Finance Ministry rejects DoT’s Rs 74,000 cr revival package for BSNL-MTNL: FE report

The broad contours of the revival plan proposed by the DoT consisted of offering voluntary retirement to a large chunk of the 1.65 lakh employees.

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While the earlier reports had suggested that the government had agreed to a Rs 74,000 crore package to revive the two public sector telecom companies, Bharat Sanchar Nigam Limited (BSNL) and Mahanagar Telephone Nigam Limited (MTNL), it now transpires the Ministry of Finance is not convinced with the revival plan submitted by the Department of Telecommunications (DoT) and has turned it down.

The broad contours of the revival plan proposed by the DoT consisted of offering voluntary retirement to a large chunk of the 1.65 lakh employees and releasing funds to buy the 4G spectrum to enable the companies to turn competitive in the market again. DoT had given the financial projections too for BSNL in which it had hoped the company will bring down the losses over 2-3 years and turn profitable by March 2023. Of the Rs 74,000 crore, close to Rs 40,000 crore would have been used up in the VRS payouts plus the other retirement benefits and dues to the staff. The remaining amount would have gone towards buying the spectrum and on capital expenses in rolling out the 4G services across the country.

This was thought to be a better option than to close the companies down completely which would have meant an outgo of Rs 95,000 crore from the exchequer.

Now that the Finance Ministry has informed DoT to go back to the drawing table and come up with alternative proposals, the entire process may take longer to get resolved. There is no denying that the reduction in the workforce must be undertaken on priority. The wage bill on a monthly basis absorbs as much as 77% of the revenue, again on a monthly basis. A one-time settlement and reduction of the retirement age from 60 to 58 would result in correcting this anomaly.

The idea of getting into 4G too looked sensible since without that, the PSEs were not in a position to compete with the private players and were steadily losing customers. The situation in the Indian telecom industry currently is in such a state of flux that no entity would be willing to invest and take over BSNL and MTNL either.