Pension Expenditure for DoT/BSNL Retirees incurred by DoT

The expenditure on pension incurred by DoT for the DoT/BSNL retirees is as below:

For 2006-07=Rs 1395 crore. For 2010-11=Rs 3700 crore; For 2011-12=Rs 4450 crore(RE); For 2012-13=Rs 4806 Crore(BE)

Note—RE=Revised Estimate in the budget; BE=Budget Estimate; The BE will generally increase in the case of pension.

At present there are 2 lakh pensioners. If 40650 employees are given VRS as proposed in the MoU signed between BSNL and DoT for the eyar 2012-13, the pension expenditure will increase by 20 per cent and will be Rs 5762 crore. This will add burden on BSNL since it has to meet the pension expenditure which will be over and above the 60 per cent limit of its annual contributions to DoT other than pension contribution under FR 116. Hence VRS is a burden on BSNL and not a relief and hence should not be implemented.

Battle among Telecom Corporates for Spectrum

2G spectrum freed out of the cancellation of the 122 telecom licenses as per the Supreme Court’s judgment has to be auctioned. Government is planning for auction of the 4G spectrum. This is now triggering a fresh round of battle between the private telecom companies. Each company is acting as per its own interest.

Among the companies which were given 2G spectrum(GSM), it was allotted in 2 bands. One band was 900 MHz and another band was 1800 MHz. The earlier entrants Airtel, Vodafone, Idea and BSNL were allotted 2G spectrum in both these bands. But the later entrants like Reliance, Tata Teleserrvices, Uninor, Loop, Etisalaat, MTS(Systema) etc were allotted only in 1800 MHz band. The Supreme Court cancelled the licenses allotted in 2008. The licenses thus cancelled were of Uninor, MTS, Loop, Etisalaat etc.

The spectrum freed for auction due to the cancellation of 122 licenses was in 1800 MHz band only. It is now realized that by utilizing the 2G spectrum in the 900 MHz band, advanced services like wireless broadband services can be given, due to the technological developments. But for the present as per the existing license conditions this spectrum in 900 MHz band can be utilized only for providing 2G services and not wireless broadband services. As and when the Goverrnment liberalizes the license condition allowing advanced wireless broadband services by utilizing the spectrum in the 900 MHz band, it will be advantageous for the companies having 900 NHz band spectrum. 

Therefore a question has arisen about the refarming of the 900 MHz band spectrum, that is, asking the companies having the 900 MHz band spectrum to vacate their 2G services from that band to the 1800 MHz band, by allotting them additional spectrum in 1800 MHz band and then auction the 900 MHz band spectrum vacated by them. The operators having the 900 MHz band spectrum (Airtel, Vodafone, Idea) are opposing such refarming on the ground that it will impose additional cost on them for the migration of the services to the subscribers from 900 MHz band to 1800 MHz band. But the operators not having the 900 MHz band spectrum are demanding for immediate refarming of that band of spectrum. Their argument was that the 900 MHz band spectrum enabled the operators having that band of spectrum to provide services with less costly equipment and hence less capital expenditure expenditure and therefore they should not have that advantage permanently and all should be allowed to have some spectrum in the 900 MHz band.The operators whose licenses were cancelled and want to continue by getting their cancelled spectrum again in the auction to be held, and the operators whose licenses are not cancelled, but not having the spectrum in 900 MHz band are the group demanding this. They are Uninor, Etisalaat, MTS, Loop (whose licenses are cancelled) and Tata Teleserrvices and Relicance Communications (of Anil Ambani).

Another issue is whether the spectrum in 1800 MHz band freed due to the cancellation of licenses should be auctioned by allowing all the existing companies and the companies whose licenses are cancelled and also the companies who want to enter in the telecom services business now, or not. The companies whose licenses are cancelled are demanding that the spectrum thus available should be auctioned in 2 stages. They demand that in the initial stage only the companies whose licenses are cancelled and those who want to enter in the business now should be allowed and a quantum of 4.4 MHz spectrum should be auctioned in the initial stage. Their argument is that the existing companies like Airtel, Vodafone, Idea, BSNL etc are having more than 6.2 MHz spectrum in all circles and if they are allowed to participate now in the auction, they can bid aggressively since they are the established players and get more spectrum and hence a monopoly on the spectrum. They demand that first the companies whose licenses are cancelled and the new applicants be allowed to acquire the minimum 4.4 MHz spectrum in the auction and thereafter in the next stage all can be allowed to participate. But the existing established operators like Airtel, Vodafone, Idea etc are demanding that all should be allowed in the auction and the entire available spectrum should be auctioned in one go. Thus they want to get more spectrum so that there is no scope for the cancelled licensees to get it, so that only they remain in the field and dominate the sector.

The other auction for spectrum is 4G spectrum auction and that spectrum is in 700 MHz band. Anil Ambani’s brother Mukesh Ambani’s Company “Infotel Broadband” is the only company now having pan India(in all circles in India) 4G spectrum( but in 2300 MHz band). After bagging the 4G spectrum license , Infotel Broadband wants to enter now in voice telephony market also and hence it joined along with the operators whose licenses are cancelled, demanding that the auction for 2G spectrum be confined in the first stage to the cancelled licensees and the companies like Infotel broadband which are not having any 2G spectrum.

But the 4G spectrum in 700 MHz band is more efficient than the 4G spectrum in 2300 MHz band. The Communications Minister Kapil Sibal recently announced that the 4G spectrum in 700 MHz band will be auctioned in this year. Airtel, Vodafone, Tata teleservices favour immediate auction of the more efficient 700 MHz band spectrum so that they can enter the 4 G services businesses without delay. But Infotel Broadband which is having 4G spectrum in 2300 MHz band already is demanding that first the 2G spectrum freed due to the cancellation of 122 licenses be auctioned and thereafter only the Government should think of auctioning the 4G spectrum in the 700 MHz band.

There is another controversy regarding the spectrum. Some Companies like BSNL, Airtel, Vodafone, Idea etc who are the established old players are having more than the contracted amount of 6.2 MHz spectrum in several circles. BSNL is having 10 MHz spectrum in most of the circles. The new entrants whose licenses were cancelled now by the Supreme Court have demanded that since these companies are having more than the contracted amount of 6.2 MHz spectrum, the Government should collect upfront fee for the spectrum they are having beyond 6.2 MHz. But the Airtel, Vodafone, Idea etc have opposed it. At one stage the Telecom Commission recommended for collecting this amount. If collected, then BSNL has to pay around Rs 10000 crore, Airtel has to pay  Rs 8000 crore, Vodafone has to pay Rs 5000 crore and Idea has to pay Rs 3000 crore. But it seems that the Government may not collect this amount from these companies.

The battle will go on among the private telecom companies on these issues and each of them will pressurize the TRAI and the Government to recommend and decide in their favor. But why should at all the spectrum which is a natural resource and hence the property of all the people in the country should be allotted at all to any private telecom company for their commercial profit? Only the Government , through the  telecom companies of its own, that is, BSNL and MTNL should install, operate and maintain the telecom services in the mobile sector so that the spectrum in all the bands is best utilized for the benefit of the nation, without any corruption and controversy. It is better to nationalize the telecom services. 

The Destructive Austerity Measures in America

The austerity measures being implemented in America are affecting the public health, security, education and other social benefits. 19 per cent of the cities have cut their budget allotment for public security. Wage freeze and the increased number of students in the classes have reduced the self confidence of the teachers. In Georgia, the number of students in the class increased by 35 per cent and the teachers are feeling as if they hae become trainers of the lions, instead of teachers. In Philadelphia, due to budget cuts, out of 320 teachers, 187 were laid off. In Camden city in New Jersey, 60 Fire Services staff were removed, increasing the chances of fire accidents. The Fire Services staff are unable to get leave and holidays due to staff reduction. Due to the increased workload, the staff are injured while doing the work.

The number of employees in the Government’s education sector was severely reduced and in 41 states college tuition fees was increased. 30 states have i9mposed budget cuts for schools. 25 states have imposed cuts in the benefits to senior citizens and physically handicapped. 30 states have imposed budgetary cuts in health services. 

In this year, budgetary cuts were imposed on 68 per cent of the schools. The number of teachers feeling insecurity regarding their jobs has increased from 8 per cent in 2008 to 34 per cent now.

There is a job reduction of 34 per cent in civilian jobs, 46 per cent in transportation and ware housing and 20 per cent in manufacturing during the period 2009 January to 2011 December.

(Source-Prajasakti dated 7-4-2012 and another web site)

Grand Alliance of Telecom PSUs?

The draft National Telecom Policy described the role of the PSUs in the telecom sector saying, “The PSUs have played a pre-eminent role in provision of telecom services in the country, particularly in rural, remote, backward and hilly areas. Contribution of BSNL and MTNL to broadband penetration in the country is significant. The importance of PSUs in meeting the strategic and security needs of the country can also not be understated. This policy recognizes that these PSUs will continue to play such important role.”

But how to strengthen these telecom PSUs which are contributing significantly in the expansion of telecom services and in meeting the security and strategic needs of the country? The draft policy did not mention any policy support from the Government for making them the dominant players in the R&D, manufacture and services sectors of the telecommunications. Instead, it recognizes the pre-dominant role of the private sector telecom companies and ensures their continued viability. No such assurance was given in the draft policy for the continued viability of the PSUs.

The draft Policy only talked about the objective to “encourage recognition and creation of synergistic alliance of public sector and other organizations of Department of Telecommunications (DoT) through appropriate policy interventions and support for optimum utilization of their resources and strengths in building a robust and secure telecom and information infrastructure of the country” and further mentioned that the strategy is “to encourage Public Sector Units under the DoT to identify and exploit strategic and operational synergies so that they play a significant role in service provision, infrastructure creation, and manufacturing” and “to exploit individual strengths of organizations under DoT/DIT to their mutual benefit for ensuring these organizations to effectively flourish in the competitive telecom market while adequately supporting the security needs of the country.Efforts will be made for according preferential treatment for procurement of products and services rendered by individual organizations”.

As per the reports that appeared in the news papers, a panel will be formed under the Chairmanship of the Secretary DoT for preparing a plan for establishing a grand alliance between the Goverrnment’s Research&Development institute C-DoT, the manufacturing PSU company ITI, the service providing PSU companies BSNL , MTNL and TCIL. The panel will define the role of each of these PSUs in this alliance. It will resolve the likely conflicts between them in the alliance. It will make a formula for sharing of assets and for procurement of products for optimizing the capacities of these PSUs. C-DoT will do the R&D (Research and Development), ITI will manufacture the products based on the R&D of C-DoT and the products manufactured by the ITI will be bought by BSNL and MTNL.

The senior officers of the PSUs will be the members in this panel. This panel will also monitor the implementation of various initiatives required to be undertaken by each of these PSUs in strengthening the performance of the alliance. The Telecom Commission has already endorsed the objective and the strategy of the draft National Telecom Policy 2011 for exploring the synergies between these loss making PSUs in order to form a strong alliance capable of facing the competition with the private sector companies and coming out of their losses.

But how can these PSUs come out of their losses only by the co-ordination among them? Without financial from the Government for its R&D activities how the C-DoT can develop the technological know how? Also without transfer of the existing technological know how from the foreign companies how the R&D can be developed? What are the conditions to be imposed by the Government on the foreign companies for transfer of their technological know how? How the ITI can come out of its losses? BSNL and MTNL are already giving preferential treatment to it by purchasing 30% of their equipment from it. What about the preferential treatment to be given to it by the private operators also to ITI? What is the financial support from the Government for making ITI a top telecom equipment manufacturing company? Why the Government is not coming forward to fully subsidize the BSNL for the losses incurred by it on the rural landlines and why the TRAI is fixing a maximum ceiling of Rs 2000 crore only which can be recommended by it for this subsidy to BSNL whereas the actual losses incurred by it on rural landlines is about Rs 10,000 crores?  Why the Government has not implemented its commitment for reimbursing the license fee to BSNL as per the NTP 1999 and discontinued the reimbursement? Why should the BSNL and MTNL pay the upfront spectrum license fee to the Government when the telecoms PSUs in China were exempted from payment of such upfront fee?

Instead of limiting its support only for the synergistic alliance between the telecom PSUs, the Government should extend all the necessary policy and finance support to the PSUs as detailed above.

BSNL’s Viability and the MoU Signed Between the Government of India and BSNL

Every year MoU (Memorandum Of Understanding) is signed between a PSU and the Government. It is a negotiated agreement. It specifies clearly the objectives of the agreement and the obligations of both parties. “The main purpose of the MoU system is to ensure a level playing field to the public sector enterprises vis-à-vis the private corporate sector.”(www.dpemou.nic.in)

The MoU for the year 2012-13 was signed between BSNL management and the Government (Department of Telecommunication). As per this MoU, the Department of Telecommunications (DoT) “ shall endeavour to assist the BSNL in the following manner”:

i.                     Reimbursement of deficit on account of commercially non-viable services.

ii.                   Refund of up front BWA spectrum license fee.

iii.                  Issue of a soft loan which has been requested by BSNL for an actual loan of Rs 15000 crores   for 10 years with a moratorium of 5 years.

iv.                 Center/State Governments and PSUs should give priority to BSNL for their telecom service requirement.

v.                   Pension Contribution is collected on the maximum of the scale in IDA instead of on actual pay drawn which is contrary to the procedure followed in respect of CDA scales.

vi.                 Funding Support for VRS.

Endeavour means an effort to attain some thing. Therefore as per this MoU, the DoT will try to achieve the above said support for BSNL and hence none of these are certain.

While the losses to BSNL on rural landlines are about Rs 10000 crores per year, the BSNL submitted to TRAI requesting for a subsidy of Rs 2580 crore only per year. But the TRAI already fixed the maximum ceiling of Rs 2000 crore per year and recommended for sanction of an ad-hoc amount of Rs 600 crore from USO fund, subject to its final recommendation to be made after consultation. Therefore after consulting the private telecom operators, the TRAI will give its recommendation for payment of this subsidy to BSNL which will not, in any case, be more than Rs 2000 crore. Thus even with the best recommendation to be given by TRAI, only one fifth of the losses incurred by BSNL on rural landlines would be subsidized.

The Rs 8300 crore BWA spectrum license fee has to be refunded to BSNL by the Finance Ministry since the amount was with the Finance Ministry. The Finance Ministry will not refund it. It already came in the news that the amount will be refunded to BSNL only after the auctioning of the BWA spectrum surrendered by BSNL. This process of auction has not yet started.

The proposal of payment of pension contribution by BSNL to DoT on the basic pay of the employees instead of the maximum of their pay scale was already rejected by the Government. Again DoT may approach the Government to review this decision.

The total number of employees in BSNL on 31-12-2011 was 2.71 lakhs. VRS is planned for 15% of the employees, i.e., to 40650 in 2012-13, as per this MoU. Besides, another 5420 employees are to be redeployed in 2012-13. The DoT, in this MoU, assured BSNL for funding support for VRS. While BSNL requested for a grant from the Government for implementing the VRS, no such grant is assured by the Government. As per the DPE rules on the subject, the management has to either meet the fund requirement from its own resources or must take loan from banks. When such rule is already there and when the Finance Ministry is not likely to grant the large amount of atleast Rs 5500 crore as VRS fund for BSNL, the assurance of DoT for funding support will only result in its’ support to BSNL for taking bank loan for meeting the funding requirement of VRS. Further, if 40650 employees are given VRS, it will increase the pension funding burden on BSNL  at least to the extent of Rs 1500 crore per year, since the rule is that the pension expenditure of DoT, if exceeds over and above 60% contributions of BSNL to the exchequer, the amount exceeded beyond 60% has to be paid by BSNL in addition to the pension contribution for each and every employee in service. Therefore taking loan for funding VRS will add more burdens on BSNL and it will impact its viability. Moreover it is also to be noted that BSNL management proposed to take a soft loan of Rs 15000 crore for purposes other than VRS, purposes necessary for the development of BSNL. Hence VRS is counterproductive.

 There is no necessity for VRS since there is no recruitment and the employees are retiring in large number every year. In fact, as per the data submitted by the CMD BSNL to the BRPSE (Board For Reconstruction of Public Sector Enterprises) on 21-12-2010, the number of employees in BSNL was 2,87,749. As per this MoU for 2012-13 the number of employees in BSNL as on 31-12-2011 was 2.71 lakhs. Thus in one year 2,87,749-2,71,000=16749 employees have either retired or died. Thus the attrition rate ( attrition is the reduction in the number of employees due to retirements and deaths) is 5.82 per cent. But the management wrongly shows in the MoU that the attrition rate is 0.5 per cent only (which means only 1355 employees will retire/die per year!) with the intention to create an impression in favour of VRS, ignoring the fact that such VRS is counter productive as explained above.

It is good that the DoT agrees to try with the Government so that preference is given by the Central/State Governments and PSUs to BSNL for their telecom services requirements.

The above measures proposed in the MoU are either not sufficient or counter productive for the viability of BSNL. To make BSNL viable and to see that it comes out of the losses,

a)      The management of BSNL and the Government should drop the objective of right sizing the man power i.e., the VRS.  The VRS proposal should be dropped since it is unnecessary in view of the large scale attrition without recruitment and since it adds more financial burdens on BSNL instead of reducing the burdens.

b)      The BSNL management should project the real losses on rural landlines and claim full compensation for such losses. The rules allowed/framed by TRAI for calculating the losses suffered by BSNL on rural landlines should allow BSNL to claim full compensation for the losses actually faced by it, without unnaturally reducing it. Similarly, full compensation has to be paid to BSNL for other services which are loss making, but socially necessary.

c)        The Finance Ministry should immediately refund the BWA spectrum license fee of Rs 8314 crore to BSNL along with interest, from the date of surrender of the spectrum by BSNL.

d)      The BSNL should be allowed to fully utilize the 2G spectrum it has in 900 and 1800 MHz bands and also the CDMA spectrum it has by allowing it to provide advanced services like wireless broadband on the 900 MHz band by liberalizing the rules. It also must be allowed to fully utilize the 3G spectrum it has. Since it is a PSU serving the cause of the nation no upfront license fee should be collected from it for the spectrum it has in any band.

e)      For the full utilization of the spectrum, the BSNL must be allowed to procure the required equipment without creating any hurdles. The equipment for providing high quality landline/broadband services should be procured immediately.

f)        The management should have a proper strategy to achieve the objectives mentioned in the MoU—(a) to provide quality and reliable fixed telecom service to customers and thereby increase customer confidence, and (b) to provide customer friendly mobile telephone services with focus on value added services and data services, of high quality and play a leading role as GSM operator in the area of operation. The DoT should encourage such a strategy.

g)      The BSNL, as mentioned in the objectives of the MoU, must be allowed to leverage its existing infrastructure for facilitating implementation of the government’s programmes and initiatives, particularly in rural areas.

h)      The Central/State Governments and PSUs must be immediately  instructed to procure their telecom services from BSNL only.

i)        Orders should be issued immediately by the Government for allowing payment of pension contribution by BSNL on the actual basic pay of the employees instead of on the maximum of the pay scale of the employees.

j)         The order requiring BSNL to meet the pension expenditure of DoT which is in excess of the 60% of the contributions of BSNL to the exchequer (other than the pension contribution under FR 116), should be withdrawn immediately.

Commerce Ministry says special treatment to Indian telecom equipment manufacturers is violation of WTO agreement

As per the report in the Economic Times dated 21-3-2012, the Commerce Ministry wrote a letter on 12-3-2012 to the Secretary, Telecom Department stating that the proposal of the Telecom Department in the draft of the National Telecom Policy 2011 for granting preferential access to the domestic telecom equipment manufacturers is against the WTO (World Trade Organisation) agreement to which India is a signatory.

The draft national telecom policy fixed the target that by the year 2020,  80 per cent of the demand for telecom equipment should be met by the domestic  manufacturers with the value of 65 percent of the equipment added in India. The draft policy has made this proposal for encouraging domestic manufacture of the telecom equipment. At present, 90 percent of the demand for the telecom equipment in India is met by imports. The draft national policy also held the view that encouraging the domestic manufacture of equipment with the technology developed domestically in India is necessary in the interest of national security. This proposal in the draft national telecom policy is based on the recommendation of the TRAI.

But the Commerce Ministry raised the objection to this proposal on the ground that as per thee WTO agreement signed by India, such preferential treatment cannot be given to the domestic equipment manufacturers and no condition should be imposed for procuring the equipment from domestic manufacturers only. The telecom companies procuring thee equipment for the expansion of their network should be left free to procure the equipment from which ever vendor they prefer, whether Indian or foreign.

The European Union, USA and Japan already raised objection to this proposal of the draft national telecom policy for encopuragin domestic manufacture. Recently the US Assistant Tradee Representative (South & Central Asia wrote a letter to the Telecom Department against this preferential treatment to domestic manufacture.

But the point to be noted is that even the draft national telecom policy says that the preferential treatment to the domestic equipment manufacturers is subject to the international commitments of India. So the international commitment is the WTO agreement signed by India banning any preferential treatment to domestic manufacture and the draft national policy commitment is to give preferential treatment to domestic manufacture!

The only way to come out of this problem is to nationalize the telecom services since the WTO agreement is not against the procurement by Government companies from domestic manufacturers. Otherwise India will remain a technologically dependent country in telecom sector inspitee of the tremendous growth in the number of telecom subscribers, with a permanent possibility of threat to its national security due to the imported equipment.

Anti-Competitive, pro-monopoly attitude of Telecom Department

What should be the maximum share a telecom services company can have in terms of the number of subscribers? What is the maximum quantity of spectrum which can be allowed for a telecom services company?

The TRAI recommended that the market share can be upto 35 per cent automatically and upto 60 percent with the recommendation of the TRAI, and the maximum spectrum that can be allowed to a company can be 25 per cent of the total spectrum available in a circle. The Telecom Commission took decision in favor of this recommendation.

But the Competition Commission of India opposed this decision of the Telecom Department on the ground that allowing such a big share in the market to any company will be against the principle of allowing sufficient competition and it will lead to monopoly.

This compelled the DoT to delay the implementation of its decision in favor of a maximum cap of 35 to 60 percent share in the market and upto 25 of the spectrum. However, as per the reports in the news papers, the DoT is likely to inform the Cabinet that since the TRAI is there to take care of the issues related to competition in telecom sector, the telecom sector has to be exempted from the purview of the Competetion Commission of India. But the Competition Commission holds the view that even though the TRAI is there to frame policies in telecom sector to encourage competition, it is the Competitive Commission that has the powers to regulate anti-competition and it is the Competitive Commission that has the necessary expertise to analyse the complex issues related to competition, from the financial, economic and legal perspectives.

In any case the TRAI’s recommendation and the decision taken by the DoT on that basis to allow market share upto 35 percent and to allow spectrum share upto 25% to a telecom company is nothing but encouraging monopoly and discouraging competition. The DoT should stop the implementation of its decision for encouraging competition in the telecom sector.