The state-owned telecommunications firms, Bharat Sanchar Nigam Ltd (BSNL) and Mahanagar Telephone Nigam Ltd (MTNL), have long been a drain on the public exchequer and on the state’s borrowing capacities. While only Rs 100 crore was set aside as direct budgetary support for the two majors in the last Union Budget, they were supposed to raise over Rs 15,000 crore through internal and extra-budgetary resources. BSNL, for example, in 2018-19 made a loss of almost Rs 14,000 crore, taking its accumulated losses to over Rs 90,000 crore. The company has almost 170,000 employees, whose wages consume 77 per cent of its revenues. Many factors can be blamed for this situation, including government policy decisions of the past. The entry of deep-pocketed Reliance Jio has in addition made things difficult for all legacy players. But, in the end, the decline of the public-sector telecom majors is due to structural changes in the business itself. The telecom sector is increasingly a service-based business, which means that private-sector companies have an inherent advantage over even public-sector ones with the softest of budget constraints. There is little reason to imagine retaining BSNL or MTNL in their current state. They are relics of the 20th century, and have little place in the India that is entering the third decade of the 21st.
The question is: What is to be done now? The companies and their associate Union departmental bureaucrats have argued that it is cheaper to revive them than to shut them down. The latter is expensive, they claim. In BSNL’s case, they argue that getting those 170,000 workers off the payroll through voluntary retirement schemes and the like would cost Rs 95,000 crore but a revival package would cost less. This argument, however, can easily be questioned. Not all the public-sector workers need to be treated in the same way. Some can be re-absorbed in other public-sector enterprises or the government, which is short of manpower in many key areas. Others are close to retirement anyway. The revival plan is, also, absurdly optimistic, suggesting that losses would sharply narrow beginning two years from now and that BSNL would be in the black by 2024. The Union government has fallen for such revival plans produced by interest groups related to public-sector undertakings (PSUs) before. It must not make a habit of it.
As with other PSUs — Air India, for example — there is a distinction to be made between the tarnished brand name and the burden of employee rolls, and the extensive network infrastructure that has been developed. The latter cannot be ignored. For example, the Bharat Fibre network has more than 800,000 km covered. This is more than Vodafone-Idea, Bharti Airtel, and Jio put together. It is severely under-utilised and undervalued at this point. Significant national savings would be involved in ensuring that this network is not duplicated by private-sector investment. Thus, the emphasis on the PSU telecom majors must be on how their assets can be sold so as to ensure higher productivity, and how their manpower can be absorbed elsewhere where necessary and let go otherwise.―Business Standard