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Unrealistic BSNL Revival Package-PS Deodhar

Thursday, 18 March 2010

The Sam Pitroda committee’s recommendation for BSNL’s revival is an advice for surgery wholly uncalled for. As a monolithic mini-ratna, BSNL is not living up to its potential but is not a sick private sector US company. The committee’s dispensation gives one the feeling that BSNL is GM or some such sick US corporate monster.

How has BSNL hogged the limelight in an economy with an intriguing mix of great successes and massive failures? BSNL is essentially a PSU recently carved out of the Department of Telecom but still owned by the government. The Government of India corporatized the operations wing of DoT on October 01, 2000 and named it as Bharat Sanchar Nigam Limited (BSNL). One has to understand the core concept of a PSU and also its flawed manifestation over the years before suggesting what will help it to dynamically meet its objectives and stated purpose.

There is nothing basically wrong with the BSNL management or its employees. There are a large number of very capable and qualified talents that work for almost every PSU. In fact, our present private sector in telecom is largely manned by human resources drawn from DoT, BSNL, MTNL and other PSUs in the telecom sector. Problem with the BSNL is its owner and it’s an uncalled for intervention.

In terms of social objectives, terms of reference and employee aspirations a PSU is fundamentally different than a private enterprise. It is a pity that the owner, the Government of India or the state governments, have failed to efficiently and imaginatively use these valuable assets for public service where service and not profit is the prime objective. One has to remember that even today, when everyone is being provoked to be an entrepreneur, most learned and competent persons prefer job security. That’s why somehow a PSU is still a veritable talent magnet.

I have been associated with two tiny PSUs during my stint with the government during the 80s; ETTDC Ltd at the Centre and Meltron Ltd in Maharashtra. Both were sick and loss making PSUs with unused talents. Both changed soon to profitable and respected enterprises giving bonus shares to their owners. Often I was asked how I did it; my answer was; the talented managers in both the organizations were waiting to be used by challenging them to perform and giving them concrete ideas to work on. The second important reason was that I used my shadow power to distance them for their respective owners; much to the relief of those capable managers in these companies. A great push, in case of ETTDC, was to change its horrible name to ET&T. That changed the mood.

My experience at Mahanagar Gas Limited in Mumbai in the 90s was no different even though it was a joint venture between the two PSUs; GAIL and British Gas plc. The PSUs differ from the private sector in their terms of reference. The centerpiece of their operational goal is public service and not necessarily maximizing profit. Governments create PSUs to isolate public service utilities from the administrative structure and give them autonomy to perform as a public service utility.

What the Sam Pitroda committee is trying to do is to change BSNL’s terms of reference and want BSNL to be a less replica of say an Airtel or a Vodafone. This will not happen and in fact hurt BSNL more. All PSUs are deeply hierarchical and the committee hopes to make it a networked outfit. The employees of BSNL take comfort in the safety of employment in a PSU and have the ambition to climb-up in the hierarchy with performance that will please the bosses; looking forward to go up the ladder; AGM to GM to CGM and so on. (Sam should know how his effort to provide the unified title of GM in DoT failed due to the upheaval that followed. He also shouldn’t forget his resistance to invest in cellular technology during his tenure. Since the mighty AT&T board also failed to see the future, he however need not feel bad!).

I found nothing wrong in such hierarchical ambition since it provides a career path. We know that networked organizations suffer from attrition since its employees have little by way of a permanent bond with the institution they work for. Look at the ease with which a President of these firms jumps to another their ‘for better prospects’ which essentially means a better pay package. There is no love lost for the institutions these guys work for. A study of PSUs will reveal that in every case whenever a strong upright personality has been at the apex of a PSU hierarchy, that unit has done extremely well in terms of its objective of providing public service.

However, the most surprising dispensation of Sam’s Committee is a master stroke indeed. Its advice to prevent BSNL from procuring equipment for US$93 million worth GSM lines will hit BSNL below belt. The private competitors would certainly love this. If not other ‘reforms’, this would certainly cut the wings of BSNL to take on others and retain its supremacy. Somehow, this intervention is rather ill-timed and harmful.

The true dispensation for a PSU could be twofold; first the government should delink PSUs from their parent ministries and reduce its own role to be just a shareholder and limit itself to its rights as a majority shareholder and second, to notionally make its managers and employees ‘tenure bound shareholder’s as long as they serve the PSU. During their tenure they should enjoy the privilege to get annual dividend. In addition when they leave they should be given the book-value appreciation of the shares during the years of their service. The new incumbent will inherit the surrendered shares from the one who left. This indeed will bring about rapid change. The yardstick for its performance should be the quality and price of the services they provide. I think the PSUs can beat the private sector with such motivation.

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