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Telecom twins seek income tax waiver

New Delhi, Jan. 27: Bharat Sanchar Nigam and Mahanagar Telephone Nigam have decided to press for exemption from income tax — a benefit that has been extended to other private telecom operators.

Both the telecom public sector companies have approached the finance ministry and have sought tax exemption for the fiscal 2003-04. A team of senior officials from the communications ministry recently met finance ministry officials to push the demands of the two state-owned units. If the tax exemption is granted, the two state-owned companies will notch up savings of Rs 2,000 crore.

“All the private sector companies that launched telecom services after April 1, 1995, are getting the benefit of a tax exemption under section 80-IA. However, BSNL and MTNL have been denied such a benefit on the ground that they started their service prior to the benchmark date,” said a senior official in the communications ministry.

“We had approached them last year but the case was rejected. We have urged the finance ministry to extend the same benefit to the two PSUs. Otherwise, it will amount to a violation of the basic principles of a level playing field. This is important since BSNL and MTNL have invested heavily to expand telecom infrastructure in the country and should not be at a disadvantageous position vis-à-vis private operators,” sources said.

The demand of the two PSUs has also been supported by the Planning Commission and is likely to be reflected in the recommendations made to the finance ministry in the budget estimates for BSNL and MTNL during the financial year 2003-04.

Last year, when the Department of Telecom Services (DTS) was corporatised as BSNL, the company was assured of a level playing field in terms of the benefits that a corporate gets as per the government norms. The company was also promised full compensation for activities undertaken by it to fulfil the social objectives of the government.

“They are still on paper and no initiative has been taken to fulfil these promises,” said a senior communications official.

BSNL chairman and managing director Prithipal Singh has written a letter to Vinod Vaish, secretary in the ministry of communications and information technology, requesting immediate action. “The financial burden due to corporatisation works out to Rs 40,000 crore over the next 10 years. This is a huge drain on BSNL resources and puts BSNL in the position of carrying social responsibilities at the same time generating resources for the government. This is being expected despite social obligations of rural connection and NTP 1999,” Singh said.

Out of the Rs 40,000 crore, Rs 18,000 crore is estimated because of licence fee/spectrum charges. The dividends on equity, preference equity and servicing of government loans included in the capital structure of BSNL account for another Rs 9,000 crore.

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