Memoranda for Submission to the Chief Ministers of the Two Telugu States.

Telecom Engineering

BSNL & MTNL cannot be saved

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)

 

 

 

END