Centre’s move to roll out BharatNet on PPP mode may not find many takers

Ayushi Kar Mumbai | Updated on July 29, 2021

Airtel, RJIo evaluating a bid but smaller players not keen

The global tender for development of the rural broadband project, BharatNet, through public-private partnership (PPP) model may not find too many takers due to legacy issues attached to the project.

According to sources, Airtel and Reliance Jio may be the only two players who could evaluate a bid to run this project. Smaller broadband companies such as Sify Technologies Limited and Tikona Infinet Limited told BusinessLine that they are not evaluating the tender.

Rajesh Chharia, President of Internet Service Provider Association of India told BusinessLine, “While smaller players are much more penetrated in rural areas for last-mile delivery, our inability to take on vast amounts of credit needed to invest and participate in this project means we are not likely to bid on the BharatNet tender,”

Development issues

The project, which was launched in 2010-11, has been marred by delays and inter-departmental procedural hassles. There are concerns around the project not being able to deliver, even in a public-private partnership mode. Furthermore, as BharatNet has faced many controversies since its inception, the quality of optic fibre cable laid and existing infrastructure is also a cause of concern for many industry experts. “Bidders might be taking on a network that could be poorly laid out, therefore they might not be able to accurately estimate the cost of maintaining the existing network,” an industry expert said.

Last week, government owned Bharat Broadband Network Limited (BBNL) came out with a global tender for the development of BharatNet through a design, build, operate and transfer condition in a PPP model, in nine separate packages across 16 States in India. This essentially means that the government will give responsibility of upgradation, maintenance and operation of the network to private players. To make this undertaking commercially attractive for private players, the government will also foot the bill partially, through viability gap funding capped at ₹19,041 crores overall.

“This viability gap funding will be extremely necessary to make this proposition attractive for private players.In my experience this figure of ₹19,041 crores is sufficient,” RK Upadhyay, former CMD for BSNL told BusinessLine.

Upadhyay also believes that the rural market is finally mature enough to have multiple use cases for the high-speed internet that might come from successful completion of this project. “Unlike a few years ago, where infotainment was the only use case of internet for the rural population. The digitisation of key services such as banking, means that multiple use cases are available, making this a robust market for private players to reap sufficient revenue,” Upadhyay explained.

However, R Chandrashekhar, former President of Nasscom and former Secretary of Department of Telecommunication believes that undue risk could be transferred to private players. “The normal principle in PPP is that you should transfer only those risks and uncertainties to the private partner that they are in a position to control. Here you are transferring the uncertainty of uptake and payment for these internet services by numerous government institutions like schools, panchayats, PHCs, coops etc. in the rural areas and that too, over an extended period of time,” Chandrashekhar said.

While Chandrashekhar speculates that the viability gap funding might be able to cover some of this risk, he also raises concerns around negative bidding. A concern echoed by multiple experts in the industry. According to the notice inviting BharatNet tender, the project will be assigned to the enterprise that can complete the project with the least financial support from the government. This means that the project will be assigned to the player submitting the bid with lowest subsidy requirement or highest rate of premium for the government. Experts cite the 2007 tender where USO Fund aimed to provide subsidy support to set up mobile infrastructure in rural and remote areas, however, that tender invited negative bids, that is, enterprises ended up paying the government for project ownership. These undertakings were later abandoned due to commercial inviability. Thus in the enthusiasm to bid for the project, costs were poorly estimated and lowballed, and experts remain apprehensive stating this could happen again.

Published on July 29, 2021

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