BSNL GSM deal: Victory or eyewash?

Neeraja Kumar in New Delhi

Much ado about almost nothing. The much publicized intervention of Minister of Communications Pramod Mahajan brought down the price of the Bharat Sanchar Nigam (BSNL) GSM project only by Rs 80 crore — and not by the Rs 230 crore, which was the figure floated by the minister’s PR machinery.

BSNL officials admitted on conditions of anonymity that the negotiations done post-intervention had brought down the price by only Rs 80 crore.

“While the total negotiated figure from the price quoted by the lowest bidders to the final price at which the tenders were awarded is Rs 187 crore for three zones —- much of this happened before the minister intervened,” according to a senior BSNL official.

BSNL had already brought down the total price for the three circles for which negotiations have been held so far — North, South, and West — to Rs 2100 crore prior to Minister’s demand for a re-negotiations to fit the project into the Rs 2000 crore budget, backed by a threat to go for re-bidding. The Rs 230 crore savings figure touted by the communication ministry also assumes a 10 per cent cut in the East zone bid figure of Rs 508 crore.

After re-negotiations were held at the behest of the minister in December, the price was further brought down to Rs 2030 crore for these three circles.

Motorola (which has won the tender for the South Zone) agreed to reduce the price further by Rs 45 crore, ITI-Lucent (which has the West Zone) brought it down by Rs 20 crore, and Ericsson (which has bagged the North zone) reduced its price by Rs 15 crore, according to BSNL sources. While the Ericsson-HFCL combine has won the tender for the East zone, no negotiations have been held for that circle so far.

The whole exercise was carried out amid a high tension drama between the minister and the equipment vendors, with both trading charges. While the government accused the vendors of cartelization, the vendors on their part alleged that the whole ploy was aimed at delaying BSNL’s entry into GSM to benefit private operators. They also claimed that the BSNL got a decent deal at prices which were 40 per cent lower than prevailing international prices.

The vendors, who had been issued advance purchase orders and had submitted performance bank guarantees, also threatened to take legal recourse, in case the tender was cancelled.

Since BSNL is already losing Rs 4 crore per day due to the delay in the project, going for re-bidding would have proved to be very costly for BSNL.

Finally better sense prevailed and BSNL agreed to a skin-deep rate cut on the part of the vendors as a face saving device to end the impasse. However, it was portrayed as a major victory in breaking the “cartel” of the equipment vendors.

Vendors on their part do not want to talk about the issue now since they are relieved that the impasse ended without any major casualties and are afraid to talk about the issue, since they do not want to get on the wrong side of the minister.

When contacted, the minister’s communications wing said it stood by the figures given out by it earlier.