Reduced grants to dent BSNL results in FY06

Firm will receive only Rs 700 cr in reimbursements against Rs 2,000 cr in the previous year.

The state-owned Bharat Sanchar Nigam's (BSNL) profits are likely to take a hit in 2005-06 as reimbursements from the government towards licence fee and spectrum charges are slated to be reduced by 60 per cent during the fiscal.

BSNL may also be allotted a significantly lower grant from the universal service obligation fund (USOF) during the year.

A source in the ministry of communications said BSNL would receive only about Rs 700 crore in reimbursements and write-backs for 2005-06 against Rs 2,000 crore in the previous year.

Additionally, from this fiscal onwards, BSNL would no longer be the sole recipient of grants from the USOF for its rural activities.

This implies, that the Rs 1,200 crore, that has been allotted for the USOF this fiscal would be split among telecom operators, which have won bids to provide fixed lines in rural areas.

BSNL had recorded a 70.4 per cent growth in net profit to Rs 10,183 crore during 2004-05. However, the over 76 per cent of the Rs 4,207 crore increase in profits was on account of the tax refunds and the USOF grant.

BSNL executives, however, maintained that the reduction in grants was unlikely to have an impact on the company, on account of increased revenues from its growing mobile subscriber base.

Besides, the PSU has also outlined massive expansion plans, and is set to issue a tender for 60 million GSM lines this month. It has also undertaking a Rs 10,000 crore project to provide an additional 24.7 million landlines during this fiscal.

Last fiscal, the government had sanctioned Rs 1,765.68 crore to BSNL towards reimbursement of license and spectrum charges in addition to about Rs 200 crore as writeback to tax provisions. The PSU had also received a grant of Rs 1,200 crore from the USOF.

As per the March 2005 agreement, the grants from the USO funds would have to be shared between BSNL, Reliance Infocomm, Tata Telecom and Tata Teleservices (Maharashtra) for providing rural household lines in 1,685 short distance calling areas (SDCAs).

The department of telecommunications is also considering the proposal to provide shared passive infrastructure for mobile services with funding from the USOF to lower entry barriers for private operators in the 1,685 commercially unviable SDCAS, the source added.