The present condition of BSNL and
MTNL
a)
Condition of BSNL
Total loss for the 4 years 2009-10 to 2012-13=Rs 25256 crore,
including the loss of Rs 8198 crore in 2012-13)
Net value=Rs 50,000 crore(Net value=The current market value of
assets less any loan or debt)
Loans =Rs 4264 crore
Revenue for the year 2012-13=Rs 25256 crore
Expenditure for the year 2012-13=Rs 34590 crore
Employees cost=49% of the revenue(Industry average, i.e employee
cost in private telecom companies, is 5% of the revenue)
If the accumulated losses are more than 50% of the average net value
of the company for the last 4 years, it will be declared as a sick industry. The
net value of BSNL for the years 2009-10,10-11,11-12 and 12-13 is Rs 86476 crores,
80069 crores , 71171 crores, and 50000 crores
(Note—The net value figure for 2012-13 is based on news paper reports
where as the figures of the earlier years are as per the DPE website). Therefore
the average net value of BSNL for these 4 years is Rs 71929 crore. In such
case, if the total loss of BSNL exceeds 50% of it, i.e., Rs 35964 crore, it
will be declared as a sick industry ( Now the accumulated loss is Rs 25256 crore. ).
Therefore if the losses continue like this, with in one or two years
BSNL will be declared as a sick industry.
b)
Condition of MTNL
Total loss for the 4 years 2009-10 to 2012-13=Rs 13759 crore ,
including the loss of Rs 3335 crore in
2012-13)
Net value=will be 0 by the end of June 2013(Net value=The current
market value of assets less any loan or debt)
Loans =Rs 10789 crore
Revenue for the year 2012-13=Rs 2682 crore
Expenditure for the year 2012-13=Rs 6017 crore
Employees cost=103% of the revenue (Industry average, i.e employee
cost in private telecom companies, is 5% of the revenue)
Thus the MTNL has already reached the stage of sick industry,
although not yet declared as such.
GoM appointed by Prime Minister to
submit recommendations for revival and revitalisation of BSNL and MTNL
Keeping in view
of the above said condition of BSNL and MTNL, the Prime
Minister constituted a “GoM” (Group of Ministers) on 21.4.2013 with the terms
of reference, to recommend measures required to be taken in short, medium and
long term for the revival and revitalization of BSNL and MTNL, keeping in view
the national and strategic interest of the country. The GoM has to submit its
report in 3 months.
Members of the GoM
The GoM consists
of the Finance Minister Sri P.Chidambaram(Chairman)with other members Sri Kapil Sibal (Communications Minister),
Sri Anand Sharma(Commerce Minister), Sri Aswinikumar(Law Minister; After the
resignation of Sri Aswinikumar, Sri Kapil Sibal is looking after the charge of
the law Ministry), Sri Montek Singh Ahluwalia(Deputy Chairman of the Planning
Commission), Sri Manish Tewari(Information and Broadcasting Minister) and Sri
V.Narayanaswamy(Minister of State in the Prime Minister’s Office).
Proposals submitted by DoT to the GoM
for revival of BSNL and MTNL
As per the
reports appearing in the news papers, DoT submitted the following proposals for
the consideration of the GoM:
- Refund of the amount paid by BSNL and MTNL for the BWA spectrum
which they have returned back
BSNL and MTNL were given BWA (Broadband Wireless Access) spectrum
for providing 4G services. It was allotted in the year 2008 on the condition
that they would pay the highest bid price whenever auction would take place for
the BWA spectrum. But they were allotted
the BWA spectrum in 2.5 -2.6 GHz band. But the technology for
providing 4G services in this band has not yet matured. Therefore BSNL and MTNL
were not able to use this spectrum gainfully. But BSNL paid Rs 8313.81 crore
for the BWA spectrum in all the 20 circles it has been operating and MTNL paid
Rs 4533.97 crore for the two circles it has been operating, in 2010 as per the
auction determined price. On the other hand, the private operators who were
successful in the auction held in 2010 were provided BWA spectrum in 2.3 GHz
band for which matured technology was readily available and hence it was
possible to utilise it gainfully. Why the BSNL and MTNL managements agreed to
take such sub-standard BWA spectrum band is not known. But after paying the
amounts in 2010, they have decided to return back the spectrum since it could
not be used gainfully, because of non-availability of suitable technology. BSNL
returned back the spectrum in 6 circles and MTNL returned back the spectrum
fully in both the circles. BSNL is eligible for a refund of Rs 6724.51 crore
and MTNL is eligible for the refund of the entire amount of Rs 4533.97 crore.
The DoT has proposed to the GoM for refund of this amount to BSNL and MTNL,
which will be Rs 11,258.48 crore.
But the private operators (Airtel, Vodafone, Idea etc) are objecting
to this proposal of DoT. According to them, the NIA (Notice Inviting
Application) for participation in the auction for BWA spectrum specifically
prevented such refund for spectrum once it was allotted. But DoT’s argument is
that the BSNL and MTNL were allotted BWA spectrum in 2008 without any such NIA,
on the condition that they have to pay the price for the spectrum as per the
rate determined by the auction and hence the NIA condition will not apply for
BSNL and MTNL.
2. Exempt BSNL and MTNL from payment of one time charge for the 2G
spectrum they are holding beyond 4.4 MH
As per the decision taken earlier by the Cabinet, all the telecom
operators including BSNL and MTNL have to pay a onetime charge for the 2G
spectrum they are holding beyond 6.2 MHz for the period 2008 to 2012 and for
the spectrum they are holding beyond 4.4 MHz for the period 2013 January to
till the end of their license period. As per this, the BSNL has to pay Rs 6912
crore and MTNL has to pay Rs 3205 crore. While the remaining license period of
private operators is only 2 to 4 years from 2013 onwards, the remaining license
period of BSNL and MTNL is 8 and 6 years since they were given mobile services
license several years after the private operators. Because of this
discrimination, the remaining license period of BSNL and MTNL is more and on
that basis they are asked to pay more amounts for the spectrum, which is
unfair. Hence it is necessary to exempt BSNL and MTNL from this payment. DoT
proposed to the GoM for exempting BSNL and MTNL from this payment. But the
private operators are opposing it on the ground that since they are asked to
pay the one time spectrum charge for their remaining period of license, BSNL
and MTNL also should pay it for their remaining license period
- Payment of Rs 5925 crore pension liability in case of MTNL
DoT proposed to the GoM that Government may
pay Rs 5925 crore to MTNL pension fund towards one time settlement of
pension liability of employees for their service rendered in DoT before
absorption in MTNL. Even as per the Rule-37A of CCS(pension) rules such on time
payment towards pension liability has to be paid by the Government. But it
cannot be a measure towards reviving MTNL since the Government has to pay this
amount in any case, as per the Rule 37A.
- Merger of BSNL and MTNL
The DoT proposed to the GoM
th at “a decision on the framework of the PSU licenses for considering
the networks of BSNL and MTNL as a single entity for provision of services is
is to be considered and that the payment of charges on account of inter-connection…are
avoided”. Thus the merger of BSNL and MTNL is proposed by DoT.
But there are difficulties in such merger. The pay scales of the
staff in MTNL and BSNL are different. While Government is paying pension to
BSNL absorbed employees, MTNL pension fund is paying pension to MTNL absorbed
employees. In MTNL, disinvestment took place and the Government holding is only
56.25%, whereas BSNL is 100% owned by the Government. Merger of BSNL and MTNL
means the combined entity will have disinvested shares and it will not be 100%
Government owned. It will be nothing but a starting for the privatization of
the combined entity. How the GoM will view all these issues is a question.
- Provision of funds to BSNL and MTNL for implementing VRS
DoT proposed to the GoM for financial support for implementing VRS for
1,00,000 employees in BSNL and 20,000 employees in MTNL, for reducing the staff
cost. For this, it proposed that the funds can be mobilised by selling the land
owned by the Companies or by providing interest free loan to the BSNL and MTNL
for this purpose. The cost for implementing this VRS will be Rs 12371 crore for
BSNL and Rs 5074 crore for MTNL.
- Trifurcation of BSNL and MTNL
It is reported in the news papers that the proposal for trifurcation
of BSNL and MTNL is submitted by the DoT for the consideration of the GoM. As
per this proposal, two more companies will be created from
BSNL and MTNL, one for towers and
network and technology business, another for land development and
utilisation. BSNL and MTNL will continue to be services and marketing
companies.
BSNL has already appointed the consultancy firm KPMG India to assist
it in separating its tower assets into a new company and facilitate leasing of
infrastructure to private firms. The consultancy firm is likely to give its
report by the end of July 2013. BSNL is having 70,000 towers. It has 7,00,000
KM of optic fibre cable which no private operator is having or intending to
have. The idea is to bring the towers and cable into a separate company. BSNL
says it will earn Rs 1600 crore in 5 years if such a tower company is formed.
BSNL has a land bank of 4400 hectares across the country which can be developed
commercially. It expects to earn Rs 250 crore per year from 2016-17 onwards as
rental on such commercially developed lands.
- Allow BSNL and MTNL to enter into Cable TV and broadcasting
services
Another proposal said to be submitted by DoT for the consideration
of the GoM is to allow BSNL and MTNL for “exploring new business opportunity
being created by the convergence of services and networks across telecom (value
added services and internet telephony), information, cable TV and broadcasting
media services”.
- Government Departments/institutions and Government employees
should be asked to take their telecom services from BSNL and MTNL only
This is another proposal said to be submitted by DoT for the
consideration of the GoM. The DoT note
said,”For enhancing the market share of the two telecom PSUs,
telecommunications services required by government, central public sector
enterprises and autonomous bodies receiving grants from the government may be
asked to seek BSNL and MTNL services only for wire line, wireless and broadband
services.” “In order to incentivise the same, BSNL and MTNL would develop a
concessional and preferential plan for government servants”.
- Waiver of the remaining
principle amount of Rs 980 crore
outstanding against BSNL
At the time of formation of BSNL, the Government has shown Rs 7000
crore notional loan in the BSNL’s account, although it was not really paid by
the Government to BSNL. It has to be paid in 15 years, at the interest rate
14.5% along with a penal interest of 2.5%. It is said that BSNL paid Rs 12000
crore so far as interest, on this loan. The DoT proposed to the GoM to waive off
the remaining principle amount of Rs 980 crore outstanding against BSNL.
The DoT’s proposals are nothing but
an attack on BSNL, MTNL and their employees
- The DoT’s proposal for merger of BSNL and MTNL is contradicting
with its other proposal for their trifurcation. It seems merger is not
going to happen due to the complexities involved, but the trifurcation is
on the cards. Trifurcating each of them into (a) Towers and Network
Company (b) Real Estate Company, and (c) Services company, is with the ulterior motto to bring
private partners into them. The tower and network company and the real
estate company will be separate companies subsidiaries) that will be held by BSNL or MTNL by having 51 to
100% stake in them.
- To make such privatisation attractive, it is proposed to send
home one lakh employees in BSNL and 20,000 in MTNL by VRS. To implement
VRS, it is proposed to raise funds either by selling the lands or by grant
of interest free loan by Government. In the liberalisation era,
privatisation means selling the assets of the Government at throw away
prices to the corporate in private sector.
Hence selling land of BSNL/MTNL in metropolitan cities means
handing over the high value lands
to real estate firms at low value. The alternative proposal for implementing
VRS by taking loan from Government or loan with guarantee from the
Government will be nothing but adding more burden on MTNL and BSNL since
they have to repay such a loan.
- Refund of the amount paid for BWA spectrum to BSNL and MTNL and
exempting them from the one time charge for the spectrum they are having
beyond 4.4 MHz are opposed by the private operators and they are exerting
a lot of pressure on the Government, including the Prime Minister.
- It seems that the DoT has not recommended full compensation to
BSNL and MTNL for the losses incurred on their landline networks, nor
changes in the equipment procurement rules for facilitating immediate
procurement. Thus the important measures required for the survival of BSNL
and MTNL were left out in the proposals of DoT.
- It seems that the DoT has not recommended for full compensation to
BSNL and MTNL for the losses incurred by them on the landline network.
What can be expected from the GoM
Thus, in spite of some good points, the proposals of the DoT are mainly
aimed at mass scale reduction of staff by VRS and fragmentation of BSNL and
MTNL into 3 companies each with a view to privatize them. How far the GoM is
likely to accept the good proposals of DoT for refund of the amount paid for
BWA spectrum to BSNL and MTNL, exempting BSNL and MTNL from payment of
thousands of crores for the additional spectrum held by them, is to be seen,
since the private operators are pressurizing the Government not to agree for
these proposals. But it is likely that the GoM may accept the proposals of DoT
for implementation of VRS and fragmentation of BSNL and MTNL. Thus the net
result of the GoM will be negative. This is because the “National Telecom
Policy,2012” has prescribed to “appropriately consider the restructuring of the
Public Sector Undertakings , under the Department of Telecommunications , in
terms of management, manpower and equity”.
But such an outlook oriented for fragmentation and privatization of these
two PSUSs is against the terms of reference of the GoM. As per the terms of
reference, the GoM is constituted to
recommend the steps to be taken for the revival of BSNL and MTNL not simply as
a profit making organizations, but for as PSUs serving the national and
strategic interests of the country. The rationale for the existence of BSNL and
MTNL is to serve the national and strategic interests of the country and hence
they cannot be simply viewed as commercial, profit oriented organizations.
The strategic role and the inborn
difficulties of BSNL and MTNL
But the very existence as PSUs is preventing them from having the
advantages of the private operators in respect of earning profit. They have
inherited the extensive landline network from DoT on which incurring losses is
certain. On the other hand the private operators had the option of not entering
into the landline business or entering wherever it is profitable. They have
inherited a huge work force from DoT, recruited for the landline network which
requires more staff compared to mobile services. The private operators have not inherited any
such large work force and they have outsourced most of their works and
recruited only a small number of employees. Thus while BSNL and MTNL are
serving the national task of providing large scale employment, the private
operators are not serving this cause.
While the private operators have handed over the installation, maintenance
and operation of their net works to the foreign equipment manufacturing
companies confining themselves only to marketing and branding of the services,
without caring for national security . The BSNL and MTNL, as PSUs catering to the
interest of national security cannot do this and hence not having this
advantage. While the BSNL and MTNL
served the nation by providing internet and broadband connections on their
landline network on a largescale , the private operators have not played such a
key role in the knowledge economy. The optic fibre cable of 7,00,000 km owned
by BSNL is a national asset serving as the backbone for telecommunication
services. It is now engaged in extending the optic fibre cable from block level
to the village level, which will be owned by BBNL (Bharat Broadband Network
Limited, a Special Purpose Vehicle PSU created by the
Government).This network to the rural areas is essential for providing reliable
high speed broadband connections to villages. BSNL is entrusted with the work
of establishing optic fibre cable net work for the defence forces for vacating
the spectrum allotted to them. BSNL is entrusted with the job of providing telecom
facilities in naxal effected areas. Only after the entrance of BSNL and MTNL in
mobile services, the mobile tariffs were reduced. If there is no BSNL and MTNL,
the private operators would form cartel and increase the tariffs fleecing the
customers. BSNL and MTNL are the PSUs on which the Government has to depend in
cases of emergencies.
Thus while playing a key role in the strategic and national requirements of
the country which cannot be played by the profit oriented private operators,
the BSNL and MTNL are having the inherent disadvantages of maintaining a large
landline network which is essentially loss making and a huge number of staff required
for it, requiring a huge expenditure on salaries. Added to this, the Government
policies like compelling the BSNL and MTNL to take 3G spectrum for all their
circles including circles where it is commercially not required, by paying a
huge amount of Rs 16750 crores(BSNL-Rs 10,000 crore and MTNL-6750 crore).
Besides this, the Government has allotted poor quality BWA spectrum to BSNL and
MTNL for all their circles and collected
Rs 8313 crores and Rs 4534 crores respectively from them. Thus BSNL and MTNL
were compelled to pay huge amounts for the 3G and BWA spectrum bands allotted
to them in violation of all commercial principles. This huge payment emptied
the cash reserves of BSNL and compelled MTNL to take huge loan. BSNL has paid an interest of Rs 7000 crore on
a notional loan of Rs 7500 crore written in its account at the time of its
formation. Thus it has paid a total Rs 18500 crore for this to the Government
including principle and interest, although it did not really receive any such
loan. It was the dues of DoT, transferred to the BSNL. The BSNL and MTNL were
prevented from quick procurement of equipment, tools and material in the name
of following the rules of the Government as PSUs whereas the private operators
were able to procure equipment quickly. This prevention of equipment
procurement prevented BSNL and MTNL from expanding their mobile services in competition
with the private operators and as a result they lost their due market share.
These rules are preventing timely procurement of even telephone instruments,
modems etc. BSNL is having equipment production facilities in its telecom
factories. But these telecom factories are not modernized and allowed to
produce the equipment required by BSNL and it was compelled to purchase from
the market. The management’s failure in providing proper marketing and sales
strategy and in creating confidence in the customers regarding after sales
service further added to the vows of these PSUs.
Counter pressure on the
Government is required to neutralize the pressure of the private operators and
the Indian and foreign big capitalists
The unity of entire BSNL and MTNL employees along with the support of left
and democratic forces is required to pressurize the Government for not
surrendering to the pressure of the private telecom operators and for taking appropriate
measures for the revival of BSNL and MTNL without resorting to VRS to employees
and without resorting to the fragmentation of BSNL and MTNL. The support of the
people is essential for this struggle. The remedy for preventing the losses to
these PSUs is to refund to them the huge amounts collected by the Government in
the name of BWA and 3G spectrum, to refund the huge amount collected by the
Government from BSNL in the name of notional loan, to exempt it from payment
for the 2G spectrum held by them beyond 4.4 MHz, to fully compensate them for
the losses incurred on the rural landlines,to refund the huge amount to BSNL
collected by the Government in the name of notional loan, to liberalise the rules to enable them to
procure equipment quickly, to restructure the management to enable efficient
functioning keeping at the same time their PSU character in view, and to
inculcate better work culture for immediate and best service to the customers.
The arguments of the private operators for not providing the above said reliefs
to BSNL and MTNL in the name of level playing field are not valid since the
private operators are not fulfilling the social responsibilities fulfilled by
BSNL and MTNL.
Therefore it is necessary that all the workers and officers in BSNL and
MTNL should unite and fight to achieve
these concessions from the Government for reviving BSNL and MTNL. Since their
revival is necessary for the development and well being of the country, the
support of the people and their representatives has to be mobilized for this
struggle. All the unions and Associations of the workers and officers of BSNL
have come together and submitted a common memorandum to the Group of Ministers
on the revival of BSNL. Similar step has to be taken by all the unions and
Associations of the workers and officers in MTNL. Further, they all should fight
together for the revival of BSNL and MTNL. Such a serious struggle is required
to compel the GoM to stop it from recommending in favor of VRS , fragmentation and
disinvestment of of BSNL and MTNL and to recommend refuds and compensations and
liberalization of procurement rules etc as detailed above.
---------P.Asokababu
