Tussle at NIXI over ₹210-cr rural Wi-Fi project

A proposal by the Ministry of Electronics and IT (MeitY) to set up internet connectivity at 5,000 locations in rural areas has hit a hurdle after some private members of the National Internet Exchange of India (NIXI) raised concerns over the manner in which the project was being executed.

The primary objection raised by the members is against withdrawing ₹210 crore from NIXI’s account for the project without getting the approval of its Corporate Governance committee.

NIXI is a not-for-profit company, set up in 2003, under section 25 of the Companies Act 1956 of India, with representation from the industry. It was set up to act as an exchange to keep domestic Internet traffic within the country. But in 2005, it was given the additional mandate to manage the .in registry from which it now earns substantial part of its revenue.

On March 29, 2017, a proposal was sent to the NIXI’s board that since the company had surplus funds, ₹210 crore can be utilised towards undertaking a public interest project to promote and establish internet connectivity at 5,000 locations in rural areas and Wi-Fi services for providing tele-education, tele-health and e-agriculture.

According to the proposal, ERNET, a 100 per cent government-owned entity, would undertake this project after the sum is transferred by NIXI to ERNET.

While the private members of NIXI had no objection to the overall objective of the proposals, some of them wanted the project to be vetted by a Corporate Governance Committee and an external consultant to determine the feasibility and the actual cost of such a project.

However, Rajiv Bansal, Chief Executive Officer of NIXI and a Joint Secretary at the Department of Electronics and Information Technology, said that the proposal had been approved by the NIXI board unanimously and the objections were raised by some of the private members as an after thought.

“Approval was granted by all members, including the private members, present at the board meeting. All laid down procedures and norms were followed during the approval process. Later, couple of viewpoints have been raised by some of the private members. Based on the merit of the points raised, MeitY will take a view on the matter,” Bansal told BusinessLine in a written response.

The private members who have raised questions, on conditions of anonymity, said that the proposal submitted by ERNET was based on exaggerated costs.

“A node which would not cost more than ₹25,000-30,000 has been pegged in lakhs. That’s why there is a need for this to be examined by a neutral committee,” said a former member of NIXI. The worry is that if ₹210 crore is taken out of NIXI then it may leave the company bankrupt. The other concern is over why funds were being parked with ERNET even before the actual costs are worked out. “No one has explained why it is ₹210 crore and not ₹90 crore,” said another private member.

Dismissing the allegations, Bansal said that ERNET is subject to government procurement rules including the General Finance Rules, 2005 laid out by Ministry of Finance as well as other statutory audits guidelines. “ERNET would be required to select one or more execution agencies through an open bidding process, wherein the actual execution price of the project would also be discovered,” Bansal said, adding that if there is any money left post price discovery then ERNET will use it to scale up the project to more locations.

“The surplus funds generated by NIXI remained unutilised, for long and only earning interest. There is no point in parking the funds, when the country requires more development initiatives to fulfil its dream of transforming into Digital India,” Bansal said.

According to MeitY, claims bankruptcy did not have any merit as the company (NIXI) is still generating surplus. “In the current FY (17-18), another ₹30-40 crore will be generated as surplus. i.e., an average of ₹3 crore every month. So this project or transfer of ₹210 crore to ERNET is not making the company bankrupt,” Bansal said.

The key question, however, still remains on whether the proposal should also have been ratified by other NIXI members who are not on the company board. The board has 13 directors with representatives from Tata Communications, Sify, Citycom, Netmagic, Tulip Telecom and the Internet Service Providers Association of India. The other Directors are from DeitY or from Government agencies like National Informatics Centre.

According to NIXI website, there are 42 ordinary members in all including large telecom operators and Internet service providers.

“Since the project involves large sums of money, perhaps only a board resolution is not enough. They should have called for an AGM,” said an industry observer.

Bansal defended the procedure. “The project was of national importance and was taken to the Board which has representatives of all stakeholders and is fully competent to approve the proposal...important factor is to get the project executed at an early date.”

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