Monday, August 11, 2014

Government’s Cure for BSNL is more dangerous than the disease

Losses of BSNL and remedies of the Government

In the Rajyasabha, while answering several questions raised by MPs in July and August  2014 on the viability of BSNL, the Minister for Communications and IT, Sri Ravishankar Prasad has revealed the following facts and proposals:
1.       The losses of BSNL on its landline network and its net losses are as below:

Loss for 2011-12
Loss for 2012-13
Loss for 2013-14
Loss on landlines
Rs 12669 crore
Rs 13445 crore
Rs 14979 crores
Net Loss
Rs 8851 crores
Rs 7884 crores
Rs 7085 crores

2.       The landline connections of BSNL have reduced by 38.04% during the period from March 2009 to May 2014 and the market share of mobile subscriber base of BSNL has reduced from 14.87% in March 2009 to 10.95% in May 2014.

3.       The wire line connections of BSNL were 2.247 crores as on 31.3.2012 and it declined to 1.818 crores as on 31.5.2014.The wireless connections of BSNL were 9.851 crores as on 31.3.2012 and it declined to 9.162 crores as on 31.5.2014.The total number of wire line and wireless connections taken together were 12.098 crores on 31.3.2012 And it declined to 10.98 crores as on 31.5.2014, with the percentage of decline as 33.4%. The market share of BSNL and MTNL taken together as on 31.5.2014 in wire line connections is 77.03% and wireless connections is 10.44%.

4.       The market share of BSNL in wire line connections was 85.61% on 31.3.2012 and it declined to 82.57%
5.       The revenues from operations of BSNL have reduced by 11.67% in the last five years

6.       The total debt of BSNL is Rs 6448 crores (unaudited) as on 30.6.2014. It was Rs 3335 crores on 31.3.2012, Rs 4772 crore on 31.3.2013 and Rs 5948 crore on 31.3.2014.

7.       The declining market share of BSNL  is for the following reasons:
·         The declining wire line business due to shift to mobile communication
·         Inability to expand coverage due to finance and procurement problems
·         Lack of adequate skill sets due to changing nature of technology and customer centric business with focus on sales, marketing and customer services
·         Stiff competition in the telecommunications sector

8.       The following measures were taken by the Government to revive BSNL:

a)      Waiver of Government loan to BSNL involving an amount of Rs 1411 crores

b)      Financial support of Rs 6724.51 crores to BSNL on surrender of BWA spectrum

c)       The Government is formulating a coordinated plan aimed towards revival of BSNL by addressing issues of high employee expense and gainful utilization of assets to enhance availability of finances for network expansion and improvement in Quality of Services.

d)      BSNL has submitted a proposal to offer Voluntary Retirement Scheme(VRS) to one lakh employees to reduce employee expenses. After consideration of various options and based on the recommendations of Group of Ministers, Department of Telecommunications is considering a proposal to provide annual financial support for reduction of employee expenses with certain conditions.

e)      BSNL has taken the following steps for improving its landline business:

·         Migration from Public Switched Telephone Network to Next Generation Network(NGN) in the current Five year plan(i.e 2012-2017)to provide enhanced value added services like Personalized Ring Back Tone, Broadband VAS, Multi Media Video Conferencing, Wide Area Centrex, Voice over Internet Protocol(VOIP) services and fixed –mobile services convergence etc(fixed-mobile convergence means your cell phone will work on mobile networks when you are outside your office or home and will work on landline network while you are at home or office)[Note—these portions in italics are added by me…asokababu]

·         Redeployment of workforce with more focus on Sales, Distribution and customer care activities

·         Measures to retain and enhance the landline connectivity by increasing penetration of broadband.

·         Sales and marketing set up has been strengthened by having exclusive channel management team consisting of 4500 exclusive sales representatives.

·         Introduction of Call Detailed Record (CDR) based billing, commercial and fault repair service and work order management system.

f)       BSNL is preparing a revival plan for increasing revenue potential, identifying business opportunities, organizational restructuring to enable them to grow into customer-centric companies with expertise in marketing and customer services delivery and developing human resources strategy in line with restructured organizational vision.

g)      The long term measures, including revival of BSNL and MTNL, would attempt to position these PSUs to emerge as market leaders in the converged telecommunications market. For an in-depth study on the implications of merger of the two PSUs, three groups have been constituted to study issues of human resources integration, technology integration, and corporate integration. Views of the Unions on merger would be taken into consideration before a decision is taken in best public interest and that of two companies.

If landline network is not there, BSNL would have been in profit-But the society would have lost

As per the above figures given by the Minister, BSNL’s loss on its landline network for the year 2013-14 was Rs 14979 crores where as its net loss was Rs 7085 crores only. Thus if the landline network is not there, BSNL would have been in a profit of Rs 7894 crores (14979-7085). The losses are on account of landlines. The losses on landlines means that the expenditure on landlines(including salaries of staff working on landlines, administrative and operational expenditure on landlines, depreciation on landline assets etc) has exceeded by Rs 7894 crores over the revenue on landlines for the year 2013-14. But most of the staff of BSNL is engaged on landlines only. Thus the issue is how to make the landline business profitable. Another question is since BSNL is having vast landline network in throughout the country including rural and backward areas which are necessarily loss making, whether BSNL should operate its landline network only in urban areas like the private operators? If so, how the fixed line broadband connectivity can be provided to the rural and backward areas? Whether proper quality bandwidth can be provided on mobile connections without the necessity for landlines in the loss making areas? As per the technical considerations, quality bandwidth for broadband connections cab be provided only through wire line connections. Therefore there is necessity to maintain landlines in rural and backward areas for providing broadband connections, although the landlines in these areas are loss making. In the urban areas, the wire line connections are generally loss making. If BSNL has not maintained the vast land line network even by posting huge losses, it would not have been possible to provide internet and broadband connections in the scale provided at present on wire line connections. As on 31.5.2014, BSNL’s wired broadband (speed >512 Kbps) subscribers are 99.8 lakhs whereas the next largest provider Airtel has 14 lakhs wire line broadband connections.

Thus the BSNL’s wire line network is socially required, although it is essentially a loss making business. At the same time, with proper steps taken by the Government and management in providing necessary equipment, tools and material, the revenue on landline network would have been more. In spite of this, there will be some loss to BSNL on landlines and it is the responsibility of the Government to compensate BSNL for this, since the landline network is being maintained as a social obligation by BSNL.

The decline in mobile connections

As per the statement of the Minister, the number of mobile connections of BSNL has declined from  9.851 crores as on 31.3.2012 to 9.162 crores as on 31.5.2014.As per the TRAI’s report, In May 2014 alone, while there is  increase in the customer base of all other operators (except Reliance), BSNL lost 15,73,275 mobile customers. In May 2014, the proportion of VLR subscribers for BSNL was 61.53% i.e. only 61.53% of mobile subscribers have made calls/accessed data etc using their mobile connection. But the VLR subscribers for Idea, Airtel, Vodaphone and Relaince in the same month were more than 94%. Thus even in mobile services, BSNL is losing its customers and market share and even in these customers only 61.53% are active using their connections.  Non procurement of the required GSM equipment in time, defects in operation and maintenance of the services, defective services, and poor strategy in marketing and sales are the reasons for this.

Recommendations of Deloitt  Consultant-A serious  attack on the job security of BSNL employees

Instead of compensating BSNL thus, the Government and BSNL management are now resorting to a serious attack on the job security of BSNL employees. The Minister Sri Ravishankar Prasad told in Rajyasabha, “  BSNL is preparing a revival plan for increasing revenue potential, identifying business opportunities, organizational restructuring to enable them to grow into customer-centric companies with expertise in marketing and customer services delivery and developing human resources strategy in line with restructured organizational vision.”  He also told that the plan for revival of BSNL includes “addressing the high addressing the  issue of high employee expense. This means there will be an organizational restructure of BSNL and according to that the man power also will be restructured. In fact, BSNL has appointed the Deloitte Consultant, on the issue of revival of BSNL. It submitted its recommendations recently.

Following are the important recommendations of this Deloitte Consultant:

a)       Restructuring of the field units of BSNL:   Instead of the present 300+ SSAs, there should be only 167 SSAs by merging some SSAs and these 167 units are to be called as Area Offices

b)      These Area Offices will have to focus on sales, marketing and   customer service delivery.

c)       These Area Offices also have to monitor the outsourced agencies for O&M of wireless and wire line networks. Thus the entire work of Operation and maintenance of wire line and wireless networks has to be outsourced.

d)       The transmission, network planning has to be moved to circle office. The non-territorial circles like Projects and Maintenance Circles, Civil and Electrical wings etc have to be abolished.

e)       After full implementation of ERP, the functions such as HT and Finance have to be moved to Circle Office. Thus there will be no staff, pay, TRA sections in Districts. According to these recommendations Sr ToAs are required only until implementation of ERP.

f)       For sales, marketing, customer service delivery, and IT,  fresh recruitment of a total 13300 executives has  to take place, but majority of them will be off the rolls of BSNL. Thus there will be a new situation with two kinds of employees, on roll and off roll.

g)      The recommendations have declared that most of the non-executives are surplus, even without full implementation of ERP and outsourcing of O&M.

h)      According to these recommendations, in the case of AP Circle, even without implementation of ERP and without outsourcing of O&M, out of the 20775 non-executives in all the SSAs of the Circle, only 5889 are required. Similarly, as per these recommendations, out of the 15378 non-executives in all the SSAs in Gujarat , only 8415 are required. Similarly in UP(E) Circle, out of the 8425 non-executives working in all  the SSAs, only 1798 are required.  In this manner, these recommendations have proposed drastic reduction in the requirement of non-executives, in all the circles.  These recommendations have proposed to show the vast majority of the non-executives as surplus, to be shown against supernumerary posts.

i)        The excess staff beyond requirement has to be shown against   supernumerary posts. This means they will not be shown against their own posts which will be abolished and will be shown against supernumerary posts, thus declaring that they are surplus and unwanted.

j)        BSNL has to claim half of the salaries of the employees shown against supernumerary posts, from the Government.( After full implementation of ERP and outsourcing of O&M as per these recommendations, more number of non-executives will be declared surplus and shown against supernumerary posts. )

Thus these recommendations are a serious attack on the job security of the BSNL employees. The staff strength has been in decline considerably after the formation of BSNL due to lack of recruitment and large scale retirements on superannuation. Therefore there is no basis for declaring the large number of staff as surplus. It is only a mind game of the management and Government to make the propaganda that the staff are surplus.  Also, these recommendations, if implemented, will result in two sets of employees-on rolls and off rolls, thus creating disunity among employees and weakening their potentiality to fight against the attacks on them. These recommendations, if implemented, will lead to privatization of the maintenance and operations of the networks of BSNL, both landline and mobile.

The BSNL Corporate Office has issued a circular to all CGMTs vide No.4-2/2014-Restg dated 18.7.2014 asking them to come prepared for a discussion on these recommendations proposed to hold a discussion in the Heads of the Circles meeting to be held on 12th & 13th August 2014(now postponed to 21st  and 22nd August 2014).  Thus the management is going ahead with the process for implementation of these recommendations. It is a part of the Minister’s statement in Rajyasabha that the Government is “formulating a coordinated plan aimed towards revival of BSNL by addressing issues of high employee expense”. Thus a serious attack on the job security of BSNL employees is in there in the near future.

Merger of BSNL and MTNL-another proposal for further attack on BSNL

The Minister told in the Rajyasabha that merger of BSNL and MTNL is one of the long term measures proposed for the revival of BSNL and MTNL and three groups were constituted to study the implications of this merger. While BSNL and MTNL have been continuously in losses since 2009-10, MTNL has posted a profit of Rs 7825 crores for the year 2013-14 not due to increase in revenue or decrease in expenditure, but due to the Government’s decision to write back of provisions on account of pensionary liabilities of MTNL since 1.10.2000 and spectrum amortization costs, as per the decisions of the Government.  Thus the issue of operational losses to MTNL continues in spite of this. When both MTNL and BSNL are in losses, how their merger can result in the magic of profit to them? MTNL is disinvested to the extent of 43.75% and if BSNL and MTNL are merged, the combined entity will be a disinvested company, whereas at present BSNL is a 100% Government owned company. Thus, the merger will lead to disinvestment and privatization in installments. Moreover, as on 31.3.2013, the net worth of MTNL was negative, with (-)2784 crores. The net worth of BSNL on the same date was Rs 63639 crores. Their combined net worth as on 31.3.2013 would be Rs 60855 crores. Their combined losses as on 31.3.2013 would be Rs 39777 crores. Thus as on 31.3.2013, their combined loss was more than 50% of their combined net worth and hence the combined entity would become sick as per rules on the date of its formation itself! Merger will not result in MTNL scales for BSNL employees, but will result in BSNL scales for MTNL employees, as per the rules issued by the Government for payment of Government pension to MTNL employees. On the other hand, the merged company would be a sick and disinvested company. Thus merger will create more problems instead of solving it.

Forming a subsidiary tower company by separating the 62000 towers from BSNL

As per the reports in the news papers on 25.6.2014, the Communications Ministry has prepared the draft of a note on the merger of BSNL and MTNL and sent it to the Communications Minister Ravi Shankar Prasad for his approval. It seems the note has proposed for forming a separate 100% subsidiary tower company by separating the towers from BSNL, with outsourcing of operation, maintenance, sale and marketing functions. But some other reports talked about inviting a private partner into the tower company by forming a joint venture. As per the reports in various newspapers, a DoT has proposed a note  It seems the note has proposed for forming a separate 100% subsidiary tower company by separating the towers from BSNL, with outsourcing of operation, maintenance, sale and marketing functions.

No proposal for financial assistance to BSNL for expanding and upgrading its services, but all proposals for fragmentation and privatization of BSNL along with a serious attack on the job security of the employees

The replies given by the Minister Sri Ravishankar Prasad on the issue of revival of BSNL and MTNL are clearly indicating that the Modi Government is following the UPA Government in rejecting the compensation to BSNL for the huge losses incurred by it on landlines which are maintained by it as a social obligation. It is equally as adamant as the UPA Government in not providing any financial help to BSNL for expanding and upgrading its network. As per the previous CMD Sri R.K.Upadhyay, Rs 40,000 crores capital is required to be invested by BSNL during 12th plan (2012-17) for expanding and upgrading the network of BSNL so that it is able to achieve profit and viability by 2017. Since BSNL is incurring losses on landlines as a social obligation for the commercially unviable landlines, it is the responsibility of the Government to evolve a policy for compensating BSNL   for these losses so that it can utilize the amount  for expanding and upgrading its network. But such a help is being denied by the Modi Government.  Instead, it is resorting to various proposals to divide BSNL into Tower Company and Services Company, to privatize the operation and maintenance of these tower and services companies, to declare thousands of staff as surplus and to merge BSNL and MTNL to create a sick and disinvested entity etc. Its talk of providing annual financial support for reduction of employee expenses with certain conditions is aimed at declaring staff surplus.

The proposals of BSNL employees for the revival of BSNL

The Forum of Unions and Associations of BSNL Non-Executives and Executives has been demanding that the Government should take the following steps for reviving BSNL:

1.       Fully compensate the losses incurred by BSNL on landlines

2.       Refund the Rs 18500 crore amount collected by the Government from BSNL   in the name of 3G and BWA spectrum. BSNL was compelled to take 3G spectrum even for the commercially unviable circles, whereas the private operators are allowed to take 3G spectrum only for some circles and share the spectrum of other operators in the remaining circles. BSNL was allotted poor quality BWA spectrum and it surrendered it back to Government in most of the circles.

3.       Financial assistance to BSNL for expanding and upgrading its services

4.       Necessary procedure for immediate procurement of the required equipment, tools and materials

5.       BSNL be allowed to pay pension contribution on the actual pay of the employee instead of on the maximum of the pay scale.

6.        BSNL/MTNL services be made mandatory for Central/State Government departments and PSUs.

7.       Filling up the posts of Directors of the BSNL Board(BSNL is now not even having a regular CMD)
8.       Absorption of ITS officers in BSNL

9.       Dropping the proposed tower company/BSNL-MTNL merger/Deloitte consultant recommendations.

The  Government has to be compelled to concede these demands by organizing a serious struggle and mobilizing  the support of the people. It is also necessary for the BSNL employees to work with dedication for extending better service to the customers.

…..P. Asokababu

1 comment:

  1. let them do atleast something as suggested by Deloitte Consultant.