BSNL has 1.65 lakh employees and their costs make up 75 per cent of the company's total income.

The pressure of huge losses and competition has forced consolidation in the PSU telecom space as Department of Telecom is currently working on a proposal for merger of its two ailing PSUs - BSNL and MTNL - to revive the state-owned telecom firms.

The BSNL-MTNL merger is "one of the many components" of the overall revival plan being worked out for the two corporations, a source said on Tuesday, adding that a final call on the matter will be taken by the Union Cabinet.

The plan includes MTNL being merged with BSNL.

MTNL provides telephone services in Delhi and Mumbai, while BSNL is present in the rest of the circles.

The move assumes significance as both have been making losses and have faced challenges in clearing staff salaries in the recent past.

The Department of Telecom is preparing a survival plan for MTNL and BSNL in the form of a revival package that entails components like voluntary retirement scheme, asset monetisation, and allocation of 4G spectrum.

BSNL's estimated losses are Rs 14,000 crore in 2018-19 on the back of revenue that fell to Rs 19,308 crore in the same fiscal year. It has 1.65 lakh employees and their costs make up 75 per cent of the company's total income.