The government has turned down BSNL's request for a Rs 2,395 crore additional grant for setting up rural broadband infrastructure, a move that may force the telecom PSU to scale down the project significantly.

State-run BSNL had requested the Department of Information Technology (DIT) to grant an additional Rs 2,395 crore for implementing the WiMax rural project.

"...BSNL is seeking only Rs 2,395 crore against rural deployment and BSNL has absorbed Rs 6,650 crore as its own cost by apportioning only 20 per cent spectrum cost. With the present allotted grant for Wi-Max, BSNL will be able to cover about 17,000 Common Service Centres (CSCs) using Wi-Max Broadband access instead of 62,000 CSCs planned originally," BSNL said in a letter to DIT.

The grant would help BSNL realise the expenditure on the project on no profit-no loss basis, it added.

It added that the grant would enable BSNL commission 7,863 WiMax BTS under Phase I and II, failing which BSNL shall be forced to limit the WiMAX deployment to 1,798 BTS.

This comes on top of the government refusing to reimburse over Rs 18,500 crore paid by BSNL for acquiring 3G spectrum.

BSNL has been seeking these exemption in view of social obligations attached with the PSU. BSNL has been rolling out network and offering services in the rural areas whereas the private operators are opting to concentrate only in the metros and urban areas in view of profitability.

According to sources, the DIT's present grant-in-aid to BSNL is only Rs 710 crore that would enable the PSU to install only 1,798 base stations for the rural broadband project.