Friday, May 31, 2013

Salutation To The Dawn

Look To this day!
For it is life, the very life of life
In its brief course
Lie all the verities and realities of your existence

The bliss of growth
The glory of action
The splendour of beauty

For yesterday is but a dream
And tomorrow is only a vision
But today well lived makes every yesterday a dream of happiness
And every tomorrow a vision of hope
Look well, therefore, to this day!
Such is the salutation to the dawn.

Wednesday, May 29, 2013

GoM on revival and revitalisation of BSNL and MTNL—what can be expected from it

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:

  1. 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

  1. 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.

  1. 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.

  1. 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.
  1. 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.

  1. 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”.

  1. 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”.

  1. 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

  1. 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.
  2. 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.
  3. 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.
  4. 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.
  5. 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.