This means for every rupee that BSNL earned through its services in the last fiscal, 53 paise went in paying just salaries to its staff.

New Delhi: Have you ever wondered why the once-profitable public sector telco BSNL is now begging for huge financial support from the government?

The sheer number of slothful employees of this state-run company leaves it with no other choice.

A presentation made by BSNL on 1 August to a Group of Ministers (GoM), which is looking into the company's demand for a huge financial injection, contains a startling revelation: in 2012-13, employee wages accounted for more than half the company's revenues!

Put simply, this means for every rupee that BSNL earned through its services in the last fiscal, 53 paise went in paying just salaries to its staff.

The benchmark for private telecom companies which have a far greater share of the telecom market than BSNL is anywhere between 5 and 7% which means they do not even shell out 10 paise of every rupee earned on employee wages and benefits.

Last fiscal, BSNL earned Rs 26,396 crore in revenue but paid Rs 13,856 crore as employee remuneration.

So, even though BSNL is now promising a turnaround by 2017-18 with a minimal net profit, its profitability projections are likely to be based on flimsy grounds. In fact, we would suggest that the GoM would do well to reject BSNL's demands until it comes up with a more feasible turnaround plan. Else, the tax payer may have another Air India on her hands.

1) BSNL wants close to Rs 15,000 crore in a bailout package from the government. It wants Rs 6,274.51 crore refund for surrendering broadband wireless access (BWA) spectrum and another Rs 8,045 crore for a voluntary retirement scheme to phase out 71,861 employees. So, unless the government accepts its demand fully, the turnaround may not happen even in FY18.

2) BSNL's own calculations show that despite an expected VRS cash infusion from the government and an actual reduction in manpower, it will still be paying almost 37 percent of its revenue in wages by FY18. By that year, the PSU has projected that its revenue will rise to Rs 44,026 crore while wage payments will be Rs 16,162 crore. So, even if it gets all the money it wants from the government, BSNL will continue to have multiple times the number of people for perhaps the same job that its private sector peers employ.

3) It is projecting a profit after tax of just Rs 35 crore in FY18, while it will continue piling up losses from now until March 2017 despite all the financial help the government is being pushed for. But accumulated losses of Rs 11,627 crore between now and FY17 will remain.

4) All the proposed expansion and incremental market share gains will happen only if the company is able to invest Rs 40,000 crore over the next five years in capex.

It is true that not all the ills which plague BSNL today are of its own creation. In some measure, the government is to blame since it forced BSNL to buy 3G and BWA spectrum which meant a huge payout of Rs 18,500 crore. BSNL declared Rs 10,183 crore in profits in 2004-05. It fell into the red for the first time in 2009-10. The net loss of BSNL widened to Rs 8,851 crore during 2011-12 against just Rs 1,823 crore two years back in 2009-10. During 2010-11, losses rose to Rs 6,386 crore and BSNL ended March 2013 with losses of another Rs 8,198 crore.

But still, unless there is a viable and workable turnaround plan, why should the government pump in crores into a PSU behemoth?

In its presentation, BSNL says it has finally been able to arrest a decline in overall market share last fiscal at 13.55 percent against 12.7 percent in the previous fiscal but then adds that despite competitive intensity decreasing in the telecom market, it plans to at least retain this market share in the next five years.

On its core business of landline connections, the PSU says a decline in this market will be arrested and annual revenue of Rs 5,000 crore maintained by taking a series of steps. It is also eyeing almost double the current revenues from its broadband services at Rs 8,984 crore in the next five years.

But none of this will materialise unless wages are reduced drastically and schemes for monetisation of its assets are expedited. Earlier this year, BSNL had said it will generate Rs 1,600 crore revenue in the next five years by hiving off its tower business into a separate company and that almost Rs 91 crore will be generated in 2013-14 itself. The presentation says a consultant has been appointed for this, but gives no further timeline.

BSNL has around 70,000 telecom towers and had earlier said it was looking to explore various business models that can realise value of its infrastructure.

Also, no update has been provided on the progress in monetising its land assets. Earlier, it had said a consultant is to submit his report for utilisation of land and building assets for call centres/ BPOs/ software parks. BSNL has estimated that use of land and building will generate upfront revenue of Rs 250 crore in the next fiscal and rental income of another Rs 250 crore from 2016-17 onwards. The telco owns prime land in cities like Mumbai, Hyderabad, Chennai and Gurgaon.