Govt. Unlikely To Take DIPAM Route For Cash-Strapped BSNL Asset Sale

The department of telecommunications ( DoT) is considering not selling assets of the beleaguered Bharat Sanchar Nigam (BSNL), worth over Rs 1 trillion, through the Department of Investment and Public Asset Management (DIPAM) route.

This is because the public sector unit is severely cash strapped and a sale through this route may slow down fundraising.

The fastest way to revive BSNL is by way of monetisation of its assets, which includes land, telecom towers and optical fibre.

However, the same exercise may take longer than expected if it is done through DIPAM, a senior official in the know told Business Standard.

“The disinvestment department has a well-defined structure for such a sale but the money generated through the exercise first lands in the consolidated fund of India. It is later given back to the company, which may take almost a year,” he said. The other option is the company doing it itself, which, however, has not progressed in the last few years, DoT felt.

Therefore, telecom department is in a fix as the DIPAM route may prove to be longer.

BSNL is currently grappling with a revenue shortfall of about Rs 800 crore every month and is struggling to pay salaries to its employees. It relies on short-term loans from the central government to meet its operational expenses. The revival package being readied by the Union government will be finalised after factoring in the pros and cons of various proposals, including a voluntary retirement scheme (VRS), allotment of 4G spectrum free of cost and monetisation of assets. A new proposal has been planned after the Prime Minister’s Office (PMO) rejected the earlier plan of its merger with sick public sector unit Mahanagar Telephone Nigam (MTNL).

Meanwhile, DoT is negotiating with the Department of Revenue, Department of Economic Affairs and NITI Aayog for giving loan guarantee for raising funds for the two PSUs in a bid to keep them afloat.

The loans would be utilised toward the companies’ capital expenditure and salary payments. BSNL raised loans in the past also to pay salaries to its employees. These loans mainly act as small to medium term arrangements before the Union government finalises a full-fledged bailout package for the two sick PSUs.

The previous proposal that included merger of the two companies was shot down by the PMO as it felt that the merger won’t serve the desired purpose of reviving the two companies.

The voluntary retirement package being considered for BSNL is expected to be around Rs 6,365 crore and an equity infusion of Rs 6,767 crore has been planned for the allotment of 4G spectrum. Both BSNL and MTNL had sought relief from the Centre in the form of conversion of debt to sovereign guarantee as well as for pay revision and subsequent voluntary retirement. BSNL sought 4G spectrum across India through an equity infusion of Rs 7,000 crore. MTNL suggested converting its Rs 20,000 crore debt into sovereign bonds and surrendering 3G spectrum.

The proposed retirement package may be funded by a bond issue of over 10 years.

About half the 176,000 employees at BSNL are estimated to retire in the next five-six years. If only about 50 per cent of the eligible employees (those about 50 years) opt for voluntary retirement, that would be 40,000 people.

For MTNL, the VRS package could have a revenue impact of Rs 2,120 crore. The company has 22,000 employees. Of this, 16,000 employees with retire in the next five-six years.

BSNL’s loss is estimated to be around Rs 14,000 crore with a decline in revenue to Rs 19,308 crore during 2018-19.

BSNL’s losses were Rs 4,859 crore in 2015-16, Rs 4,793 crore in 2016-17, Rs 7,993 crore in 2017-18 and is estimated to swell to Rs 14,202 crore in 2018-19.

The firm’s debt stands at Rs 13,000 crore against the overall debt of the telecom sector at over Rs 6 trillion. IT & telecom minister Ravi Shankar Prasad, in his first press conference after assuming charge, had said that the government will revive BSNL and MTNL.―Business Standard