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BSNL and MTNL financial issues-DoT prepares Rs 74000 crore revival plan

BSNL and MTNL financial issues-DoT prepares Rs 74000 crore revival plan

Tag:GS-3| Economy|| Infrastructure|| Communication

 What is the issue?

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

Status of the two firms

  • In the last Union budget, only Rs 100 crore was allocated as direct budget support to these two major firms.
  • But by means of internal and extra-budgetary capital, they are supposed to rise over Rs 15,000 crore.
  • g. BSNL lost nearly Rs 14,000 crore in 2018-19, bringing its total losses to over Rs 90,000 crore.
  • The company has nearly 170,000 workers whose salaries consume 77% of its revenue.
  • Both BSNL and MTNL have long been a drain on the public exchequer and on the state’s borrowing capacity.

Causes

  • Government Policy Decisions: Many factors can be blamed for this situation, including government policy decisions of the past.
  • The entry of Jio: The entry of Reliance Jio has, in addition, made things difficult for all legacy players.
  • Structural changes: The decline of the public-sector telecom majors is due to structural changes in the business itself.
  • Service-based business
    • 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 departmental bureaucrats of the companies and their associate Union argued that reviving them is cheaper than shutting them down.
  • In the case of BSNL, it would cost Rs 95,000 to get the 170,000 workers off the payroll through voluntary pension schemes and the like.
  • A recovery kit, on the other hand, will cost less.
  • It is also claimed, however, that not all employees in the public sector should be treated in the same way.
  • Some may be re-absorbed in other public-sector undertakings or the government, which in many key areas

 lacks manpower.

  • Also, many others would be close to retirement anyway.
  • On the other hand, the revival project is not very realistic as losses beginning  2 years from now would be sharply narrow.
  • BSNL would, therefore, be in worse condition by

Way ahead

  • As with Indian PSUs, due importance must be attached to the extensive network infrastructure that has been created.
  • This is to be seen in contrast to the tarnished brand name and employee roll pressure.
  • It is certainly not possible to neglect the infrastructure.
  • For example, the Bharat Fiber network covers more than 800,000 km
  • More than Vodafone-Idea, Bharti Airtel and Jio put together.
  • At this stage, it is worryingly under-used and undervalued.
  • Significant national savings would be required to ensure that private-sector investment does not replicate this network.
  • 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.

References