Department of Telecommunications (DoT) has given a letter of comfort to the cash-starved BSNL for raising loans, which is a guarantee from the government.

BSNL has already approached banks to raise the amount as it becomes difficult for the company to meet its daily expenditure, including wages, a senior company official told DNA Money.

Owing to the stress in the telecom sector, banks have been reluctant to lend to telecom service providers, but after the comfort letter from DoT, borrowing money from banks will be easier and swift, the official said.

So far, DoT had allowed BSNL to take bank loans only for meeting its capital expenditure.

The ailing PSU has a huge employee cost, which is about 55% of its expenditure.

For the first time in its history, the company has defaulted on employee salary payment for the month of February. However, on Wednesday, it assured its employees that all dues – around Rs 850 crore -- will be cleared by March 21. The company had earlier frozen its employee benefits -- LTC (leave travel concession) and controlled medical expenses to cut costs drastically.

DoT is considering a revival package for BSNL, which was submitted in 2017. The telecom firm had submitted a detailed project report to acquire 4G spectrum worth about Rs 13,885 crore. A preliminary report by IIM Ahmedabad has also been submitted recently by BSNL which suggests giving VRS (voluntary retirement scheme) to about 35,000 employees at a cost of Rs 13,000 crore. For BSNL, which has an employee base of over 1.76 lakh, a VRS package of Rs 6,365 crore is being considered. The proposal was discussed at the last Digital Communications Commission (earlier Telecom Commission) meeting in February.

However, it is unlikely that a final decision will be taken before June, since the model code of conduct for elections has come into force. A decision can only be expected after the elections as the proposal needs a Cabinet approval as well, the BSNL official said.

The PSU has a debt of about Rs 15,000 crore, while it posted a loss of Rs 8,000 crore for fiscal 2018. Revenues and profits of all the telecom players have fallen significantly in the last 2-3 years as the competition in the sector got intense.

With no tariff revisions in sight, the financial stress in the sector is expected to continue for a few more quarters, according to experts.

The telecom industry has been reeling under financial stress since the entry of Reliance Jio in late 2016. Low data tariffs and free voice call offer from the new entrant pushed the financial of incumbents, including that of BSNL, on a downward spiral, apart from triggering a consolidation phase in the industry where now only three private players are left along with BSNL/MTNL.