Dt: 5/5/15
BSNL & MTNL cannot be saved
Dr T.H.Chowdary*
Just as on several occasions in the past, employees of the Bharat Sanchar Nigam Limited (BSNL) have staged a two-day strike on 21 & 22 April 2015 with lots of demands chief among which is that the BSNL must be saved. This company as well as the Mahanagar Telecom Nigam Limited (MTNL) once a Nava Ratna! have been incurring losses of over Rs.10,000 cr for the last few years. These companies have been losing their land lines as well as mobile telephone subscribers to the rival private telephone companies (P-Telcos). Since they have accumulated losses they are not even able to bid for the 3G and 4G spectrum which were recently auctioned. They don’t have money to invest in the expansion and improvement of the network .
2. BSNL has an order for the National Optical Fibre Network (NOFN) running to about Rs.20,000 cr . They are not able to execute it for want of investible and working capital. This national project aiming to extend broadband to 2,25,000 gram panchayats all over the country is getting very much delayed. The work was given to private telephone companies to keep the BSNL alive with some work orders.
3. How has this parlous state come about? Telecom services in this country started with the Telegraph in 1853 (1850?) under the Government Telegraph Department (GTD) in Calcutta with its own Director General. During the second world war in order to effect economies, the telegraph and postal departments were merged to become the P&T department. The telecoms were separated in 1985 under the initial liberalisation steps taken by the then Prime Minister Rajiv Gandhi. Sri Rajiv Gandhi directed the Department of Telecoms (DOT) to corporatise the services so that efficiency, consumer responsiveness and financial discipline as well as capital from the markets could be obtained. The officers of DOT who to the extent of 90% are engineers were opposed to corporatisation. The unions were, of course much more violently opposed as they are led by communist parties.
4. The Overseas Communication Services ( OCS) which was another department of the Ministry of Communications and the telephone systems of Delhi and Bombay, the largest in the country were constituted into state -owned corporations, the Videsh Sanchar Nigam Limited (VSNL) and the MTNL respectively in 1986. After reviewing the work of these companies the officers of the DOT said further corporatisation could be considered in the light of the performance and experience of the two Public Sector Undertakings (PSU). During the Prime Ministership of the late P.V.Narsimha Rao the permit-licence-quota system going by the name of socialism was bidden goodbye and many services began to be opened for private sector participation. So were the telecoms. In a masterly move, to overcome the resistance of the DOT officers and the unions Sri Narasimha Rao opened up the services which then were not available in the country like mobile telephony, radio paging, video conferencing, electronic mail etc., to private companies. The internal opposition was thus pacified by the clever assertion that these new services were meant for the elite and would have limited demand and revenues and therefore would not affect the fortunes and prosperity of the DOT. The internal opposition was thus disarmed.
5. The first National Telecom Policy (NTP) was announced in1994. All the distortions were removed by the NDA government by NTP 1999. In the beginning the DOT was the licensor of the private companies; competitor as a government department and was also the regulator and arbitrator. This irrational situation, involving unfair competition was objected to by various quarters, including foreign companies (and their governments) which were required to be obligatory partners of the indigenous private companies to qualify for licences. Then was constituted the independent Telecom Regulatory Authority of India ( TRAI). Later, functions like the settlement of disputes between the licensor (that is the DOT) and the companies were removed from the jurisdiction of the TRAI and entrusted to a new organisation Telecom Disputes Settlement and Arbitration Tribunal (TDSAT). As the competition between P-Telcos and a government department, the DOT with all the privileges of government ownership was unjust and so was objected by everybody. The NDA government corporatized all the DOT’s services into the BSNL in Oct 2000. That was nearly a decade after the entry of the private companies into the provision of telecom services. Also the DOT/BSNL’s monopoly on the inter-state and international telephony (STD & ISD) was also removed and the BSNL was allowed to compete with the P-Telcos across the board, in all services. This created level playing field between the private and the government owned telecom companies.
6. The NDA government also removed the government’s monopoly of provision of Internet services. Until the TRAI came, DOT was fixing up the tariffs for various services. It fixed the mobile telephony tariffs at Rs. 16 per mnt; not only the caller was to pay but the called party was also to pay. However, as soon as the DOT owned BSNL entered the sector in 2001, the price fixation came under the jurisdiction of the TRAI. It decided that market should determine the price. Competition forced the prices to come down and the obnoxious imposition of the called party also paying was ended. Independent regulation and real competition from experienced P-Telcos started problems for the BSNL and MTNL. The top officers as government servants never knew how to work in a market subject to competition. In the first 4 to 5 years, government levied certain cesses on the P-Telco rivals and gave that amount as subsidy to the BSNL on the score that it was providing rural services which were uneconomic. They came to be ended gradually by about 2005 and since then the BSNL started losing money. The subscribers of BSN and MTNL were defecting to the rival P-Telcos as the services offered by the former government department were inferior to those of the P-Telcos. BSNL & MTNL inherited huge staff - about 3,50,000. Successive pay revisions boosted up their salaries. A driver of the BSNL gets Rs. 30,000 but there are no vehicles and the drivers cannot be retired. finding that the purchase operation and maintenance of vehicles is very costly, the BSNL found it cheaper to hire the services; hence are drivers with handsome and increasing pay but with no work. The old technology has been retired. Electronic exchanges and mobile telephony are the technologies. The ageing employees are retrained but with not so good expertise as their P-Telco rivals. There are no overhead lines or underground cables but there are Line Men and Cable Jointers. There is no telegraphy but there are Telegraphists and Telegram Delivery Messengers. There is direct dialling both within the country and across the continentals operators are not required but the BNSL & MTNL have all these employees, with new designations. In this fashion so many trades have become redundant but the employees continue to be paid government salaries and given assured promotions, work or no work.
7. Added to this misery, most of the top officers, General Managers belonging to the Telecom Engineering Service (TEC) of the Government did not opt for the company service. They were treated to be on deputation. That period was extended year after year but many did not opt for company service. They were surplus. They could not be accommodated in other government departments. More than 100 of them are sitting in their homes and are getting pay cheques of over Rs. 1 lakh per month.
8. Added to these miseries is the ministerial oversight of the BSNL & MTNL. These companies wanted to expand their mobile telephone network to meet demand they would invite tenders but the final orders had to be placed only with Minister’s involvement. The Minister would sit tight taking no decision but raising query after query. The emerging demand could not be met by the BNSL /MTNL and was taken up by the rival P-Telcos. No Minister can be fixed up for delaying the decisions. He would benefit by sitting tight and imposing equipment famine upon the government owned companies so that the hunger for service would be met with by the P-Telcos. For his great service, readers can guess as to who were getting benefited.
9. No government company which had been a monopoly is able to survive fair competition under independent regulation. In Telecommunications, the Hindustan Teleprinters and Hindustan Cables are dead under competition. The Indian Telephone Industry (ITI) which came up in the early years of India’s independence has been a loss making company surviving on orders for some quantity “reversed” for it but at rates determined by the lowest tender. Periodically government is injecting money into this company so that it is not closed and its workers are not on the streets.
10. It is not only the BNSL & MTNL which are loss -making, the Air India which is also owned by the government is also making huge losses. The question is when the air & telephone and telecom and information services could be provided by a sufficient number of competing P-Telcos, why is it necessary that the government should have telephone and air ways companies? Are they serving the public or the political bosses? Would the country be poorer if these PSUS in these two sectors which more than are adequately served by fiercely competing private companies are wound up with mounting accumulated losses and declining morale of the employees? These companies will be a drag on the public exchequer. Before they go into negative worth, it is better to sell them off. They have huge assets under utilised. Their managements are not professional nor would be able to compete with the same freedom and capability as in the private companies. The bogey of security is misleading. The most fiercely capitalistic and the number one super power, America has no government -owned telephone or airline companies. Its security is not threatened. There are ways in which governments can build secure telecom & information networks by hiring transmission capacity from private telephone companies. That is what America does, so does Canada.
11. By delaying total disinvestment of the government equity from BSNL & MTNL, these companies are going to be reduced to zero value soon. There never was a time when every reform, every step for liberalisation was not opposed by the communist –led unions. But they never succeeded in stopping any reform. But they magnificently succeeded in delaying the reforms for long. The telecom companies are becoming weaker and weaker and hurtling towards zero value. It is to be hoped that the BJP -led NDA government which never had any fascination for the permit – licence- quota version of Indian socialism, would have the boldness to wind up the state owned companies which have outlived their utility and are a dead weight for the public exchequer. (1,810 words)
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