Incorporating the company under the act will impart India Telecom with much-needed flexibility to raise resources, including valuable foreign exchange through global depository receipts, a draft note prepared by the Department of Telecommunications for the cabinet says.

The note also explains details of the statutory model which can come through an act of parliament. However, this has been discounted by the Department of Telecommunications, which said it will not allow India Telecom without further amendments in the original act, sources said.

The note also contains three different approaches, suggested by the Department of Telecommunications, to deal with a liability of Rs 12,067 crore towards payment to its employees as retirement benefits at the time of corporatisation,the sources said.

One of these is to be approved by the cabinet, they said.

The note proposes that DoT raise private borrowings to meet this huge expense from domestic financial institutions or resort to external commercial borrowings as the last option.

DoT has suggested debt-equity ratios with least, moderate and maximum debt proportions. A ratio of 0.19:1 was proposed in the least category, while 0.53:1 in the moderate and a 1.09:1 in the maximum category.

Meanwhile, telecom officials continued talks with representatives of employees in an effort to garner support for corporatisation.

Althouth most unions have accepted the corporatisation decision, the move to register the company under the companies act has attracted employees' ire.

Indian Telecom Service Association general secretary NK Chhokar said this is a clear indication of the government buckling under pressure from multinational companies and the World Trade Organisation.

The finance ministry asked for corporatisation since thegovernment needed more foreign exchange and dot disinvestment would bring in valuable forex, Chhokar said, adding the association would fight it out.

Telegraphic Engineers' Service Association's S Basu, who represents Group B officers, said any move to register India Telecom under the Companies Act would meet with stiff opposition since only an act of parliament can make it truly self-regulatory.