Department of Telecom (DoT) is currently framing terms and conditions for the next round of bidding for fixed phone services in various circles and is believed to have been building some clauses that would, in effect, keep HFCL away from bidding. Next round of bidding is expected to commence by December after the TRAI of India makes its recommendations on the modalities of bidding. Member (finance) of Telecom Commission, A Prasad told The Financial Express that the terms and conditions for the next round of bidding would have some clauses to punish companies which have not fulfilled contractual obligations like paying licence fees and rolling out networks in the last bidding.

"How can we allow a defaulter like HFCL to participate in the bidding. After all, because of that company we are not able to provide competition in the national capital, rendering MTNL service less qualitative," said Mr Prasad. When contacted HFCL Chairman Mr Mahendra Nahata said DoT can not debar his company from participating in the bidding as the company had not violated any contractual obligations. As such the ruling of the single bench is the legal position and the government can not violate the ruling till another ruling is made by the division bench, he added. Meanwhile, there are some reports that the company has approached the Prime Minister's Office with a compromise package, but Mr Nahata denied any such move from his company's side.

HFCL had won 11 circles for basic services in the first round of bidding in 1995 and had incurred a liability of Rs 85,000 crore as licence fee. Consequently, there was an uproar in the Parliament and the issue had gone to the Apex court, which put a cap on the number of circles one company could get. HFCL was left with Delhi, Haryana, UP (west) and Orissa. Even for these four circles, the company had a liabilty of Rs 25,000 crore, with Delhi alone accounting for Rs 15,000 crore. Failing to pay the first installments of licence fees, DoT encashed the bank guarantees of the company to the tune of Rs 105 crore in 1996. Thereafter, the company moved the single bench of the Delhi High Court, which ruled in the company's favour.

DoT moved the division bench of the court on appeal and the case is still pending before the bench. Industry sources said HFCL is not very keen on reviving the licences as it comes with a huge licence fee and have been riddled with controversies from the beginning. The company is looking forward to participate in the next round of bidding and win some lucrative circles.

Moreover, HFCL is also upbeat over the fact that the fixed phone service has been thrown open for unlimited competition by the government early this year and accordingly any number of players can be accommodated in each circle.