CAG faults BSNL, MTNL for over Rs1,547 crore revenue loss

CAG has observed financial irregularities to the tune of Rs1,547,47 crore in the test check of transactions of telecommunication PSUs BSNL and MTNL.

Of the irregularities pointed out by the CAG Rs1,089 crore losses are attributed to imprudent financial management, Rs321.57 crore losses due to revenue loss; Rs101.65 crore losses due to irregular/wasteful/excess payment/loss another cases; and Rs35.25 crore on account of non/short billing/other observations.

BSNL, according to CAG, lost Rs355.66 crore revenue on account of loss/non-recovery/non-short billing.

CAG attributed these to poor call efficiency of trunk automatic exchanges in Patna which could maintain call completion ratio ranging between 11 to 18 per cent only, against the standard benchmark of 42 to 50 per cent. This reflected poor quality of service besides loss of revenue of Rs285 crore during the period 2005-08 due to high incidence of missed calls.

Failure of 31 secondary switching areas under Gujarat, Rajasthan, Uttar Pradesh (East), Uttar Pradesh (West) and Maharashtra telecom circles to maintain fault free/functional rural household direct exchange lines and village public telephones led to loss of subsidy of Rs32.65 crore for the period from June 2002 to March 2008.

Failure to disconnect telephone connections of subscribers and STD PCO operators by due dates, for non-payment of dues in 21 secondary switching areas under Uttar Pradesh (East), Uttar Pradesh (West), Bihar, Jharkhand and Maharashtra telecom circles resulted in non-recovery of revenue of Rs14.08 crore, CAG noted.

CAG said BSNKL lost Rs1,164.38 crore due to imprudent financial management, irregular/wasteful expenditure and excess payment. Some of the important cases highlighting the above aspects were as under:

BSNL Corporate office failed to retire government loan amounting to Rs7,500 crore, in spite of having adequate cash reserves in short term deposits with various banks with average rate of return of 6.19 to 7.38 per cent per annum as against the rate of interest of 14.50 per cent payable for the loan during the years 2005-06 and 2006-07. This resulted in extra expenditure of Rs1,089 crore, being the interest differential on the unretired government loan.

BSNL enhanced the maximum permissible limit of productivity-linked incentive of its employees from Rs12,500 to Rs25,000 in contravention of the instructions of Department of Public Enterprises and the Department of Telecommunications. This resulted in irregular extra payment of Rs19.78 crore as productivity-linked Incentive to the company's employees for the year 2005-06, it said.

Failure of Kerala telecom circle to account for interconnect usage charges revenue and expenditure from and to basic services of BSNL for computation of adjusted gross revenue of its mobile services resulted in avoidable payment of spectrum charges of Rs12.44 crore, GAG said.

Nine secondary switching areas in Kerala telecom circle failed to establish proper monitoring/ control mechanism and avail eligible Cenvat credit, during the financial years 2005-07. This resulted in excess payment of service tax of Rs8.67 crore.

MTNL, on the other hand, lost Rs27.43 crore including that relating to a 16.24 crore loss in its idle investment on construction of hostel building, failure to comply with the conditions stipulated by Mumbai Municipal Corporation and obtain the requisite occupancy certificate from it.

MTNL, Mumbai also failed to avail the cheaper Bill Mail Service provided by the Department of Post and dispatched telephone bills through ordinary post at higher rates. This resulted in extra expenditure of Rs6.10 crore during the period from April 2004 to March 2007.