With the government allowing Chinese vendors to supply equipments, state-owned BSNL has decided to scrap the 5.5 million lines tender for expanding its GSM operations and invite fresh bids for the same.

The move may prove a shot in arm for the Chinese firms such as Huawei and ZTE, who were not allowed to put in bids for the 5.5 million tender due to security concerns.

According to a senior official, BSNL decided to scrap the tender after the government allowed Chinese vendors to supply telecom equipment to the PSU.

In its last tender for over 5 million GSM lines, the PSU had invited bids only from three European and American vendors and Chinese companies were totally left out.

BSNL has already received bids from Alcatel-Lucent, Ericsson and Nokia Siemens Networks for the same.

After a temporary bar due to security concerns, the government lifted ban on state-run telecom firm BSNL to procure equipment from Chinese vendors, Minister of State for Telecom and IT Sachin Pilot had said.

BSNL employee unions raised the issue with the Department of Telecom (DoT) last week. They alleged that ban on BSNL for buying equipment from Chinese vendors was "discriminatory", as private players were allowed import from China.

Earlier, DoT had barred BSNL from deploying Chinese equipment in sensitive regions -- Assam, Manipur, Tripura, Sikkim, Nagaland, Arunachal Pradesh, Mizoram, Meghalaya, West Bengal, Gujarat, Rajasthan, Punjab, Jammu and Kashmir, Himachal Pradesh, Uttarakhand and Maharashtra.

BSNL had earlier cancelled 93 million line tender amidst controversies that the process lacked competition and also the PSU did not require that kind of capacity addition at one go.

Leading vendor Nokia-Siemens, which was disqualified from participating in the financial bid, had also challenged the decision of the telecom PSU in the court.

Due to cancellation of the tender the PSU has been facing severe shortage in its capacity and sources said that in some of the circles the company was unable to add new subscribers resulting in loss of market share.