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Dealing with BSNL and MTNL

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October 14, 2019

What is the issue?

  • The state-owned telecommunications firms, BSNL and MTNL, are under considerable financial strain.
  • In this context, here is a look at the causes and the possible measures out.

What is the status of the two firms?

  • Only Rs 100 crore was set aside as direct budgetary support for these two major firms in the last Union Budget.
  • But, they were supposed to raise over Rs 15,000 crore through internal and extra-budgetary resources.
  • E.g. BSNL, in 2018-19, made a loss of almost Rs 14,000 crore, taking its accumulated losses to over Rs 90,000 crore
  • The company has almost 170,000 employees whose wages consume 77% of its revenues.
  • Both BSNL and MTNL have long been a drain on the public exchequer and on the state’s borrowing capacities.

What has caused this?

  • Many factors can be blamed for this situation, including government policy decisions of the past.
  • The entry of Reliance Jio has in addition made things difficult for all legacy players.
  • But, above all, the decline of the public-sector telecom majors is due to structural changes in the business itself.
  • The telecom sector is increasingly a service-based business.
  • This means that private-sector companies have an inherent advantage over even public-sector ones with the softest of budget constraints.
  • Given all, there is little reason to imagine retaining BSNL or MTNL in their current state.

Is revival a feasible option?

  • The companies and their associate Union departmental bureaucrats have argued that it is cheaper to revive them than to shut them down.
  • In BSNL’s case, getting the 170,000 workers off the payroll through voluntary retirement schemes and the like would cost Rs 95,000 crore.
  • In contrast, a revival package would cost lesser.
  • However, it is also argued that not all the public-sector workers need to be treated the same way.
  • Some can be re-absorbed in other public-sector enterprises or the government, which is short of manpower in many key areas.
  • Also, many others would be close to retirement anyway.
  • On the other hand, the revival plan is not very feasible as losses would sharply narrow beginning 2 years from now.
  • Consequently, BSNL would be in a poorer state by 2024.

What is to be done now?

  • As with the Indian PSUs, the extensive network infrastructure that has been developed has to be given the due importance.
  • This is to be seen in distinction from the tarnished brand name or the burden of employee rolls.
  • The former (infrastructure) can, certainly, not be ignored.
  • E.g. the Bharat Fibre network has more than 800,000 km covered
  • This is more than Vodafone-Idea, Bharti Airtel, and Jio put together.
  • Worryingly, it is severely under-utilised and undervalued at this point.
  • Significant national savings would be involved in ensuring that this network is not duplicated by private-sector investment.
  • Thus, the emphasis on the PSU telecom majors must be on how their assets can be sold.
  • This is to ensure higher productivity, and see how their manpower can be absorbed elsewhere where necessary.

 

Source: Business Standard

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