A recent audit report from the Comptroller and Auditor General of India (CAG) on Bharat Sanchar Nigam Limited (BSNL) has sparked a controversy. The report says that the government has incurred a loss of Rs 17.57 billion due to BSNL failing to bill Reliance Jio Infocomm Limited (RJIL) for fees due for passive infrastructure sharing for a decade.

The CAG claims that BSNL did not enforce a master service agreement (MSA) with RJIL, and thus failed to charge for additional technology deployed on shared passive infrastructure. This lapse in billing occurred from May 2014 to March 2024, leading to financial losses of Rs 17.5 billion (excluding penal interest) according to the CAG’s assessment.

The report pointed out further billing discrepancies, calculating that BSNL suffered a loss of Rs 383 million by not deducting the licence fee share from payments made to telecom infrastructure providers across 22 of its 28 operational circles. This is said to have cost the PSU Rs 383 million between 2019-20 and 2021-22.

“Non-adherence to the terms and conditions laid down in the MSA with RJIL by BSNL and non-application of the escalation clause also resulted in a loss of revenue of Rs 290 million (including GST) towards infrastructure sharing charges,” the CAG further stated (this amount is included in the assessment of Rs 17.57 billion losses).

BSNL responded with a public refutation and said it was preparing a formal response to the Department of Expenditure (DoE). The company stated: “There is no revenue loss to BSNL. The previous demand and, therefore, loss (of Rs 17.57 billion) had been erroneously overestimated due to misrepresentation and misapplication of the clause for add-on components.”

In its submission to the DoE, BSNL also stated that it has raised invoices to Reliance Jio for Rs 1.08 billion and is looking to collect this amount in addition to the regular base rental Jio has been paying. According to available data, Jio has paid Rs 1.718 billion (2016-17), Rs 4.728 billion (2017-18), Rs 6.783 billion (2018-19) and Rs 4.022 billion (first three quarters of 2019-20) to BSNL. Jio has not made any statement as of the time of writing.

Industry observers say that the CAG report has overlooked the fact that the agreement with Jio for infrastructure sharing was reciprocal in nature. BSNL has also said that the itemised rates agreed upon by Jio in April 2018 were offered for additional hardware and power for using both time division duplex (TDD) and frequency division duplex (FDD) technology beyond the standard configuration. According to BSNL, an addendum to the master agreement was signed on January 31, 2025 for applicable charges for using 4G TDD and FDD to formalise the arrangement. BSNL says this addendum is in compliance with the policy supporting infrastructure sharing among operators.

Ever since the centre relaxed its policy to allow sharing of infrastructure, BSNL and Mahanagar Telephone Nigam Limited have monetised their tower infrastructure by sharing these assets with private players. In 2014, BSNL entered into agreements to share infrastructure with Reliance Jio, Bharti Airtel and the erstwhile Vodafone India Limited and Idea Cellular. The agreement with Vodafone Idea continued after the merger in 2018.

In February 2020, Ravi Shankar Prasad, who was then the minister of communications, stated in the Rajya Sabha, “Out of 13,146 mobile towers shared by BSNL, 8,363, 2,779 and 1,782 mobile towers have been shared with Reliance Jio, Bharti Airtel and Vodafone Idea respectively.”

However, BSNL claims that the loss has been “erroneously overestimated” due to incorrect interpretation and application of the clauses related to add-on components in its MSA with Jio. The operator maintains that there has been no actual revenue loss, and that the amount cited by the CAG is not reflective of the reciprocal nature of the infrastructure sharing arrangement. Under this arrangement, infrastructure sharing was not a one-way service, and the terms were mutually agreed upon, especially for add-on technology requirements.

The report also flags BSNL’s deviation from its own procurement manual, which led to the injudicious purchase of higher-sized polyethylene-insulated jelly-filled underground cables. Cables worth Rs 806 million remain unutilised. This procurement misstep may be due to lacunae in BSNL’s resource management and planning.

The CAG’s interpretation of the MSA and infrastructure sharing fees will certainly be subject to debate and, quite possibly, to further investigation and judicial review and, perhaps, some  rounds of litigation.

This controversy highlights an issue that has been a roadblock to the development of the telecom sector and, more broadly, caused friction across the entire policy space: ambiguities and inconsistencies in the drafting of rules, regulations and contracts. It has led to repeated litigation, not just in the telecom sector but in other infrastructure sectors as well.

The difficulty in interpreting contracts and enforcing contractual obligations in India is also a key reason why the country has scored poorly on ease-of-doing-business metrics. The latest controversy further underscores the need for clarity in drafting contracts so as to leave less room for ambiguity in interpretation.

Devangshu Datta