BSNL got Operating Profit Rs 672 crore and Net Loss Rs 8234 crore for the year 2014-15---Net loss should have decreased, but increased due to change in accounting procedure! Is Next Wage Revision from 1.1.2017 Possible?

BSNL got Rs 672 crore operating profit

CMD BSNL Sri Anupam Srivastava has informed that BSNL got an operational profit of Rs 672 crores for the year 2014-15. During the last few years it has been in operational loss also, besides net loss.

What is this operational profit or loss? If the current year’s income on services exceeds current year expenditure, the company will be in operational profit. If the current year income is less than the current year expenditure, the company will be in operational loss. Calculated thus, BSNL got an operating profit of Rs 672 crores. It means BSNL did not take loan to meet its routine expenditure in 2014-15.

Net loss increased from Rs 7019.76 crore in 2013-14 to Rs 8234.90 crore in 2014-15

What is the net loss? If the current year’s expenditure of the Company plus depreciation and amortization costs etc   exceeds the current year’s income, the company will be in net loss.

For the year 2014-15, BSNL’s total income was Rs 28645.20 crores and total expenditure including depreciation and amortization etc was Rs 37292.10 crore. The loss was Rs 8646.90 crore. From this, after deducting the prior period items and deferred tax benefit, the net loss was Rs 8234.09 crore.

 The total income of BSNL in 2013-14 was Rs 27996.35 crores and it increased to Rs 28645.20 crores in 2014-15. In this, the income on services increased from 26153.26 crore in 2013-14 to Rs 27242.23 crore in 2014-15, an increase of Rs 1088.97 crores , i.e 4.16% increase ( It is to be noted that there was some  increase of income on services from Rs 25654.81 crore in 2012-13 to Rs 26153.26 crore in 2013-14also, an increase of Rs 498.45 crore i.e 1.94% increase. But the employee expenses and administrative & operating expenditures increase in 2013-14 compared to 2012-13.)

The expenditure on employees which was Rs 15435.84 crores in 2013-14 was reduced to Rs 14963.50 crores in 2014-15.This is due to retirement of a large number of employees.

The administrative and operating expenditure was reduced from Rs 11009.30 crores in 2013-14 to Rs 10839.59 crores in 2014-15.

The payment towards License and spectrum fee reduced from Rs 2243.30 crores to Rs 2170.32 crores in 2014-15.

Thus there is an increase of Rs 648.85 crores in income and a decrease of Rs 715.03 crores in expenditure as per the above details. The total improvement is Rs 1363.88 crores. Therefore the loss in 2014-15 should reduce to this extent at least, compared to 2013-14. In fact, it is calculated that but for the change in the procedure for calculating depreciation, the net loss to BSNL for the year 2014-15 would have come down to Rs 5370 crore from Rs 7019.76 crore in 2013-14.

Improvements not due to Manmohan Singh or Modi Governments

Thus there is definitely some improvement in the performance of BSNL in 2014-15 compared to 2013-14. The BJP worshipers are campaigning that this improvement is due to Modi Government. c This is a wrong.  The improvement in performance is due to the procurement and installation of 7^th phase GSM equipment increasing mobile capacity and such procurement started since 2012 under UPA Government due to the consistent struggle of BSNL employees Joint Forum. No extra policy measure was taken by Modi Government besides what was achieved by the struggle of the BSNL employees Forum during UPA regime. Modi Government did not settle any of the demands raised by the BSNL employees Forum for reviving BSNL. The decrease in wage expenditure is due to retirements of employees in more number and similarly administrative and operating expenditure decreased to some extent not because of any policy measure of Modi Government. The policy measure taken by Modi Government is to separate the towers of BSNL into a separate Tower Company with a view to privatize it subsequently. It is to be remembered in spite of knowing the fact that the Corporatization would lead to losses, the then BJP Government lead by Vajpayee had formed BSNL. It assured to take necessary measures to avoid loss to BSNL, but immediately broken that assurance by limiting the compensation to BSNL for its losses on rural landlines only for a few years. Thus the root cause for the losses to BSNL was this policy decision of Vajpayee Government. Subsequently the UPA Government added its share in increasing the losses by delaying the procurement of GSM equipment etc. The spectrum policies of Vajpayee and Manmohan Singh Governments with further continuation of the same by Modi Government are another main reason for the losses to BSNL.

Whether BSNL will become a sick company?

The accumulated loss of BSNL as on 31.3.2015  was Rs 11030.99 crore, after deducting the total of net  losses from 2009-10  to 2014-15  from the total of net profits the company got up to 2008-09.  As per the BRPSE rulings, a PSU becomes sick if its accumulated loss equals or exceeds 50% of the average net worth of the previous 4 years. The average net worth of BSNL for the previous 4 years (2010-11 to 2013-14) was Rs 67926.28 crores. 50% of it is Rs 33963 crores. Since the accumulated loss so far is Rs 11030.99 crores, the possibility of BSNL becoming sick by 2017 is not there.

Is wage revision due from 1.1.2017 possible?

Since there is no possibility of BSNL becoming sick, there is no possibility for denying wage revision on that  basis.

But as per the DPE guidelines issued in November 2006 for the wage revision that took place with effect from 1.1.2007, “ CPSEs which incurred net loss during any of the three financial years preceding the proposed wage negotiation, but not referred to BIFR/BRPSE may also be allowed to enter into wage negotiation, provided they give an estimate to their administrative Ministry/Department as to how resources would be generated by them to meet the extra expenditure arising out of implementation of wage revision.”

If the same guideline is repeated by Modi Government for the wage negotiation due with effect from 1.1.2017, it will create problem. It means, for wage revision,   BSNL should not post losses during 2013-14, 2014-15 and 2015-16. But BSNL was already in losses during 2013-14 and 2014-15. It is likely to be in losses during 2015-16 also, since CMD told that BSNL would become profitable in 2017-18 only.  In such case, wage revision from 1.1.2017 is possible if BSNL management convinces DoT that the extra expenditure required for wage revision can be generated internally by BSNL. The case for this is that for the year 2014-15, BSNL got Rs 672 crore operating profit and it will go on increasing during 2015-16 and onward. But this is as per the existing guidelines. 

The Government has to issue fresh guidelines for the wage revision from 1.1.2017. Therefore we should first demand that Government should allow wage revision in loss making PSUs also since employees are not responsible for the losses. Also, the Government should compensate BSNL fully for the losses incurred by BSNL on landlines and settle the demands raised by Forum of BSNL Unions for revival of BSNL.