Management’s plan to wipe out the losses of BSNL-whether it will work?

The BSNL posted a loss of Rs 1823 crores in 2009-10 and a further loss of Rs 6384 crores in 2010-11. It is not yet known what will be the likely loss for the year 2011-12. But CMD BSNL says the total loss upto March  2012 will be Rs 12,000 crores. This means the loss for the year 2011-12 will be around Rs 4000 crores. But the management’s estimates are proving wrong. For example, for the year 2010-11, the loss projected by the management in December 2010 before BRPSE (Board for Reconstruction of Public Sector Enterprises) was Rs 2372 crores only where as actually it became Rs 6384 crores finally.

Assuming that the total loss for BSNL for the 3 years 2009-10, 2010-11 and 2011-12 will be Rs 12000  crores  only as stated by the CMD BSNL, what is the plan of BSNL management to come out of these losses?

On 16-12-2011 the CMD BSNL Sri R.K.Upadhyay, in his meeting with the media at Hyderabad, expressed the confidence that in the next three years the BSNL will wipe out the above detailed loss of Rs 12000 crores by the measures initiated by BSNL now. According to him, the following are these measures:

a)      If the Government approves and gives funds to the extent of Rs 12000 crores for implementing VRS to 1,00,000 employees and if 1,00,000 employees as expected by the management will opt for VRS, then it will result in a saving of Rs 2400 crores in salries.

b)      The BSNL was given Rs 2000 crores per year for the last 3 years until July 2011 to compensate it for the losses incurred on it for the social obligations like rural telecom services. The BSNL management requested the DoT to continue this compensation further and the DoT is considering it.

c)      DoT agreed in principle to refund Rs 6000 crores to BSNL on account of the proposed surrender of BWA spectrum allotted to BSNL in several circles.

d)      The BSNL  will take loan from banks to the extent of Rs 5000 crores to procure 15 million lines GSM equipment for increasing its mobile subscribers

e)      It will increase its revenue significantly and  earn profit through value added services.

f)       It will utilize its land in prime locations in several cities for commercial purposes through PPP(Public-private participation) model, that is, in partnership with a real estate company or companies.

But how retrenchment of 1,00,000 employees by VRS will help BSNL? The professed saving of Rs 2600 crores per year is imaginary. As said by him, BSNL is expecting a grant of Rs 12000 crore from the Government for meeting the expenditure on account of exgratia payment to the one lakh employees for  whom VRS is proposed to be implemented. But this grant from Government is unlikely since the Government itself is having a large budget deficit which is much more than expected by it. Moreover, as per the DPE guidelines, BSNL has to take loan for implementing VRS. If it takes loan to the extent of Rs 12000 crore for implementing VRS, it will add to its burden instead of reducing its loss. Besides, even if this Rs 12000 crores is available by taking loan, as said by CMD, another Rs 4000 crore is required for leave encashment and other payments to be done by BSNL for VRS to one lakh employees.The Rs 6000 crore expected to be refunded by the Government for surrendering the BWA spectrum has to be utilized towards meeting this expenditure. Moreover, if one lakh employees are to be give VRS, it will increase the number of pensioners of DoT/BSNL from present two lakhs to 3 lakhs and the pension expenditure will increase from the present Rs 3700 crore to more than Rs 5000 crores. In this amount of Rs 5000 crores, as per the Order dated 15-6-2006 issued by DoT, the DoT will bear around Rs 3000 crore expenditure (60% of the amount paid by BSNL and MTNL as licence fee and dividend plus the amount paid by BSNL towards corporate tax, excise duty and service tax) and the remaining amount of more than Rs 2000 crores has to be paid by BSNL to DoT. Therefore the expenditure to be incurred by BSNL for implementing VRS will be more than the saving it gives in the salaries and it will be another loss making proposal for BSNL.

VRS is not the way to save BSNL. It will add to its losses. The only way to save BSNL is full compensation to it by the Government for the Rs 10000 crores losses incurred by it per year on the landline network which is maintained as a social obligation and increasing its revenue significantly, along with utilization of its land for commercial purpose.