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


Revival of SBNL and MTNL

Dt:  5/4/19


Revival of SBNL and MTNL


Dr T H Chowdary*



News  that there was  a meeting of the  chiefs of the BSNL and MTNL with an officer in the  PMO and that in this meeting NITI AYOG persons were also present had been published in several papers  recently. That the BSNL and MTNL had defaulted on the payment of  salaries to their  employees in Feb 2019 and  that the  Government of India  had requested the state governments to prevail upon the  DISCOMS not to disconnect electrical power to the telephone exchanges of these  two companies had also hit headlines in several news papers. That both the  companies are having too many employees and that their wage bills are very high has also received extensive publication. These two companies have been losing   a few thousand crores of rupees every year and the debt of BSNL alone is Rs. 14,000 cr .  The question is: is  it necessary that the  government of India should have  state -owned  telephone companies to provide its communication  services to it. And whether these companies should be  kept alive even as they incur increasing  losses year after year and public money is  poured into these companies to keep them alive.


2. There is hyper -competition in the provision of various  telecom & information services in our country, as in no other country. The  entry of  R-Jio into the  market has disrupted the telecom services eco system in the country. R-Jio can have  immense amount of capital at least cost from Reliance Industries,  its mother /associated company.   No private or government  company  has such  an abundant and  inexhaustible  financial resource to back it up.   Once  very profitable  and   healthy companies like Bharati Airtel, VodaFone are in financial distress. Smaller companies like Aircell have evaporated and Idea  had to  merge with Vodafone. When such private companies themselves are having  such turbulent   existence  and yet  services are becoming available at ever cheaper rates it is the  rational to keep a sinking government owned company burdened with huge  staff who cannot be given any work; it does not seem



to be wise. There are drivers  drawing  more than Rs.40,000 per month and  sitting idle as there are no vehicles ; there are several scores of  General Managers,  Principal General Managers, Chief General Managers and so on with enviable  salaries but little work.   Of course, it is  not the fault of the  staff. Since the  1980s itself was becoming evident from the changes  happening in all  countries where  government   telecom departments were getting corporatized, privatized and getting subjected to competition, India could not avoid this development . Sage counsels from within and outside the department did not   impress and move the senior officers including   members of the Telecom Board and Telecom Commission from seeing the  writing on the  wall namely  government companies cannot compete with privet telephone companies. Every step towards liberalization, corporatization and competition was fiercely opposed by the Marxist communist ideology -fed  employee unions and the senior government officers who had been finding it comfortable to be government  officers with all the privilege of non-accountability for either  performance or for financial  viability .


3. Without going into the  sordid  sorry history  of continuous opposition  to reforms, let us  consider what should be done .  The BSNL and MTNL have got extraordinarily valuable  sites and buildings  in all cities and towns. Their market value will run into trillions  of rupees.  Once  large  spaces and huge buildings   were required for the old type of  technology . But with ICTs becoming the basis of every variety   of communication service, these buildings and sites are  not necessary. Many of them  could be sold and a huge amount of money realized.


·         The BSNL should be broken  into  state -wise corporations with a holding company at the top. Some of the statewide companies  could be   quite  attractive to be purchased by  private telephone companies. And therefore they should be disinvested as fast as possible,  in every manner feasible. A few companies in the north-east,  Bihar and J&K  may  find no buyers . With deteriorating service, their subscribers would very   rapidly shift to  private  telephone companies. Then these  companies will be  simple shells without  substance. The employees may be  paid off from the  proceeds of the sale of the  real estate. 


4. It is sad to note that there never has been vision or  dynamism in the  management of the  BSNL& MTNL. This is in contrast to the  Videsh Sancahr Nigam Ltd which was also a state- owned corporation. Its  management  saw the writing on the wall and  facilitated its  privatization. If only BSNL and MTNL’s the   managers had the vision like that of the  VSNL, the sorry state of seeking sops   from    government for survival and for payment of wages and  electricity bills would not have come.


5.  Giving them 4G  spectrum now while 5G services from P-Telcos are  imminent is unwise –funding vitality companies with old technology while rivals are two generations a ahead .


6. If the government  has any misgiving about security  of its communications if there are not state owned companies, such a belief is absolutely unwarranted. World’s super power,  USA has no state -owned telephone corporation.  It does not find its  security  threatened . It is possible that a private dedicated  network for either the state  governments or the  union government  can be had by leasing transmission capacity  all over the country and building dedicated networks with designated points of interconnection with the  public   networks with enough  security  built it  for access.


7. Finally, it is very undesirable and wrong to infuse precious  public money into the  debts-ridden, vitality-lacking state owned companies BSNL and MNTL. It is wrong and immoral and financially disastrous to  keep overaged, sickly men or companies alive. Infusion of capital or waiver of debt will be a costly, populist, gamble and  should be  avoided.  It is  pertinent to recall the late Sri Vasant Sathe’s words about PSUs.  He wrote:


“Academicians  have  attributed  several additional strengths  to the  public sector. They primarily are:


Ability to survive without  profit

State ownership gives them immortality

Wages and high bonuses can be paid over and over again

by continuously  incurring losses

Government ownership gives full benefit of a monopoly”


- Vasant Sathe , former Communications  Minister

  Government of India  in his book, 

“Restructuring  of  Public Sector in India “



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