The Department of Telecommunications (DoT) is considering offering a soft loan of about Rs 110 billion to Bharat Sanchar Nigam Limited following its proposed merger with the Mahangar Telephone Nigam Limited. The loan would be offered at an interest rate of 1-1.5 per cent. The provision of loan is aimed at addressing BSNL’s concerns regarding MTNL’s debt, which the former will have to assume following the merger.

MTNL currently has a debt of about Rs 146 billion, which accrued as a result of spectrum payments for 3G airwaves bought in 2010 auction. However, MTNL is likely to receive a refund of Rs 45.34 billion from the telecom department for surrendering 3G airwaves, proceeds from which can be used for repaying part of the loans. As a result, the merged entity will have to assume a debt of only Rs 110 billion.

The government had earlier contended that the two state-run telecom firms are being considered for a merger by July 2015. Consequently, DoT is currently weighing several options such as delisting MTNL and merging it into unlisted BSNL or listing the latter.