Dot Set To Place Rs 1200cr Order

The department of telecommunications (DoT) plans to place an order worth Rs 1,200 crore for telecom equipment on a build-lease-transfer (BLT) and deferred payment basis. The BLT method, which is being used for the first time, is expected to meet the funds shortfall while rolling out 1997-98 network targets.

The department has, in the past, used the deferred payment method to buy cables and other transmission equipment. The BLT and deferred payment purchases will now be used to roll-out approximately 3,00,000 lines out of this years target of 2.5 million lines.

Top DoT officials told Business Standard that they had not yet finalised the exact nature of equipment to be purchased by the BLT and deferred payment route. But it is expected that most of these purchases will be cables both optical and poly-insulated jelly filled and exchange equipment.

The BLT purchase this year is seen as a test case by the DoT brass as this will be the first time that the BLT route will be used on this scale, by the department, to finance equipment purchase.

The department, which purchases around Rs 7,500 crore worth equipment a year, plans to adopt BLT deals in a big way in future when it is restructured into a corporation. BLT deals works out cost-effective for both the lessor and the lessee.

Under the Income Tax Act, leasing of equipment allows the lessee DoT, in this case tax benefits. Further, the lessor, which will buy the equipment, install and lease it and eventually transfer it, stands to gain depreciation benefits which are passed on to the lessee.

Under a restructuring plan being considered by the government, DoT plans to adopt a corporate structure by next year. The department, which had total revenues of about Rs 12,500 crore last year, has a net margin of less than 40 per cent.

This margin, however, does not include tax payments since DoT is a government department. If it is converted into a corporation next year, India Telecom as DoT is proposed to be rechristened will have a projected tax outgo of between Rs 1,500 crore and Rs 2,000 crore.

This is where the benefits of BLT deals will accrue to the department. Tax benefits for our purchases will directly boost our net profits by that amount, a senior source said. He, however, did not quantify the impact of BLT purchases on net profits.