The Hindu Business Line : Bank guarantee for mobile operators to be cut 50 pc

THE Ministry of Communication has decided to reduce performance bank guarantee for mobile operators by 50 per cent in the first year of operation. Operators can claim an additional 50 per cent reduction of the remaining amount if they fulfil all roll out obligation within the stipulated three years' time. The move is expected to bring down costs for operators, which is likely to be passed on to the consumers.

This would mean that cellular operators offering services in Circle A States such as Maharashtra and Gujarat, would have to give a bank guarantee of Rs 5 crore at the end of three years.

Similarly, operators in Circle B States such as Kerala and Uttar Pradesh would have to give a guarantee of Rs 2.5 crore and for Circle C States such as Bihar and West Bengal, it will be Rs 50 lakh. As per the existing norms, operators pay a bank guarantee of Rs 20 crore, Rs 10 crore and Rs 2 crore respectively, which is reduced by 50 per cent at the end of three years.

In the case of metro circles, the bank guarantee has been reduced by 25 per cent.

The Ministry has also decided to allow operators to declare the completion of the roll out obligation on `self certification' basis and claim the relaxation in the bank guarantee.

According to sources in the Department of Telecom, there is also a proposal to reduce the financial bank guarantee for cellular licence holders and unified access providers.

Operators under the unified access licence would, however, be allowed full release of the bank guarantee after three years.

This is because the unified access regime has imposed a separate fine of Rs 50 crore on those operators found violating licence norms. In the case of cellular operators, there are no such safeguards, therefore, 25 per cent of the bank guarantee would be retained.

The Ministry had recently announced similar concessions for the long distance operators and infrastructure providers.

This is part of the DoT's strategy to reduce operator's working costs without impacting the revenues of the Government.

DoT sources said that bank guarantee was benefiting only banks, which was charging up to 10 per cent of the bank guarantee amount for their services.