Dealing with BSNL and MTNL

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