Union Cabinet may decide today on key proposals, but funds will have to wait for elections to get over
The Union Cabinet is likely to take a final call on Monday on key proposals for revival of ailing telecom PSU units Bharat Sanchar Nigam Ltd (BSNL) and Mahanagar Telephone Nigam Ltd (MTNL).
BSNL might get an approval for its land asset monetisation while other proposals of BSNL and MTNL for a voluntary retirement scheme (VRS) and allotment of 4G spectrum may also come up for discussion. However, it is unlikely that any funds will be given immediately given to the sick PSUs as the general elections are underway, a senior government official said. And the proposals would need a nod from Election Commission as well.
The Department of Telecommunications (DoT) had sent the note on BSNL and MTNL for approval of the Cabinet last week.
Both the PSUs have been incurring losses since 2009-10. Due to hyper competition and a huge employee cost, the expenditure of both firms has hit the roof while revenues have nosedived. For BSNL, about 55% of its expenditure goes into employee salaries as it has a huge base of 1.76 lakh employees across India. For MTNL, the expenditure on employees is around 99%.
A VRS proposal for Rs 6,365 crore for BSNL and around Rs 2,120 crore for MTNL was given to the government for consideration. Also, both the firms have asked for allotment of 4G spectrum without paying auction price. Telecom Regulatory Authority of India (Trai) has put the ball in the court of DoT to decide on spectrum allotment.
Both the companies lag behind their private counterparts due to lack of 4G spectrum. 4G services, which gained momentum after Reliance Jio entry in late 2016, changed the dynamics of the whole industry, besides change in data consumption habits of mobile users as data tariffs hit rock bottom while voice calls became free.
For the first time in its history, BSNL defaulted on salary payment for its employees for the month of February, which was paid in March. Even MTNL delayed salaries of its employees. It is estimated that around 16,000 MTNL employees, out of total 22,000, will retire in the next 5-6 years.
BSNL has a debt of about Rs 15,000 crore, while it posted a loss of Rs 7,500 crore for fiscal 2018. The revenues and profits of all the telecom players have fallen significantly in the last 2-3 years as the competition in the sector got intense. With no tariff revisions in sight, the financial stress in the sector is expected to continue for a few more quarters.
The telecom industry has been reeling under financial stress since the entry of Reliance Jio in late 2016. Low data tariffs and free voice call offers from the new entrant pushed the financial of incumbents, including that of BSNL, on a downward spiral, apart from triggering a consolidation phase in the industry, where now only three private players are left along with BSNL/MTNL.
DIALING BACK TO LIFE
The stats
- 1.76 – lakh employees with BSNL
- 55-60% – Expenditure of BSNL is employee cost
- 22,000 – Employees MTNL has
The proposals
Land asset monetisation, VRS plan and 4G allotment
- Rs 6,365 crore – BSNL voluntary retirement scheme to cost
- Rs 2,120 crore – MTNL VRS scheme to cost
- Election Commission nod may be required even after Cabinet approval
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