Government Set to Issue Sovereign Guarantee of Rs 15,000 Crore to BSNL, MTNL

Bharat Sanchar Nigam Limited (BSNL) and Mahanagar Telephone Nigam Limited (MTNL) are now set to receive Rs 15,000 crore sovereign guarantee from the government of India. In October 2019, the Union Cabinet approved the revival package of BSNL and MTNL that included the allotment of 4G spectrum along with the issuance of a sovereign guarantee of Rs 15,000 crore. The proposal to issue the sovereign guarantee to BSNL and MTNL has now received the nod of the Department of Economic Affairs (DEA) in the finance ministry.

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Sovereign Guarantee Enables BSNL, MTNL to Raise Money

The sovereign guarantee of Rs 15,000 crore which includes Rs 8500 crores to BSNL and Rs 6500 crores to MTNL, enables the operators to restructure the debts. Additionally, the sovereign guarantee utilised for the issue of long term bonds by BSNL, MTNL aids the operators to meet some capital expenditure requirements for the launch of 4G services.

However, in a letter dated July 8, the DEA approved the proposal but set numerous riders. It was said that state run operators are required to pay a guarantee fee at 1% each to the government.

The guarantee is also said to cover only the principal amount and the normal interest. Crucially, it was also highlighted that the sovereign guarantee shall not be transferable and “would cease to exist in case the ownership of the entity is transferred from government of India.”

The letter also said that the Department of Telecommunications (DoT) will review the proper utilisation of the guaranteed funds.