MTNL will issue seven-year bonds which will have a call and put option after three years.

Telecom Commission officials told The Financial Express that the borrowing programme will be carried out in two or three tranches, with the first tranche by the end of January 2000.

Earlier this year, DoT, for the first time, embarked on a public-borrowing programme with an initial target of Rs 900 crore. This was subsequently revised to Rs 3000 crore following the rebalancing in basic telephony tariffs carried out by the Telecom Regulatory Authority of India (Trai).

MTNL had earlier raised nearly Rs 900 crore through an open bidding process, becoming the first instance of a corporate paper auction in the country. MTNL had entered the market with two instruments to raise funds for the DoT. It had askedfor bids for a five-year paper from banks and institutions and put out another instrument, with an identical maturity, offering a call and put option after three years.

Traditionally, domestic corporates have been raising money in the private placement market through the book-building process. MTNL had asked commerical banks to subscribe to its issue at 11.75 per cent. The issue would be wrapped up shortly, the officials said.

MTNL officials said the additional issue was finalised after DoT worked out the revised fund requirements. The relevant clearance from the Government on the increased quantum of borrowings had been cleared by the Government, said sources. In the earlier round, most of the public-sector banks had made bids between 11.90 and 12 per cent. This time around also it is expected that the issue will be dominated by state-run banks.