Finance ministry wants BSNL, MTNL closed down: report
10 October 2019
The finance ministry, which had earlier shot down the proposal of the department of telecommunications (DoT) to pump in a massive Rs74,000 crore to revive the ailing BSNL and MTNL, is reported to have instead suggested that the two loss making PSUs be closed down.
Also, in the event of closure of the two PSUs, the cost won’t be as high as Rs95,000 crore as argued by the DoT while making a case for a Rs74,000-crore revival package, the reports pointed out, adding that the VRS package need not be attractive in the case of closure of a company.
It was the VRS element that shot up the cost of revival package to Rs95,000-crore, reports citing official sources said. The cost of providing an attractive voluntary retirement scheme to all 1.65 lakh BSNL employees added to the debt of the two state-run telcos has now made the revival plan least attractive to the finance ministry.
According to the finance ministry, in the event of closure of BSNL and MTNL, an attractive VRS need not be given to all the staff. There are three kinds of staff employed in the two PSUs - those directly hired by the PSUs, those who came from other PSUs or government departments and got themselves absorbed in these firms, and those belonging to Indian Telecommunications Service (ITS) officers.
In case of a closure, the ITS officers need not be given VRS but can be redeployed to other government departments. Those who are direct recruits are very junior staff, mostly technicians whose salary is not very high and whose strength is less than 10 per cent of the overall staff. It is the absorbed staff which needs to be compulsorily retired by giving some form of VRS, which would entail some cost.
Segregating the staff in these three broad categories would make the cost of VRS much less than the Rs95,000 crore originally worked out, reports said, adding that BSNL and MTNL have been asked to identify the staff strength on these lines and then provide numbers so that actual cost of closure can be worked out.
Strategic disinvestment of BSNL or MTNL has been ruled out as there would not be any takers for it considering the current financial stress in the telecom industry.
The assumption behind the revival package, which involved an attractive VRS package to BSNL’s 1.65 lakh employees and reducing their retirement age from the current 60 years to 58 years, was that it would reduce the wage bill of the company, which in FY19 was 77 per cent of its revenues. Further, if the company was provided 4G spectrum by the government as part of the package then it would be able to compete in the market and start posting lower losses FY21 onwards and become profitable from FY24 onwards.
The components of the revival package drawn up by the DoT was as follows: The VRS payout would entail a cost of Rs29,182 crore, another Rs10,993 crore would be the cost in terms of payout of retirement benefits by advancing the retirement age from 60 to 58 years. The allotment of 4G spectrum would cost Rs20,410 crore and another Rs13,202 crore would be the capex required to roll out the 4G services.
The optimistic projection underlying the revival blueprint was that BSNL, which posted a net loss of Rs13,804 crore in FY19, would see it widen to Rs18,231 crore in FY20 but thereon it would start narrowing and come down to a loss of Rs5,432 crore in FY21. It would post a net loss of Rs396 crore in FY23 and then break into a profit of Rs2,235 crore in FY24.
BSNL has in September confirmed plans to lay off 80,000 of its employees, about 50 per cent of its total workforce, after failing to pay them their August salary and nationwide protests by employees.
BSNL has a total workforce of 1.65 lakh and will be left with enough employees to operate the company. The VRS will be a big boon to BSNL as it would cut its monthly wage bill by nearly half.
BSNL Employee Union, said there was uncertainty and chaos everywhere and that employees are devastated by the government’s flip-flop, as well as the failure to pay salaries.
More than 70 per cent of the contract workers too haven’t received their salaries since February.
Union leaders see this as a ploy to force more and more employees to take VRS, and leave the company. More than 2,000 employees have already been asked to leave, they say.