Economy

DoT plans new model to rope in private players for BharatNet project

Ayushi Kar | Updated on: May 25, 2022
Despite a nearly ₹42,000 crore capex so far, BharatNet has not met targets

Despite a nearly ₹42,000 crore capex so far, BharatNet has not met targets

Government may foot entire capex for constructing network under new model as private players raise concerns over economic viability

In a bid to rope in private players to roll out the national optical fibre project BharatNet, the Department of Telecommunication is looking to bring a new model where private players will be given annual payments over a period of 20 years for constructing and maintaining the rural broadband connectivity infrastructure. Last-mile services using this infrastructure will likely be given out separately to interested private players with viability gap funding support from the Centre.

Delinking revenue aspect

According to sources, the DoT is discussing various models to bring private players into the project after the last attempt under a PPP model did not attract any bidders.

“The PP model had several issues because private operators did not want to be dependent on potential revenues for recovering their investments. Under the new model, the DoT may delink the revenue aspect from managing and operating the broadband network,” said a source close to the development.

The government may foot the entire capital expenditure for constructing the network under the new model. In the previously proposed setup, the government would have only given the differential (viability gap funding) to make the project economically viable. 

Two categories

In addition to this, the government is also considering splitting bidding on the network into two categories. In the first category, private players will bid on constructing and maintaining the core network, and the entire exercise will be paid for by the government. As per sources, private entities bidding on this tender will, however, be unable to collect revenue from the network. The second category of tenders is reserved for service providers, who can provide last mile rural services using the internet connectivity provided by BharatNet. Here, the government may consider providing viability gap funding to make providing services in a low revenue rural market economically viable. 

BharatNet optic fiber project is a 11-year old endeavour taken to provide last mile high-speed rural connectivity. Despite a nearly ₹42,000 crore capex so far and two iterations of BharatNet already launched, the project has not met targets.  

Rescinding previous tender 

BusinessLine had previously reported that Bharat Broadband Network Limited, the PSU that oversees BharatNet, saw a profit of merely ₹1.46 crore in FY21.

BBNL also had to rescind its tender to run the network in a public private partnership in February, after it saw no takers, largely because the viability gap funding was too low, the revenue model was unclear, and the quality of the network that was already set up was unknown; especially since the government also wanted private players to restore BSNL (Bharat Sanchar Nigam Limited) assets as a part of the tender.

Industry sources told BusinessLine that the DoT has communicated that they are open to a third-party audit of the PSU’s assets. Moreover, the sources believe that the DoT is adopting the correct methodologies to assess the capital expenditure needed in the network, leading to a significant increase in capital expenditure by the government.

“If this proposal gets approved, this will be the largest government-led digital infrastructure project in the world,” the source said. 

‘Final stages’

DoT’s considerations are at the final stages of deliberations, according to the source, and the new BharatNet tender is expected to be out by September. In DoT’s new consideration, they envisage the construction and restoration period for the network to be for three years. For the remaining 17 years, they expect to pay for maintenance of the network.

System integrators such as Tech Mahindra, STL, L&T and HFCL may bid for the revised project. Service providers such as telecom service providers and internet service providers are likely not bidding for the network but may come in to provide the last mile services part. 

Published on May 25, 2022
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