Dealing with BSNL and MTNL

What is the issue?

• The state-owned telecommunications firms, BSNL and MTNL, are under considerable financial strain.
• In this context, here is a look at the causes and the possible measures out.

What is the status of the two firms?

• Only Rs 100 crore was set aside as direct budgetary support for these two major firms in the last Union Budget.
• But, they were supposed to raise over Rs 15,000 crore through internal and extra-budgetary resources.
• E.g. BSNL, in 2018-19, made a loss of almost Rs 14,000 crore, taking its accumulated losses to over Rs 90,000 crore
• The company has almost 170,000 employees whose wages consume 77% of its revenues.
• Both BSNL and MTNL have long been a drain on the public exchequer and on the state’s borrowing capacities.

What has caused this?

• Many factors can be blamed for this situation, including government policy decisions of the past.
• The entry of Reliance Jio has in addition made things difficult for all legacy players.
• But, above all, the decline of the public-sector telecom majors is due to structural changes in the business itself.
• The telecom sector is increasingly a service-based business.
• This means that private-sector companies have an inherent advantage over even public-sector ones with the softest of budget constraints.
• Given all, there is little reason to imagine retaining BSNL or MTNL in their current state.

Is revival a feasible option?

• The companies and their associate Union departmental bureaucrats have argued that it is cheaper to revive them than to shut them down.
• In BSNL’s case, getting the 170,000 workers off the payroll through voluntary retirement schemes and the like would cost Rs 95,000 crore.
• In contrast, a revival package would cost lesser.
• However, it is also argued that not all the public-sector workers need to be treated the same way.
• Some can be re-absorbed in other public-sector enterprises or the government, which is short of manpower in many key areas.
• Also, many others would be close to retirement anyway.
• On the other hand, the revival plan is not very feasible as losses would sharply narrow beginning 2 years from now.
• Consequently, BSNL would be in a poorer state by 2024.

What is to be done now?

• As with the Indian PSUs, the extensive network infrastructure that has been developed has to be given the due importance.
• This is to be seen in distinction from the tarnished brand name or the burden of employee rolls.
• The former (infrastructure) can, certainly, not be ignored.
• E.g. the Bharat Fibre network has more than 800,000 km covered
• This is more than Vodafone-Idea, Bharti Airtel, and Jio put together.
• Worryingly, it is severely under-utilised and undervalued at this point.
• Significant national savings would be involved in ensuring that this network is not duplicated by private-sector investment.
• Thus, the emphasis on the PSU telecom majors must be on how their assets can be sold.
• This is to ensure higher productivity, and see how their manpower can be absorbed elsewhere where necessary.

Source: Business Standard