Telecommunications (DoT) had sought Trai's recommendations regarding continuation of support from Universal Service Obligation Fund (USOF) towards the rural direct exchange lines (DELs) on expiry of Rs 2,000 crore per year subsidy on July 17, 2011.
"Keeping in view the urgency of matter, considering that it would take some more time to issue a consultation paper and that time would also be taken in consultation process, the Authority recommends that a subsidy of Rs 600 crore purely as an ad hoc measure may be given to BSNL," Trai said in a statement.
The regulator said that at this stage it may not be easy for the government to obtain any additional funds for this purpose through the normal budgetary process and hence it recommended that a subsidy grant of Rs 600 crore may be made from USOF to BSNL.
However, Trai added that the grant and the source (USOF) are "purely ad hoc" arrangement and final recommendations would be made after due consultation.
All mobile phone companies share part of their annual revenues towards USOF.
BSNL, as per Trai recommendations, had received Rs 2,000 crore from USOF for a period of three years from July 18, 2008 to July 17, 2011 on phasing out of Access Deficit Charge (ADC) for sustaining its loss-making landline business across rural India.
Following the expiration date, BSNL had sought further financial support of Rs 2,580 crore per year from USOF for meeting the deficit arising out of "commercially non-remunerative" rural wireline services for DELs installed before April 1, 2002.
The state-run operator was asked to make a presentation before Trai, in which it stated that the exsiting cost of operations on these lines are high in comparison with revenue accruals.
"It does not make business sense for BSNL to maintain these high cost rural lines at very high net loss unless it is financially compensated by the government," BSNL had said.
Adding that these lines are key to broadband adoption in rural areas, the state-run firm sought continued financial support.
