BSNL Revival Package: Throwing good money after bad

The government’s decision to approve the third revival package for BSNL, a public sector undertaking (PSU), is baffling and woeful. With this Rs 89,047-crore revival package, the government claims, BSNL will emerge as a stable telecom service provider focused on providing connectivity to the remotest parts of India. It will provide pan-India 4G and 5G services, 4G coverage in rural and uncovered villages under various connectivity projects, fixed wireless access services for high-speed internet, and services and spectrum for captive non-public network.

The tech jargon may be impressive, but at best this is the triumph of hope over reality. Hope, Alexander Pope wrote, springs eternal in the human breast. He failed to add that it also springs eternal in the minds of those who run government and PSUs. This is the reason that despite having spent lakhs of crores of rupees on the revival of BSNL and having failed twice, they are still optimistic about the state-run PSU’s prospects.

Three Packages
In October 2019, the government had approved the first package for resuscitating BSNL and MTNL’s merger with it. It cost Rs 69,000 crore. It talked about the administrative allotment of spectrum for 4G services. “It is expected that with the implementation of the said revival plan, BSNL and MTNL will be able to provide reliable and quality services through its robust telecommunication network throughout the country including rural and remote areas,” an official release said then.

What actually happened? Three years later, in July 2022, the government came up with another, much bigger package, worth Rs 1.64 lakh crore. “With these measures,” the official press release at that time said, “BSNL will be able to improve the quality of existing services, roll out 4G services and become financially viable. It is expected that with the implementation of this revival plan, BSNL will turn around and earn profit in FY 2026-27.” Similar hopes are expressed now—with a Rs 89,047-crore bill.

The telecom PSU has devoured Rs 2.33 lakh crore in the last three years—and it wants more. This is almost 44 per cent more than the country will spend (as per Budgetary estimates) on the capital expenditure for our armed forces this fiscal.

Even after guzzling humongous amounts, BSNL has been able only to make operating profits—Rs 1,177 crore in 2020-21, Rs 944 crore in 2021-22, and Rs 1,559 crore in 2022-23. Airtel, on the other hand, earned a net profit of Rs 1,269.3 in 2022-23, without any largesse at the expense of the taxpayer. In 2019-20, its losses were Rs 51,020.9, which it gradually brought down, and is now in the black.

Against Stated Position
Four points need to be made here. First, the third revival package is against Prime Minister Narendra Modi’s stated position that the business of government is not business. This is why his government is privatising PSUs — That it has not been able to do after Air India is because of lukewarm market response rather than its slackness.

Second, it is a well-known and well-documented fact (even by the website of the Ministry of Finance) that revival plans are a waste of money. In the last many decades, governments of various persuasions have come out with dozens (perhaps hundreds) of revival packages—and hardly any PSU came back to life. Come to think of the waste of taxpayer money: after the third package, BSNL will have consumed almost a third of the total spending that the government will do on the country’s infrastructure. All this money on a single company—which will remain sick! While private telecom operators have moved to 5G, BSNL is struggling to graduate to 4G.

For it is, like the entire public sector, beyond redemption. The reasons for the poor performance are also well-known and well-documented—political interference, red tape, procedural bottlenecks, PSU culture, the constraints of CAG, CVC, courts, etc. This brings us to the third point: the decision militates against the spirit of economic reforms, which the Modi government has shown commitment to, especially in its second term. Privatisation is the boldest reform, as it is the most direct rollback of the State from the economy. Concomitantly, support to sick PSUs is reactionary.

And, finally, the decision tends to undo the lot of good work that the Modi government has done in recent years, like fiscal consolidation and infrastructure building. India is the fastest-growing big economy. All this, soon after the deadly Covid pandemic and the ensuing lockdowns, is a remarkable feat.

This is the reason that Morgan Stanley even went overboard in its assessment of India. “This India is different from what it was in 2013. In a short span of 10 years, India has gained positions in the world order with significant positive consequences for the macro and market outlook.”

If PM Modi wants global finance to laud him in the future, he must avoid populist measures like PSU revival packages. Moneycontrol