Rajagopalan said that, apart from volatile market conditions, delays in getting clarifications from the Centre on the issue of dividend and treatment of buyback had also contributed to the decision. Moreover, MTNL had not received clarifications from the Central Board of Direct Taxes over the issue of treatment of shares for taxation purposes.

MTNL had earlier earmarked Rs 528 crore for buyback, following a cabinet decision to allow the PSU buy back up to 5 per cent shares as part of the Government's move to divest equity in public-sector units. The company had then said, "we have enough surplus funds for the buyback."

Rajagopalan said that the board decisionwould be communicated to the Government in the next few days, "after I sign the minutes of the meeting."On the possibility of a buyback in the future, Rajagopalan said that was unlikely, as the company will not have any surplus funds in the next fiscal due to a major expansion and modernisation. "The buyback proposal was based on the condition that there was no immediate need of funds for other developmental purposes," he said adding that this condition would not apply next year, as the company had major expansions up its sleeve.

"The idea of scrapping the proposal was not initiated by anybody, but was part of a review of earlier proposals under the "action taken note" paper," he said.

According to Rajagopalan, MTNL had also considered a GDR issue as one of the options earlier, but had dropped it later as it felt that the time was not ripe for such an issue. This was taking into account the fact that it would have ended up tapping the same markets in direct competition with VSNL. The company had finallydecided to take the buyback route and asked for clarifcations on the issue. Additionally, Rajagopalan had opined that the process of buyback could spill over to the next fiscal.

SBI Caps, which was appointed to oversee the programme, had said that the process would take a minimum 66 days for closure. The pricing had not been finalised, but was expected to be slightly lower than the market value.With the buyers price being a variable feature related to the market, the core group on PSU disinvestsment had suggested a sellers price of Rs 176. The final price was to be announced at an extra-ordinary general meeting, followed by 10 days of book-building.