MTNL Faces Fund Shortage for Bond Interest, Government Steps In

State-run MTNL lacks sufficient funds to pay interest on its 7.78% MTNL Bond Serie VII-C, due on August 10. The Department of Telecom has cleared Rs 64 crore for the bond's interest due August 1. The government plans to allocate Rs 3,668.97 crore for the bond's principal payment.

State-run MTNL has announced a shortage of funds required to pay the interest for its 7.78% MTNL Bond Serie VII-C, which is due on August 10. This was confirmed in a regulatory filing on Thursday.

According to the structured payment mechanism outlined in the tripartite agreement among MTNL, the Department of Telecommunications, and Beacon Trusteeship, the telecom firm is obligated to deposit the semi-annual interest into an escrow account at least ten days prior to the due date.

However, MTNL has disclosed its inability to fund the escrow account adequately due to insufficient funds. The filing also mentioned that the sovereign guarantee will be invoked by the debenture trustee on default of payment, obliging the government of India to cover the payment.

A government source revealed that the Department of Telecom has already cleared a payment of Rs 64 crore for the interest, due August 1. Additionally, Minister of State for Communications, Pemmasani Chandra Sekhar, informed the Rajya Sabha that MTNL has requested Rs 1,151.65 crore for interest payments arising from sovereign guaranteed bonds this fiscal year.

Separately, the government has proposed an allocation of Rs 3,668.97 crore in the Budget to cover the principal amount of MTNL bonds.