The government on Tuesday, June 26, convened a meeting to discuss a revival plan for the state-owned telecom firms BSNL and MTNL, which have been experiencing near-bankruptcy. BSNL alone has failed to pay 1.76 lakh employees their salaries for the first time in 18 years.
A number of factors are responsible for the impending breakdown and possible divestment of yet another public sector unit (PSU)—ranging from the government’s focus on private telecom companies at the cost of neglecting state-run firms, to predatory market conditions, corruption, and misuse of funds within the organisation itself.
Now the government seeks to alleviate this crisis, knowing fully well that BSNL’s presence in the telecommunication sectors extends well beyond providing healthy competition to private sector companies, thus helping drive down phone call and internet charges. Besides making these services more accessible, BSNL plays a crucial role in ensuring e-governance projects reach rural India.
BSNL also works in strategically important, but likely unprofitable national projects, such as the National Optic Fibre Network, Network for Spectrum for defence and the “left wing extremist” areas that are dominated by India’s Maoist insurgency. These projects may need to be closed in view of the debt and loss.
The fundraising phase
Once India’s leading telecommunication giant and among its most-profitable state-run companies, BSNL recently posted a loss for the third consecutive financial year and needs as much as Rs 6,000 crore instantaneously, to service its subscriber base and disburse June salaries to its 1.75 lakh-strong workforce.
It has led to a massive agitation since February, almost a year after employees vehemently refused to allow the company to be privatised.
Instead of privatising the government-owned telecom major, the Centre should look for a strategic partnership with private organisations that have a proven track record, experts opined.
Now the government seeks Rs 25,000 crore from banks to address the liquidity crunch and keep BSNL afloat, for six months at least, until the Centre finalises a revival plan. According to the minister of state telecom, Sanjay Shamrao Dhotre, the proposal for revival of both PSUs is likely to be placed before the Cabinet in the next few months.
But for now, the Centre has agreed upon the release of Rs 850 crore by June-end, and negotiations to secure favourable repayment plans are also underway.
“The loan will help in meeting the company’s operating expenses, salaries, bill payments, vendor payments, etc,” a source told Business Standard. But BSNL may need to scale down its staff, as Rs 2,500 crore is too little given the current number of employees.
Perform or perish
This comes on the heels of a letter drafted by All India Graduate Engineers and Telecom Officers Association (AIGETOA) on June 18 urging PM Narendra Modi to provide budgetary support to BSNL.
The association comprising engineers and telecom officers at BSNL recommended that the government monetise its assets, initiate a performance-based mechanism, and allocate spectrum for 4G services, so that they can compete in the market to combat the situation that is adversely impacting operation and maintenance of services.
In the letter, they cited the government’s decision over lateral entry of professionals and deployment of retired people at key positions for ‘efficacy and output’. Through this, they hope for the implementation of a similar perform-or-perish policy at BSNL that will build a professional and result-oriented system.
Non-performance and under-utilisation of resources, human or otherwise, is a severe internal problem at the core of BSNL’s current crisis. For example, in November last year, the company received a strict warning from Telecom Secretary Aruna Sundararajan regarding the progress, or lack thereof, on BharatNet—prime minister Narendra Modi’s pet project to connect gram panchayats (GPs) in the country.
Field reports have found that connectivity is lacking in 80-90 percent of the GPs, and the BharatNet infrastructure was not being properly utilised. Poor planning as well as lack of monitoring and coordination between BSNL and Bharat Broadband Nigam Limited (BBNL) were also recorded.
On June 25, Cabinet Secretary PK Sinha convened an hour-long meeting with the Department of Telecommunications (DoT), including secretary Aruna Sundararajan, to prepare a blueprint for the revival plans of the cash-strapped telecoms.
Providing them with long-term stability would involve measures like salary and staff-cost cuts, as well as accountability of staff where non-performing employees will be held accountable. The company might receive the 4G spectrum it sought with the help of an equity infusion of Rs 6,767 crore, along with liberalised spectrum in the 2,100 MHz band at market prices.
Surprisingly, both MTNL and BSNL’s top bosses were not present in the meeting, Financial Express reported.
Currently, over 60 percent of BSNL’s revenues go into paying salaries to its staff and 90 percent of MTNL’s revenues are used to pay salaries of staff. In contrast, private sector rivals like Vodafone, Idea, and Airtel expend only 5% of their revenues on human resources.
“The gap between monthly revenues and bare expenses…has reached a level where continuing with operations would be nearly impossible without immediate infusion of adequate equity,” Puran Chandra, senior general manager at BSNL’s corporate budget and banking division, stated in a letter to DoT, according to the Times of India.
Last week, DoT and the finance ministry posted concerns over the proposed one-time voluntary retirement (VRS) package, thus delaying the rollout of the relief package for BSNL employees. DoT is considering lowering the retirement age of the employees to 58 years instead.
In addition to the Rs 6000 crore it needs to operate and pay employees, BSNL has also sought Rs 2,400 crore as interest on the Broadband Wireless Access (BWA) spectrum, and Rs 2,300 crore as excess sum taken by the DoT towards pension contribution from 2007 onwards which has also been dragged despite the Modi’s intervention.
Both state-run telecom firms, BSNL and MTNL, have been reporting losses since the time they were asked to pay auction-determined spectrum price in 2010 for all the circles where they operate.
MTNL operates in Delhi and Mumbai, and BSNL, in the rest of the 20 telecom circles. While MTNL has been continuously posting loss and has showed no signs of revival, BSNL posted operating profit of ₹672 crore in 2014-15, ₹3,885 crore in 2015-16, and₹1,684 crore in 2016-17.
BSNL’s losses have been on the rise since 2017, increasing from Rs 4,786 crore in FY17, to posting a loss of Rs 8,000 crore in FY18. For FY19, it is expected to rise further. The telecom sector’s total debt stands at Rs 6.1 lakh crore, while BSNL’s debt alone accounted for Rs 13,500 crore.
If the plan of action that has been initiated, turns out to be too little too late, BSNL may be staring down the barrel of a long divestment fracas, like other PSUs such as Air India. The BSNL engineers and officers’ association recognises this predicament.
Writing to the PM, the AIGETOA said, “Today our company is at a very crucial position where even a slight negligence further may result in to complete doomsday for our beloved company.”
A record 668 complaints have already been filed by the micro, small, and medium businesses demanding that BSNL return their outstanding, following government’s non-clearance of Rs 3,300 crore credit to the telecom. Thus, the loan and revival package cannot come sooner.
Thereafter, the government’s revival plan stands to impact Reliance Jio’s role in the imminent 5G rollout; if the government and BSNL play their cards right, the company could once again resume brisk business in the telecom sector. But it needs to have equal and affordable access to the 5G spectrum and the competition across it. With an increasing telecom subscriber base—a figure that currently stands at 120.5 crore—that is driven by the need for wireless connection and rising mobile phone users, there is a lot of demand for good connectivity that BSNL can tap into.
Prarthana Mitra is a Staff Writer at Qrius.
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