The Department of Telecom Services (DTS) and Department of Telecom Operations (DTO) were merged to form a public sector company called Bharat Sanchar Nigam Limited (BSNL) with effect from 1 October 2000. This process of corporatization highlighted the need for prior ground work in evolving a road map and a blueprint of the future strategy.

In 1994, the Government announced the National Telecom Policy which defined certain important objectives in the sector, including availability of telephone on demand, provision of world class services at reasonable prices, ensuring India's emergence as major manufacturing / export base of telecom equipment and universal availability of basic telecom services to all villages. It also announced a series of specific targets to be achieved by 1997. As against the NTP 1994 target of provision of 1 PCO per 500 urban population and coverage of all 6 lac villages, DoT has achieved an urban PCO penetration of 1 PCO per 522 and has been able to provide telephone coverage to only 3.1 lac villages. As regards provision of total telephone lines in the country, DoT has provided 8.73 million telephone lines against the eighth plan target of 7.5 million lines. 

NTP 1994 also recognised the fact there was a need of help from private investment to get the required resources for achieving these targets as the government alone would not be able to provide the needful.
The Government then tried to invite private sector participation in a phased manner but the result of the privatisation was not entirely satisfactory. Though there was a rapid rollout of cellular mobile networks in the metros and states with over 1 million subscribers, most of the projects faced problems. The main reason, according to the cellular and basic operators, was the fact that the actual revenues realized by these projects had been far short of the projections and the operators were unable to arrange financing for their projects. Basic telecom services by private operators had just commenced in a limited way in two of the six circles where licenses were awarded. As a result, some of the targets as envisaged in the objectives of the NTP 1994 h remained unfulfilled hence there was a need for a new telecom policy.

Due to the entry of private service providers there was a inevitable need for independent regulation. The Telecom Regulatory Authority of India (TRAI) was then established with effect from 20th February 1997 by an Act of Parliament, called the Telecom Regulatory Authority of India Act, 1997, to regulate telecom services, including fixation/revision of tariffs for telecom services which were earlier vested in the Central Government. TRAI's mission was to create and nurture conditions for growth of telecommunications in the country in a manner and at a pace which will enable India to play a leading role in emerging global information society. TRAI’s another objective was to provide a fair and transparent policy environment that promotes a level playing field and facilitates fair competition.

To give the telecom sector a boost, the Prime Minister, Atal Bihari Vajpayee set up a high powered group on telecom (GOT) in 1999 to evolve a policy framework for the sector. This was done outside the DoT as it was felt that the DoT may not be able to conceive a radically different roadmap, or it may even involve private sector or deregulation in its own limited vested interest. The GOT then drafted the National Telecom Policy of 1999. The objectives of the NTP 1999 were that providing Access to telecommunications was of utmost importance for achievement of the country's social and economic goals. The availability of affordable and effective communications for the citizens was at the core of the vision and goal of the new telecom policy. Another feature was to Strive to provide a balance between the provision of universal service to all uncovered areas, including the rural areas, and the provision of high-level services capable of meeting the needs of the country’s economy.

Though the TRAI’s creation should have led to redefinition of the role of Telecom Commission and DoT, but this was not done satisfactorily, the policy and part of the regulatory function continued to be with the Telecom Commission which was the one single authority. The Government decided to separate the policy and licensing functions of DoT from the service provision functions as a precursor to corporatization by the creation of various departments (DTS and DTO) from the DoT). Amalgamation of DTS and DTO and the subsequent corporatization led to the creation of BSNL and the DoT, the erstwhile Telecom Commission. This streamlined the structure by a separation of the policy and regulatory function (responsibility of DoT) and the actual operations (BSNL).

STRIKE-

The Indian government was desperate to end this Telecom strike, which had the potential to trigger broader opposition to the privatisation of other state-owned enterprises in the country. This strike was also an embarrassment to Prime Minister Vajpayee who had just left for the US seeking $US15 billion in new overseas investment in India and the investors were keenly watching the opening up of the country's communications sector to private capital.
An estimated 95 percent of union members supported this strike causing severe disruption to telecommunications services across the enitre country. Internet and data services were cut off and long distance and mobile phone calls were seriously hit. The only unaffected areas were the capital New Delhi and Bombay as they where serviced by MTNL.

When the Union Home Ministry realized they the strike was nowhere to end, they, on the request of the Telecom Department, advised the state Home Secretaries and the DGPs to ``lend all possible assistance'' to meet the situation arising out of the strike.

The Government then offered to pay Rs. 1,000 a month more to those employees who would join the newly formed Bharat Sanchar Nigam limited (BSNL). The Communication Minister at that time, Mr. Ram Vilas Paswan, assured that the money would be adjusted against the new pay scales of the corporate entity which would come into effect from October 1.
After some intense negotiations late on Wednesday night with the Communications Minister, Mr. Ram Vilas Paswan, and the Labour Minister, Mr. Satya Narain Jatiya, the Bharatiya Telecom Employees Federation (BTEF) withdrew from the strike and positive attitude shown by BTEF was welcomed by the Government . The withdrawal by the BTEF did not affect the strike much as they constituted only 35,000 employees. Mr. Paswan in a statement regretted the intransigent attitude of the majority federations - the National Federation of Telecom Employees (NFTE) and the Federation of National Telecom Organisations (FNTO)as they continued the strike though the their apprehensions had been sorted out across the table to secure them the best financial benefits.

A three-day old strike by over 300,000 Indian telecom workers was called off on 8th september night by the leaders of the National Federation of Telecom Employees and the Federation of National Telecom Organisations after they struck a deal with Communication Minister Ram Vilas Paswan. The minister reportedly agreed to the unions demands for job security and the protection of retirement benefits when the Department of Telecommunications is corporatised and renamed Bharat Sanchar Nigam Limited (Indian Communications Corporation) on October 1.

After Strike Attitude by Government { needs editing , don’t know if required or not)

Since the formation of BSNL all policies adopted by the government and decisions taken by governmental agencies were against the interest of the PSU affecting its financial viability and challenging its mere existence.

At the time of formation of BSNL, government had assured to extend all support to ensure financial viability of the company. It was assured that license fee will be reimbursed to BSNL and USO payment will not be collected from BSNL. Also that payment of ADC to BSNL will continue in lieu of providing service in rural areas on reduced rentals and as per TRAI’s recommendation the ADC was withdrawn. Only a nominal amount was paid all these years from USO fund to BSNL though BSNL alone is eligible for compensation for providing unviable connections in rural areas where as as no action for breach of contract has been taken against private companies who did not serve in rural areas. Now major portion of the fund will be given to private operators making the mobile connection also eligible for compensation from USO fund. BSNL is paying Rs.3000 Cr per annum against license fee and 5% USO charges. Rs.18500 Cr. has been taken away from BSNL towards 3G/ BWA spectrum charges, whereas only benchmark charges could have been collected from BSNL, being state own company. It was higher than any private company has paid, even though it was not allowed to participate in the tender for selecting the circles it required as in the case of other operators. DOT reduced NLD license fee of private operators from Rs.100 Cr. to Rs.2 Cr. More over the MNP validation work was imposed on BSNL only, causing financial burden of Rs.400 Crores. Payment of AGR is waived off to Private companies, but still collected from BSNL.

BSNL has been allocated BWA spectrum in higher frequency range (2.6GHz) against lower frequency radio waves (2.3GHz) given to private players. Lower frequency means better services and less capital expense on infrastructure. For BWA services, most private companies showed interest in adopting LTE (long term evolution) technology due to high speed and greater efficiency. But BSNL has been allocated with band on which it cannot launch LTE services. While private operators can use both Wi-Max and LTE technologies, the BSNL will have no way for LTE, the technology of the future. DOT, representing the government, is the owner as well as licensor of BSNL. But it does not own the responsibility of an owner, but functions as an erring licensor giving preferential treatment and benefits to private players.

Blocking the development of BSNL.

Initially BSNL was not permitted to enter in the business of mobile telephony. Mobile licenses were granted to BSNL only after 6 to 7 year’s monopoly by private companies. But due to the efforts and devotion of employees, it has emerged as number two in mobiles with in a very short period and it was striving hard for attaining the number one position in the country. Unfortunately, a tender floated for 45.5 million mobile equipment and another for 95 million lines were subjected to cancellation for illogical reasons , only to satisfy some vested interests desirous to cause harm to BSNL and gain to some others.

Finally due to interference of trade unions/ service organizations, a small portion of the same could be obtained. This has resulted in dire capacity crunch and BSNL’s down fall started at this stage. It is evident from the naked facts like this, that, the top management of BSNL, DOT authorities and those remained powerful in government to safeguard the vested interests of multinationals, colluded each other to kill the PSU and sacrifice the nation’s interests for monetary gains of somebody.

Harassment from Governments/ Government agencies. The government from the start itself, was trying to extract maximum amount from BSNL by any means, in order to make it bleed. At the time of corporatisation, an imaginary amount of Rs.7500 Crs. was shown as loan to BSNL which was neither required by BSNL at that time nor actually paid. But interest at higher rate was calculated and BSNL was not allowed to repay the loan and settle the account. During the period 2000-2001 to 2008-2009, BSNL paid about Rs.40000 Crs to government towards dividend, license fee, taxes etc. In addition, sales tax and other taxes to state government are also paid. BSNL is also paying pension contribution of serving employees, which was a responsibility thrust up on BSNL. Ever since the inception of BSNL as a PSU, various central/ state government agencies, through out the country, viewed BSNL as a source of extracting money by raising illogical and unreasonable tax claims on hypothetical basis which caused erosion of the company’s revenue.