It is possible to save BSNL and only the BSNL employees can do it
- Facts on the financial condition of BSNL
- Loss in 2009-10= Rs 1823 cr;
- Monthly expenditure more than monthly income=Rs 600 Cr
- Cash reserves on 31-3-2010=Rs 30343 Cr and at present Rs 1000 Cr(Rs 18500 crore paid for 3G and BWA spectrum fee, and remaining amount expended for other activities including meeting the monthly expenditure exceeding income)
- Interest income in 2009-10 on cash reserves is Rs 2472 Cr and it will be nominal in 2010-11 since cash reserves are over
- Income on services declining continuously
2005-06=36138 cr; 2006-07=34616 cr; 2007-08=32842 cr; 2008-09=30169 cr; 2009-10=27913 cr; (average decline per year=Rs 2000 cr)
- salaries expenditure is increasing continuously
2006-07=7309 cr; 2007-08=8809 cr; 2008-09=10331 cr(excluding wage revision arrears); 2009-10=10555(excluding arrears). The salary bill of 2006-07 was 21% of the income on services where as in 2009-10 it was 38% of the income on services. Average increase per year in the salary bill=10555-7309=3246 Cr /3=1082 cr; In any case the increase in salary bill will be Rs 700-800 Cr every year(in case of private telecom companies the salary bill is about 5-7% of the income earned by those companies)
- Compensation of Rs 2000 crore per year to BSNL for the losses on rural land lines will not be there from 2011-12 onwards.
- Since cash reserve is over, BSNL has to take loans to finance part of its operational expenditure and to finance capital expenditure(expenditure required for network expansion). Servicing the loans taken will be another additional expenditure.
- Loss in 2009-10= Rs 1823 cr;
- Likely scenario if the present trends are continued
- As per a news paper report the loss for BSNL will be Rs 4000 Cr in 2010-11 and Rs 10000Cr in 2011-12
- Does this mean BSNL became sick company?
As per DPE guidelines a PSU will be considered 'sick' if it has accumulated losses in any financial year equal to 50% or more of its average net worth during 4 years immediately preceding such financial year. As per the 2009-10 accounts of BSNL , its net worth is Rs 86476 cr. The loss for the year 2009-10 is Rs 1823 cr only. Therefore there is no immediate reason for declaring BSNL a sick company. In case the losses go on increasing and the net worth goes on decreasing, then it will take a few years for BSNL becoming sick. Therefore there is a few years time available for us to prevent BSNL from becoming sick and to make it profitable once again.
- Are there cases where loss making PSUs were transformed again into profit making PSUs?
There are several such cases.
- Vizag Steel Plant(RINL)
was commissioned in 1992 at a cost of Rs 8500 cr. But it continued to post losses every year and after six years, by 1998, its accumulated losses were Rs 3600 crore which was more than 50% of the networth Rs 6500 cr. Thus it was to be declared sick and it was decided by the Central Government to sell it. The then Steel Minister Mr. Jaitley(BJP) told that as per the observations of the Disinvestment Commission in its 12th report, no public purpose would be served by retaining RINL under Government ownership. He told that due to over-capitalisation, technological imbalance and the weak financials of the company, while it was no longer in a position to raise funds from the market on its own strength, the Government too, would not be able to afford it. The Minister further told that it was necessary to disinvest and privatize RINL and stated that enough safeguards would be put in place for protection of the workers. But it was opposed by Trade unions lead by CITU. The Vizag people supported their struggle. The Government was compelled to drop the privatization proposal and to announce a package for revival of the Company. Trade unions motivated the workers to improve the work culture and also compelled management to change its policies. The labour productivity rose from 161 tonnes/man year in 1998-99 to 240 tonnes/man year in the last quarter of 2000-01. This was more than double the productivity that was prevailing in the other steel plants in the country. Due to all these factors the Company started getting profits since 2000-2001 onwards. It became debt free company in October 2003 and wiped out all accumulated losses in January 2006. In 2005 it was declared as a "Mini ratna" Company and there after it was declared as a "navaratna" Company. (Even now the Government is implementing the policy of discrimination against Vizag Steel Plant by not allowing it to have captive mines and allowing the same for the private sector steel plants. The trade unions lead by CITU in Vizag Steel plant are struggling against this discrimination, demanding that it should have captive mines)
For 3 years
1998-99 to 2000-01) it continuously posted losses aggregating over Rs 4000 Crore. Its surplus/reserves which was Rs 4,359 crore in 1997-98 came down to Rs 34 crore in 2000-01. Its net worth, around Rs 8,400 crore in 1997-98, came down to Rs 4,365 crore in 2000-01. But it started gaining profits since 2002-03 onwards and now it is a maharatna company.
- Of the 36 sick CPSEs which received approval for fund injunction by the government, 14 have been nurtured back to health in the last two years.(January 2010 month's bulletin of IPE-Institute of Public Enterprises, Hyderabad)
- Out of the 42 PSUs under Kerala State Government, only 12 were making profit in 2005-06 when UDF was in power. The UDF regime lead by the Congress party decided to privatise or close down 25 of these loss making PSUs. After LDF lead by CPI(M) came into power this privatisation policy was dropped and decided to revive these PSUs. Due to this political will of the LDF Government and co-operation from the trade unions, the number of profit making companies increased to 24 in 2006-07 and to 32 by 2009-10. This was done without any retrenchment or VRS. On the otherhand in one year, 719 additional jobs were created in these PSUs. The key points in this turn around is describer as below, by Com Deepankar Mukherjee, Secretary, CITU in his article on this subject:
"Selective and corrective interventions, regular performance monitoring at the level of the minister, inter-PSU resource optimisation, and strategic co-operation with central PSUs are the salient features of the resurgence of these industries. For example minister of Industries himself is evaluating the performance of each PSU under his control on a monthly basis. A special mechanism of evaluation has been put in place in the office of minister with a view to providing consistent support to the PSUs. In stark contrast to the carrying out of such evaluation through consultants mostly foreign, consultancy came from within. Workers cutting across trade unions have played a vital role in the dramatic changes that was witnessed in PSUs of the state. Take the case of UEI, cited above. In a bold innovative step, a memorandum of understanding was signed among Kerala State Electricity Board the major client of UEI, the industries department, management and trade unions of UEI. Apart from involvement of trade unions in the process, it also shows significance of inter-PSU co-operation or you may call it public-public-partnership instead of public-private-partnership, which has lately become a mantra in reformist circles."
- Thus it is an established fact that the loss making PSUs can be revived by the struggles of the trade unions for changing the Government Policies and for improving the work culture and it becomes all the more possible when the Government has the political will to support and strengthen the PSUs as in case of LDF Government in Kerala. It also was proved by the experience of revival of sick PSUs in Kerala that VRS was not necessary for the revival of loss making PSUs.
- Vizag Steel Plant(RINL)
- How to reverse the losses of BSNL
- Government must be compelled to take policy decisions to compensate BSNL for the loss making operations carrried out as a social obligation
- Losses on account of rural wirelines which are uneconomical but being maintained as social obligation must be compensated As per the audited accounts of BSNL for the year 2008-09, the expenditure on rural wirelines was Rs 12681 Crores where as the income was only Rs 2744 Cr. Thus there was a loss of Rs 9937 Cr in that year on rural landlines. The average expenditure on a rural landline was Rs 702 per month where as the income was Rs 94 only. Earlier the Government reimbursed license fee and spectrum charges to BSNL and also ADC was paid by private operators. All this resulted in payment of a considerable amount (Rs 6000 cr to Rs 8000 Cr) as compensation towards meeting the losses on account of rural landlines.For example the ADC paid to BSNL in 2004-05 by private operators was Rs 5000 crores and the license fee and spectrum charges reimbursed to BSNL in the same year was Rs 2200 croree. But as a result of the pressure from the Indian and foreign big capitalists who want to grab the telecom market in India, a serious attack was made by the Government on this compensation, particularly after the enhancement of FDI limit in telecom services sector from 49% to 74%. The license feees and spectrum charges reimbursement was completely stopped with effect from 1-4-2006. ADC was stopped with effect from 1-4-2008. After thus completely stopping the reimbursement of license fee and spectrum charges and ADC, based on TRAI recommendation, the Government granted Rs 2000 crore every year to BSNL from USO fund for the years 2008-09, 2009-10 and 2010-11 as compensation for rural land line losses. From 1-4-2011 onwards even this Rs 2000 crore compensation will not be there. If the Government compensated the Rs 8000 cr loss on rural lines fully, in 2009-10 BSNL would have got a profit of Rs 4000 crores. Therefore the main reason for the losses to BSNL is the abolition of this due compensation to BSNL for the rural land lines which was implemented by the Government coming under the pressure of Indian and foreing big capitalists.(The loss on rural landlines was calculated as Rs 13000 cr per year by BSNL, but by manipulation of figures, TRAI calculated it as Rs 2000 crores in 2008.)
- Certain social obligations are preventing BSNL from procuring equipment as fast as in case of private operators. Being a PSU it has to follow all the tender rules and procedures for procuring the equipment in spite of the cut throat competition in telecom sector which requires quick procurement of equipment required for increasing the capacity to expand and modernise the services and to grab the market. Also while the private operators are free to procure the equipment from any vendor as per their choice, BSNL has the social obligation of procuring 30% of its equipment from ITI Ltd and this factor also causing delay some times.
- The private operators like Airtel etc are expanding their network by managed capacity model as per which the vendor (foreign equipment manufacturers like Ericsson, Nokia, Motorola, Huwaeii etc) will install, maintain and operate the network and the Airtel will only do marketing and branding and overall control. This means the networks of the private operators are operated by the foreign vendor companies and it is against the interest of national security. Hence recently the Government thought of putting the condition that the outsourcing of the operations of the network should be given to Indian Companies only. That is why recently the PMO(Prime Minister's Office) in an internal note, as revealed in Economic Times(dt 20-3-2011)prescribed that the outsourcing of the operation and maintenance of telecom networks should be limited to Indian Companies only. But coming under pressure from the foreign companies, the DoT issued guidelines on national security allowing such outsourcing to foreign vendors(ET 20-3-2011). But this managed capacity model is not allowed for BSNL since the Government has to depend upon BSNL in case of emergencies. From this consideration of national security, BSNL also was prevented for some time from procuring equipment from Chinese vendors where as the private operators were allowed. This opportunity was utilized by private operators to grab a considerable share in the market whereas BSNL was prevented to do so. Thus the social obligation of national security prevented BSNL from expansion and grabbing share in the market. Besides, as a PSU, BSNL has to follow PSU guidelines for procurement of equipment, which necessarily will result in some delay compared to private operators. Therefore due to the very necessity of meeting the social obligation of national security, BSNL has to face delays in procuring the equipment and consequent setback in grabbing the market share. This aspect also should be recognized as a social obligation for which BSNL has to be compensated.
- While the private operators were allowed to bid for 3G license in the chosen Circles based on commercial considerations, the BSNL was compelled to pay the 3G spectrum fee for all circles(excepting Delhi and Mumbai where it has no presence). Thus while BSNL paid Rs 10186 crore for pan India 3G license, Airtel paid Rs 5731 crore only for the chosen circles based on commercial calculations. Similarly regarding BWA spectrum license also BSNL was compelled to pay the pan india license fee of Rs 8313 crores whereas the private operators like RCOM, TTSL did not participate in the BWA auction based on their commercial calculations. This means the BSNL was asked to provide 3G and BWA services in all circles even though in some circles it is not profitable. Thus maintaining the 3G and BWA services in all circles by BSNL has to be recognized as an activity of social obligation being carried out by it. Moreover as per the New Telecom Policy 1999 BSNL need not pay any spectrum fee and hence 3G and BWA spectrum fee.Therreefore the licensee fee collected from BSNL on account of 3G and BWA spectrum should be reimbursed.
- While BSNL is being asked to carry out wi Max rural project, it has been provided with a fund of Rs 710 crore only whereas the acual cost on no profit/no loss basis will be Rs 2395 crores.
- Hence we should recognize the denial of due compensation to BSNL for the loss making social obligation activities as the main reason for the losses to BSNL. The following are to be recognized as the loss making social obligations being carried out by BSNL for which there should be adequate compensation from Government:
- Rural land line network installation, maintenance and operation
- Delay in procurement of equipment arising due to following the public sector procedure and due to the necessity for meeting the requirements of national security(explanation on this is avaailable in para c) below.
- Providing 3G services in all circles irrespective of the commercial considerations
- Maintaining the TACs(Telecom Advisory Committees) which are not the requirement of the customer or the Company but the requirement of the party in power)
- Rural land line network installation, maintenance and operation
- Cancellation of the illegal licenses obtained by the private operators in the 2G spectrum scam
The facts revealed in the 2 G spectrum scam established the truth that several private operators have obtained 2G license by illegal means and occupied the telecom services market illegally. The licenses of all such companies should be canceelled. Since MNP is there now, BSNL should try to see that all the subscribers of these companies migrate to BSNL after cancellation of their license.
- Collect the amount swindled by the private operators in the 2G scam and use it for reimbursing the 3G and BWA license fee collected from BSNL
The private operators have illegally gained Rs 1,76,000 crores in the 2G spectrum scam. This amount should be collected from them and from the amount thus collected, the license fee paid by BSNL for 3G and BWA spectrum be reimbursed.
- Procurement of equipment without delay and by proper planning
As detailed above, in view of national security concerns and in view of PSU procedure, some delay is unavoidable in case of BSNL for procuring the equipment for which the Government should pay proper compensation. But this delay should be limited to the minimum and proper planning be there for procurement of equipment without much delay. Political intervention from the Minister/Government aimed at intentionally delaying the procurement should not be there.
- Experts genuinely interested in reviving BSNL as a profitable PSU be recruited as CMD and Board Of Directors and the issue of ITS absorption be settled immediately
- BSNL should be given the work of laying the optic fibre cable under National Broadband Plan without forming any agency like NOFA for that purpose.
- Management should adopt proper marketing and sales strategies
- Employees should reorient their work culture and every employee should work like a sales representative for BSNL products and also must take an active part in going to the customers for attending their grievences
- All types of unnecessary expenditure should be curtailed.
- Where to start
The starting point for revival of BSNL cannot be any other thing except the commitment of the employees of BSNL for saving it and consequent reorientation in their attitude to extend better service to the customer, increase the sale of BSNL products, putting pressure on the management at all levels for reducing the unnecessary expenditure and for adopting better sales and marketing practices, fighting against the anti-BSNL policies of the Government and achieving due compensation to BSNL for meeting the social obligations as detailed above and also for procuring equipment without undue delay. The Government is adopting the anti-BSNL policies due to pressure from foreign and Indian big capitalists in telecom sector and due to its orientation to work for their profits. It requires a serious struggle for changing these policies. For this the support of the people and the realisation among the people about the necessity for a viability of BSNL as a PSU is required. For this, we have to go to the people to serve them better and to tell them about the necessity for saving BSNL.