The Finance Ministry has opposed subsidy of over Rs 5,800 crore to BSNL for providing telecom services in naxal-affected areas, saying that the operator was not selected through a tender process and the demand was several times the current incentives.

DoT has sought approval from the Cabinet to Rs 5,809.38 crore subsidy to BSNL from the Universal Obligation Fund (USOF) for commissioning and maintaining 2,199 sites in naxal-affected areas for five years.

The Finance Ministry in its comments on the proposal stated BSNL has "acquired a reputation for large delays in execution and shoddy performance" as its capacity appears to be over-stretched.

"There is a possibility that BSNL will be executing even the present work by sub-contracting, in which case, there can be very little reason for assigning the work to BSNL on nomination basis," it added.

The total subsidy disbursed till March 31, 2011 from the USOF for creation and maintenance of 7,296 towers and 15,407 base transceiver stations stood at Rs 211.84 crore, it said.

"This huge difference in costs cannot be accepted solely on the basis of estimates provided by BSNL," the Finance Ministry said.

It added the Draft Cabinet Note appears to be premature.

"It is recommended that the proposal be formulated for appraisal by the EFC (expenditure finance committee)," the ministry said.

It added that out of the 2,199 sites, BSNL has already installed 363 mobile sites but it was not mentioned who nominated the state-run telecom firm for this work.

With naxal-affected areas being commercially unviable for private operators, DoT had recommended that BSNL be awarded the project without having to participate in the bidding process.

The Finance Ministry has objected to DoT's decision and said it "fails to provide adequate justification for assigning the work to BSNL on nomination basis".

It has also rejected DoT's assumption that naxal-affected areas are commercially unviable.

"Any assumption about the (lack of) revenue generating potential in LWE (Left Wing Extremism) areas should be backed with evidence in the form of field trails or sample surveys," it said.

The ministry also said if the services are being used by armed forces or the police, the expenditure should be booked to the accounts of Home Ministry.

There are no details of the target group of end-users and the services that will be availed of by the end-users, the Finance Ministry said.

"Without these details, the subsidy to be reimbursed to BSNL cannot be assessed and the proposal that the entire capex and opex will have to be reimbursed to BSNL cannot be justified," it said.